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Identifying Effective Strategies for the Chinese Consumer Market
7 June 2019
17:00—18:15
KEY CONCLUSIONS
Chinese consumer market is attractive for other countries

It is obvious that everybody is looking at China trying to gain access to this market. <…> [Trade turnover between Russia and China, – Ed.] reached USD 100 billion. <…> We have a goal to reach USD 200 billion by 2024 — Timur Maksimov, Deputy Minister of Economic Development of the Russian Federation.

[China] is the largest e-commerce market. Its growth rate exceeds 20%. <…> This year, it is going to continue expanding — Raymund Chao, Chairman for Asia Pacific and Greater China, PwC.

Specific aspects of the Chinese market need to be taken into account

Chinese consumer market is complicated. <…> It is different from what we are used to in the West. <…> The consumption pattern [in China, – Ed.] is changing, the market is expanding, people are growing rich. <…> People try to consume more, to diversify consumption and focus on specific sectors. On luxury items, [for example] — Timur Maksimov, Deputy Minister of Economic Development of the Russian Federation.

We need to understand the characteristics of consumption in China, preferences of the Chinese; take into account growing expenses of the middle class. Chinese consumers are focused on the lifestyle and corresponding products and services. They are looking for convenience, they are picky. A unique feature of the Chinese consumer market is that 50% of Chinese consumers buy online, 86% pay using mobile devices — Raymund Chao, Chairman for Asia Pacific and Greater China, PwC.

The most interesting trend is e-commerce strengthening. <…> According to some forecasts, by 2020 nearly 100% of trade transactions [in China] will be made using various mobile platforms. <…> An interesting feature of the Chinese market is that there are 40 million small and medium-sized enterprises. Russian market is, of course, much smaller — Dmitriy Krasyukov, Chief Operating Officer, SAP CIS .

Russia can fill certain niches on the Chinese market

Let us consider production niches. For example, agriculture. The consumption is massive. <…> Last year export of agricultural produce from Russia to China increased by 25%. <…> The second one is pharmaceuticals. <…> The population [of China, – Ed.] is growing old, so pharmaceuticals are in high demand, and the pharma market is expanding. The next thing is ‘green’ products – industrial production that boosts energy saving and reduces emissions. <…> Everything related to the ‘green’ economy forms a huge niche on the Chinese market. As for services, they are still undervalued in our relations with China. The complete services turnover is just 6 billion. There is a huge potential here. <…> It is tourism, business trips, medicine, education — Timur Maksimov, Deputy Minister of Economic Development of the Russian Federation.

The Chinese population is growing old. <…> Despite the success of Chinese producers, the main share of hi-tech expensive medicaments still comes from abroad. China buys American and European medications that are hi-tech, expensive, cutting edge. <…> Now we are successfully winning our own market back from international pharmaceutical companies — Dmitry Morozov, General Director, BIOCAD.

We know that Russia boasts a very high level of education, and now China is very focused on education. <…> We show a lot of Hollywood and Bollywood movies in China. <…> But in my opinion, Russian films should also be screened in China. It is a huge niche — Xiaojun Yang, President, 9F Group.

China can offset Russian losses caused by Western sanctions

In the context of European and US sanctions, China can contribute to satisfying many demands — Xiaojun Yang, President, 9F Group.

ISSUES
Language and cultural barriers

The first barrier is language. <…> The Chinese started actively learning foreign languages, but we have to admit that China still has a very poor level of foreign language mastery. <…> We also need to admit that we do not know Russia well enough. Young people born in the 1990s do not know the history of our relations, and this has a negative impact on the further development of our relations. Our cooperation comes down to everyday talks and does not really involve cultural aspects — Xiaojun Yang, President, 9F Group.

We need to eradicate some misconceptions that got implanted into Russian and Chinese mindsets. There are some things related to nationalism, and they really exist. These issues need to be solved at the governmental level — Xiaojun Yang, President, 9F Group.

Incompatibility of Russian and Chinese legal frameworks

The second aspect of our interaction and a massive barrier is the incompatibility of our legal frameworks. When we solve problems within the WTO, it is easy, we have established mechanisms and legal norms, legal customs that allow us to act in a convenient legal framework. It is not the case with Russia for the moment, the laws are totally incompatible — Xiaojun Yang, President, 9F Group.

SOLUTIONS
Ongoing dialogue and mutual learning

I think managers just need time to sit down and reach agreements on getting rid of all difficulties. <…> In my opinion, as long as we have an ongoing dialogue, there are no problems that Russia and China cannot solve together — Timur Maksimov, Deputy Minister of Economic Development of the Russian Federation.

We know a lot about each other’s markets; however, we must learn from and about each other — Dmitriy Krasyukov, Chief Operating Officer, SAP CIS .

Synchronization of regulation

If we do not synchronize regulation, it is going to be a huge barrier for the development of economic relations between our countries. <…> [For example], registration of medications. I think the most significant contribution would be if Chinese medications were imported here, and our medicactions were exported to China — Dmitry Morozov, General Director, BIOCAD.

Why could not we use the WTO legal framework to solve problems in Russia? I think it would be very useful — Xiaojun Yang, President, 9F Group.

The material was prepared by the Russian news agency TASS