Overview of Selling into China
Selling into China – The Chinese market is poised to become a pivotal aspect of any company’s global sales strategy.
Despite slower-than-forecasted economic expansion, China continues to be a major catalyst for the global economy. Today, anyone involved in international commerce finds it indispensable to engage with China. A PWC report indicates that China is expected to uphold its status as the world’s leading trading nation until 2050.
China has a massive population of 1,42 billion people. The combined populations of the EU + USA + Russia + Brazil + Mexico + Canada + Australia + New Zealand are still less than China’s! Over 69% of the population in China is between the ages of 15 and 64 (source cia.gov).
Approximately 25% of all global products are “Made in China”. However, this figure has been evolving since the COVID-19 pandemic.
China’s growing middle class will lead to market opportunities for foreign companies in consumer-based industries and in the services sector. Consumer-based and services sector companies view e-commerce as an explosive area for growth.
Last year, the Chinese economy experienced modest growth of 5.2% compared to other years. China has been struggling to shake off the fallout from the Covid pandemic.
China’s Business Culture
In China, international business transactions are predominantly conducted in US dollars.
Building strong business relationships and trust is crucial in China. When you visit, anticipate spending ample time in meetings and dinners with your prospective business partners, often outside regular business hours.
At the beginning of a business meeting or discussion, discussing non-business and personal topics is customary before addressing the business matters at hand.
The Chinese concept of guanxi pertains to the quality and depth of your connections. Business introductions are essential for developing successful business ventures in China.
In China, the family name precedes the given name. For instance, someone named Li Jing should be addressed as Ms. Li.
Never publicly criticize or contradict anyone, mention a mistake, display anger, or disagree with a business contact. This behaviour, known as “losing face,” can damage relationships. Address any concerns privately and discreetly.
Avoid wearing a green hat in China, as it symbolizes infidelity. Also, please refrain from using red ink when writing or signing documents, as it signifies severing ties.
During meetings, it is essential to identify the key decision-makers. This can be achieved by observing who enters the room first, initiates the discussions, sits at the centre of the table, and commands the delegation’s attention.
Setting up in China – Selling to China
China is a complex and challenging market with an often uncertain regulatory environment.
When Selling to China, the key to success is engaging with China-based service providers and partners or hiring local Chinese staff to provide on-the-ground insight and representation.
Investing time and resources in understanding your market segment is essential to build the right networks and develop a market entry strategy.
Companies should not assume that success in other export markets, will automatically translate in China.
International Payments – Selling to China
China maintains strict rules and enforcement regarding companies, banks, and individuals transferring money into or out of the country.
In China, there are many ways to finance imports. The most commonplace are letters of credit and documentary collections. No matter the method, the Chinese importer must apply for the foreign exchange amount for the trade transaction from the State Administration of Foreign Exchange (SAFE).
Chinese financial rules state that companies must report any overseas payment within a payment term of over 90 days from the date shown on the import declaration form, or they will not be allowed to arrange the overseas payment.
When an enterprise enters into a contract that contains a clause for the pre-payment for purchases, the enterprise must register the contract with the relative Chinese government agency (SAFE) within 15 working days after the contract is signed. The enterprise also must register the foreign exchange repayment within 15 days before the remittance is issued.
For all other non-pre-payment foreign exchange payments, the enterprise must register the contract and the foreign exchange prepayment within 15 working days before the remittance is issued.
Tariffs and non-tariff barriers
Tariff – Selling to China
Chinese Tariffs and duty rates are constantly revised and are subject to change without notice. For further information, please visit the:
China Customs Press Online Books Store
All products exported to China are taxed by an import tax (unless otherwise specifically exempting the product from such payment). The key points to note about the import tax include:
- It is levied on the customs value.
- The customs value is generally assessed based on the transaction value, which comprises the product cost, insurance, and freight (CIF) value.
- The import tax rate is selective and depends on the product’s tariff classification.
All China Customs officers have access to a product valuation database that lists appropriate valuations for various imports. China Customs officers check the price reported by the importer against this database. Normally, China Customs officers will accept the importer’s price. However, suppose the reported value is too far out of line with the database. In that case, the China Customs officer will estimate the value of the goods based on methods listed in Article 7 of the PRC Administrative Regulations.
As a general rule, China Customs will charge against the highest price reflected in their database for agricultural products affected by seasonal price changes.
Non-tariff barriers – Selling to China
Exporting Food to China
All imported foodstuffs and beverages are subject to inspections by the China Entry-Exit Inspection and Quarantine Bureau (CIQA). This can be a complicated and challenging process requiring a lot of time and documentation. Did you know that eight ministries are involved regulating food safety, quality, and trade!
China New Food Safety Law
The Food Safety Law covers all imported food products, which are subject to the national food safety standards of China. Some of the key points in the new laws include:
- Foreign food manufacturers are required to register with the State Administration for Market Regulation (SAMR).
- All foreign food distributors and producers that import food products into China are required to register with the state entry-exit inspection and quarantine authorities.
- Importers must record the foods imported and distributed in China and must keep these records for at least two years.
- For those ingredients or components not registered in China, it is required that the ingredients are registered as new-to-China components.
- Any food or food ingredient or component that has had an import history prior to the new Food Safety Law should be allowed entry even if there is no Chinese standard.
- Manufacturers of dairy products, particularly infant formula, meat and seafood are subject to even stricter accreditation for the registration process. On the spot accreditation by Chinese government officials may be also required. Certification and Accreditation Administration of the People’s Republic of China(CNCA) publishes the latest lists of approved foreign manufacturers or facilities of dairy products, infant formula, meat and seafood.
Following the new Food Safety law in China, the authorities continue to release a lot of new rules to support and uphold this new law.
For example, AQSIQ has updated registration requirements:
- Decree 55 – requires exporters and agents, as well as Chinese importers, to complete an online registration form.
- Degree 177 – Relates to grains and oilseeds.
- Degree 183 – Relates to live seafood.
The China Food and Drug Administration (CFDA) has updated registration requirements for:
- CFDA Decree 26 – Relates to infant formula recipes.
- CFDA Decree 22 – Relates to health foods.
- CFDA Decree 24 – relates to foods for medical purposes.
Organic Products
Organic products such as honey, infant formula, beers & wines achieve a premium price in China.
Those Exporters who are selling Organic food products to China must obtain a Chinese organic food certificate. If the food does not have a Chinese Organise Food certification, then it cannot be sold as organic in China. The cost for this certificate is over $7,500 and the application process can take up to six months.
Product certification, labelling and packaging
Selling to China – All products sold in China must be marked in Chinese. Indeed, Chinese import inspection authorities point to labelling as one of the major reasons for noncompliance.
China’s Quarantine and Inspection requirements often change and can be complex to interpret. Prior to the dispatch of goods, exporters are encouraged to re-confirm labelling requirements and other product certifications with their importers in China or relevant departments.
Pre-packaged food must be labelled and must include the following information:
- Standard name of foodstuffs.
- List of ingredients.
- Quantitative labelling of ingredients (percentage of the ingredient).
- Net weight and configuration.
- Name, address and contact info of manufacturer and local agent or distributor.
- Production date, use-by date in YY/MM/DD format and guidance for storing.
- Generic names of food additives are used in the national standard.
- Quality grade.
- Food production license number.
- Code of the product standard.
- Special contents, if there are any (e.g., irradiated food, genetically modified food, nutrition list for baby food, or diet food).
Products should be labelled in metric units or show a metric equivalent.
A series of national food safety standards were developed to provide specific guidance in product labelling:
| Date of issuance | Effective Date | Standard Number | Standard-in Chinese | Standard-in English |
| 4/20/2011 | 4/20/2012 | GB7718-2011 | 预包装食品标签通则 | The standard for the Labelling of Pre-packaged Foods |
| 10/12/2011 | 1/1/2013 | GB28050-2011 | 预包装食品营养标签通则 | The Standard for Nutrition Labelling of Pre-packaged Foods |
| 11/29/2013 | 6/1/2015 | GB29924-2013 | 食品添加剂标识通则 | General Standard for the Labelling of Food Additives |
| 12/26/2013 | 5/1/2015 | GB13432-2013 | 预包装特殊膳食用食品标签 | The Labelling of Pre-packaged Foods for Special Dietary Uses |
Label requirements vary by the product category. Special label requirements will apply to food, beverage, agrochemicals, pharmaceuticals and cosmetics and may have to be pre-approved by regulatory bodies.
Methods of quoting and payment
When selling to China, quotations can be FOB, CIF, ex-works and in US dollars. Payment terms can be made in advance, collected (payment terms are freely negotiable, averaging 360 days), and with or without a letter of credit coverage.
Selling to China – Documentary & Clearance Requirements
Usually, the importer in China provides Chinese customs with the necessary documents required to import the goods into China. Import documents can vary by product but may include standard documents such as:
- Bill of lading.
- Shipping list.
- Customs declaration.
- Sales contract.
- Certificate of Origin
Other specialized documents can include:
- Import quota certificate for general commodities (where applicable).
- Import license (where applicable).
- Inspection certificate issued by the General Administration of Quality Supervision. Inspection and Quarantine (AQSIQ) or its local bureau (where applicable).
- Other safety or quality licenses.
- Health Certifications.
Business Risks
Companies are advised to spend time investigating the Chinese market, obtain professional advice where appropriate and thoroughly investigate the issues in entering the market before establishing business relationships.
Companies wishing to sell to China should commit to the highest level of corporate behaviour and familiarize themselves with the laws of their country and the penalties about bribery of foreign officials.
Intellectual Property Protection – Selling to China Challenges
Intellectual property rights infringement is common in China. Registering your intellectual property is essential. The registration process for a trademark can take up to 18 months. Products can only be protected once the application process has been completed. Companies should conduct due diligence to see if similar trademarks have already been registered. Current trademarks can be found in the China Trademark Office’s official database.
Dispute resolution
For all transactions, a bi-lingual Chinese/ English contract is strongly advised to be drawn up and signed between the buyer and the seller.
The terms of the contract should define a dispute and mediation process. They should also detail the name of the court in China to which the dispute will be brought in the event of an unsuccessful mediation process between the buyer and seller.
Selling to China Information Resources
National Medical Products Administration (NMPA)
China’s New Food Safety Law
China Ministry of Commerce (MOFCOM)
General Administration of Customs of the People’s Republic of China
State Administration for Market Regulation (SAMR)
Standardisation Administration of the People’s Republic of China (SAC)
Selling to China – About the Author
Aidan Conaty is the founder of TCI China and Goodada.com. Aidan has spent over 15 years assisting companies in trading internationally. He founded Goodada, which assists companies in trading internationally, and he has vast experience with supporting companies selling to China.
He can be contacted by email at aidan@goodada.com or be contacted at:
- (Europe/ Rest of the World) +353 1 885 3919;
- (UK) +44.020.3287.2990
- (North America) +1.518.290.6604