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The Chinese love quality imports

Russians know Chinese products perfectly well: many of our compatriots have home appliances from China, in any market you can find clothes and shoes made in the south-east of Asia. Russia’s imports from China exceeded $48 billion in 2017.

However, not everyone knows that China is the second largest country in the world in terms of exports from Russia. Oil and refined products account for 75% of supplies. The major part of the remaining quarter (which is more than $9 billion at the end of 2017) is the export of timber, machine tools and food products.

The share of consumer goods, in particular beauty and health products, is gradually increasing (growth of 4-5% annually). This is largely due to the fact that residents of Chinese metropolitan areas – Beijing, Shanghai, Guangzhou, and Shenzhen – have come to know the quality of imported goods and do not trust local producers very much.

It is in large cities that the highest level of Western culture penetration is observed, which is reflected in the structure of consumer demand. Forward-looking entrepreneurs are in a hurry to take advantage of this.

What’s the advantage of exporting

If we do not take into account crude oil, cracking and processing products, the greatest demand in China for wood and food. Thanks to the proximity of the Siberian taiga, transportation costs do not look high, so that the cost of products even after the seller’s nakrutki remains below the analogues of local production.

Cereals, vegetable oil, chocolate, alcohol, honey, chicken legs, which are almost not used in our country, and in China are delicacies and cost over $35 per kilo.

Previously, our eastern neighbor purchased food from the U.S., but after restricting trade relations he switched to geographical partners: India, Malaysia, Vietnam. But Asian quality does not always meet the needs of the local population.

In Russia, the requirements to the quality of foodstuffs are stricter, the same honey is considered to be almost the standard, so that it is readily purchased and sold regardless of the cost. Only 10 years ago, the capacity of our country did not allow us to export the required amount of products.

However, the sanctions regime and economic development have created all the prerequisites for this. In 2008, Russia imported $35 billion worth of foodstuffs, in 2017 – $28 billion. Russia’s own grain supply in 2017 – 99%, sugar – 95%, potatoes – 97%, dairy products – 85%, meat – 90%.

Russia also benefited from the exchange rate difference – from 2013 to 2018, the yuan almost doubled against the Russian currency.

Two supply chains

China, as a country striving for global leadership, is in great need of quality raw materials, excellent consumer goods, which will help the population feel part of the world community.

Despite many years of closed existence, today the Chinese are increasingly oriented towards the West and seek integration into geopolitical and economic processes. At the same time, Russia is also associated with a developed country: our products are of very high quality against the background of middle-class products from the Asian region.

There are two most common supply chains to China. The most profitable, though complex, is direct cooperation with customers. To do this, we need to overcome language and cultural barriers, study local legislation, and monitor the shelf life of our products, which is a priority for the Chinese.

The second way is to hire a distributor and trade through his established networks. However, you will have to share the profits, and most dealers prefer to deal with exclusive products that are in steady demand.

Uncovered niche

One of the most promising areas of export is cooperation in the field of supply of goods for beauty and health (Russia in 2017 imported goods in China in this category only for $3.5 million).

The process of urbanization and population migration to large cities continues, and Chinese women and men are increasingly in need of quality and affordable perfumes and cosmetics (in 2017, imports of cosmetics to China exceeded $1.3 billion, up 35% from 2015 to 2017).

These conditions are fully met by the products of Russian manufacturers, many of whom are in demand in the developed countries of the Old and New World.

An important advantage of Russian cosmetics is its natural components. Availability of toxic substances and harmful additives has been minimized, which, together with adequate cost, has been appreciated by consumers from near and far abroad. One of the pioneers in the Eastern market was the St. Petersburg trademark “Nevskaya Kosmetika”.

But except perfumery, cosmetics, dietary supplements, work with any production possessing high added cost which is present in the Chinese market in a small share is effective. For example, in 2017, compared to 2016, the volume of footwear imports grew by a huge 574% to $225,000. At the same time, the share of the Chinese footwear market was only 0.01%.

Imports of leather goods increased by 37% to $401 million in 2017, and China’s market share was only 1.3%. Natural and artificial fur imported from Russia to China occupies only 0.8% of the market, but is estimated at $139 million (74% growth). Russian dyes, pigments, varnishes and paints also occupy less than a percent of the Chinese market, but are estimated at $111 million. Growth in 2017 was 35%.

Helen T. Lindsey