Since the 1980’s China has based its economy on the exportation of goods and has become a major player in the global market through these exports.
Felipe de Jesus Garcia is a Trade & Investment expert between Mexico and China, that provides an important insight for Mexican businesses to establish trade relations with China.
In recent years Chinese exports have faced increasing obstacles. Tariffs on Chinese goods and an unfavorable political climate have been complicating exports to the USA. In response to this, Mexico has become an increasingly attractive place for Chinese industry to establish a foothold on the continent. In fact, “China direct investment in Mexico was US$898 million at the end of 2017 and US$264 million in 2018”. (China Foreign Direct Investment Statistics Bulletin)
If you are a business seeking to capitalize and become a part of this growing relationship between Mexican and Chinese businesses here are three secrets to accomplish successful negotiations with Chinese firms.
1. Understanding the main requirements of China
In every negotiation, it is important to know the needs of your client. Knowing what they want and what they are looking for, is hugely beneficial to sealing any deal. So then, in the case of China, Mexican businesses must understand the requirements of their Chinese counterparts.
Felipe accounts Chinese interest in Mexico to three factors.
- Operation diversity and strategy:
Having the opportunity to diversify their products into not just the North American market, but also the markets of Latin America and Europe.
- Greater proximity to the market
By bringing the goods of Chinese firms closer to the customer, Chinese firms can increase the demand for their goods. Industries such as automotive and metalworking require fast deliveries. Consequently, Chinese firms started to investigate North America as a place in which they can relocate to accommodate their main consumer.
- Setting costs to a competitive level
Having a strategic location to your final market reduces lead times and improves product quality. Being able to count on a diverse and competitive supplier network is associated with reduced production costs, allowing the final consumer to see improvements over the product cost.
2. Understanding the Chinese business culture and expectations
Uncertainty, especially in business, is disliked by all. Chinese business leaders are looking for more than just a ‘businessman’. They want a partner to go on a new journey with. Felipe mentions that the important values that the Chinese tend to look for in business ventures are: Trust, networking and connectivity, reliability and clarity.
- Trust is “something very important for them; they are looking for an ally in a market they don’t know”. They are looking for a partner who will be with them for the long haul
- Potential partners should be well versed in the art of networking and able to develop strong connections to promote mutual growth and open more opportunities.
- Reliability is crucial as they want someone who can meet deadlines. “Understanding their work schemes is a key activity, everything is very well planned, and time of response and delivery are indispensable”.
- Lastly, clarity is just as important for them. You want to make sure that your messages are clear and direct. This is important so expectations are kept realistic and that an accurate reflection of progress is reported.
3. The current trend
If you are still unconvinced of the significance of the Sino-Mexican business relationship, it is important to remember that “According to 2018 Chinese customs statistics, Mexico is China’s second-largest trading partner, largest export market and fourth-largest source of imports in Latin America”. In the same year, China-Mexico trade amounted to US$58.06 billion, up 22% year-on-year. Among them, China exported US$44.02 billion and imported US$14.04 billion, up 23% and 19% year-on-year, respectively”.
“We are complementary economies; hence our relationship will continue growing”. Felipe notes this relationship is not just developing on one side, but that Mexican businesses are also increasingly going to china and prospering.
Felipe explains that it is a developing process of mutual understanding. Whilst it is not yet the primary hotspot for the Mexican youth of today, there is a fast-increasing number travelling to Asia interested in developing new skills and knowledge and this provides a useful foundation for when a Chinese company comes to Mexico.
Using these three tips will vastly improve the chance of success for a Mexican business hoping to do business with China. Felipe also noted that it is important to recognize the difference between someone with the ability to speak Chinese and someone who understands both managing a business and the environment in which Chinese businesses operate. This is important as one must consider the differences in social media due to the politics of China and thus any well-researched businessman has the potential to negotiate with Chinese industries if they account for these tips.
Prodensa is an advisory and project management firm focused on providing sound market and business intelligence that can help you with Market Framework, Assessments and Business Continuity.