Vitafoods Asia 2017

Market entry to China 'like hosting the Olympics' — you need at least four years

By Cheryl Tay

- Last updated on GMT

Regulatory uncertainity remains in China, said Fong. ©iStock
Regulatory uncertainity remains in China, said Fong. ©iStock

Related tags China

Supplement firms looking to set up shop in China should not buy into local businesses’ promises of guan xi (connections), and should be mindful that it could take up to four years of preparation to enter the market.

That was the advice from China Health Care Association’s international marketing consultant Clarence Fong, who spoke at a conference on China’s health supplement market at Vitafoods Asia.

He highlighted the tendency of Chinese companies to claim they have guan xi​ and to over-promise when dealing with potential business partners from overseas.

“Everyone will tell you they have connections. Don’t be too trusting.”

Instead, business owners should first carefully assess a few key factors before taking steps to enter the Chinese market.

First and foremost

Fong said successful entry into the market does not necessarily translate to successful sales, and urged firms to have realistic expectations.

For instance, many foreign company owners make the mistake of assuming that partnering with local firms in China means security for their business in the country.

However, he stressed that “local partners are not problem solvers”​, even though local representation is a cost-effective way to get a foot in the door.

He also said innovative products do not always create new opportunities in China for foreign manufacturers, especially because the supplement market is highly competitive.

‘Do your homework’

Fong advised supplement firm owners who have decided to go ahead with their Chinese ventures to “do your homework”​, saying they should clarify any connection claims from potential business partners.

In addition, they should learn all they can about Chinese culture and be flexible enough to adapt to it, as not doing so has hampered opportunities for many foreign businesses trying to enter the market.

“They buy a plane ticket, come to China, go for a few trade shows and think they know everything,” ​he said in criticism of some overseas business owners.

He further advised foreign supplement firms not just to budget for government registration costs, but to treat entry costs and other related expenses as part of their investment into establishing a presence in China.

Foreign fixation

China’s health supplement market has been growing steadily, and many foreign companies are eager to take advantage of widespread consumer interest in supplements from overseas.

Chinese consumers often perceive supplements from countries and regions such as Australia, New Zealand, Europe and the UK as superior in quality to domestic supplements, thanks to the numerous food scandals in China and the solid reputation of many foreign supplement companies.

However, because China’s supplement sector ishighly regulated and “the regulatory environment is constantly changing”​, entering the Chinese market is challenging for foreign supplement firms.

In fact, a new regulatory system for cross-border e-commerce, one of the most lucrative channels for foreign supplement firms exporting to China, will be introduced come 1 January 2018.

This is concerning not just for overseas supplement companies, but also for Chinese consumers who have relied on e-commerce to avoid high mark-ups on imported products due to taxes and added expenses.

Fong closed the session with a reminder: “Trying to enter the China market is like hosting the Olympics — it takes at least four years of preparation.”

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