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China’s tech sector has grown significantly in the past two decades and is making it a challenge for the US to keep its long-standing position of the world leader. Companies like Huawei, WeChat, Baidu, Tencent, and Qualcomm among others consolidate the country’s efforts in becoming the next-generation leader in tech worldwide. Lately, China and the US are battling for the 5G technology leadership, and the competition leads to an economic war that assumes sanctions and restrictions for companies on both sides. 

Mainly there are three pillars of China’s tech sector growth: venture capital, innovation, and distinct entrepreneurial culture. All these with governmental support managed to transform China from a mass manufacturer into a tech giant.

At the same time, Alessandro Cormio from Naturality states that China has a rapidly growing market for IT products and services, with a large and increasingly tech-savvy population. The Chinese government has invested heavily in developing its own tech industry, which has led to a vibrant and innovative tech ecosystem. However, there are also significant challenges. Chinese consumers have started to shift their preferences towards domestic brands, making it more difficult for foreign companies to gain a foothold in the market. In addition, habits and market in general are very different to handle and develop when compared to the west. I always suggest NEVER trying to enter this market with the same strategy and approach as Western countries.

Why you should work with Chinese IT companies

As mentioned above, one of the three pillars of China’s tech sector is distinct entrepreneurship. In China, IT companies and businesses in general work differently than the traditional Western style. It’s about social digitalization where companies don’t need direct human interaction anymore - everything can be done remotely. Even though freelancing is a very well-known practice in the West, Chinese IT companies use corporate freelancing allowing professionals to focus on project tasks from different parts of the country.

Chinese companies don’t have any more language barriers when it comes to communication and project management is at its highest. Tech specialists are doing their job properly and fulfill the exact requirements and instructions mentioned by clients. Honestly, this is no surprise, since discipline is in the Chinese blood for centuries. 

Another reason for working with Chinese IT companies may be an abundant workforce. While European and US markets mainly confront a workforce shortage, it’s not the same for Chinese companies where tech specialists are struggling to get a place in an IT company.

What you should be aware of when working with Chinese IT companies?

On the other hand, the government controls all business processes, especially with foreign clients and investors. As a potential client, you will meet certain bureaucratic barriers that will cut the business’s appetite. The number of papers that need to be signed overlaps several times, and the number of papers you need in Europe and the US. But after having everything done, all will go smoothly.

The prices may vary from region to region and company to company. It depends on how well a region or a company performs on the national level - which still remains the main indicator for Chinese IT companies in terms of notoriety. That makes a good idea to be aware of what regions are likely to provide better services, and in which field. 

To this answer, Alessandro Cormio adds that due to the very different market culture and habits of China, to better enter the market, companies need to be aware of how differently things work in China

How reliable are Chinese IT companies

Same thing we could say about reliability. Since the country has more than 15,000 IT companies, it wouldn’t be fair to rate all companies under the same figures. Companies located in more developed regions and cities perform better, are more reliable, and have a higher credibility rate, while other companies from less-developed regions and cities are nameless, and don’t have enough experience to rate their experience.

On the other hand, in China, a nameless company can become a world brand overnight. It depends on the product they are working on, and the technologies used. Since innovation is the second Chinese tech pillar, any company can become famous, rich, or both if use the right combination.

How does the Chinese IT sector relate to the neighboring countries?

The Chinese tech sector outnumbers all neighboring countries. However, in terms of general performance, it competes with the South Korean IT sector and the Japanese one.  The internal market is enough for Chinese companies to grow and innovate, so assumingly there is no big need for exporting IT services, like in the case of Korean and Japanese companies. However, contacting foreign entities empowers and stimulates the innovation processes in a country. 

Chinese Business Environment: Complex But Rapidly Growing

China has a complex BUT rapidly evolving business environment. On one hand, it is the world's second-largest economy (projected to be N.1 in some years) with a rapidly growing consumer market. On the other hand, because of the significant state ownership and control, it turns out to be a challenging legal and regulatory environment. Working in marketing for Chinese companies looking to go overseas, it's also interesting to feel and understand the complexity and huge potential, on a scale, that this market has. China's rapid economic growth and expanding middle class offer significant opportunities for companies and talents willing to invest the time and resources to establish a strong presence in the market.

At the same time, the difficulty to open a new IT company in China is appreciated as quite open, with wide possibilities, but is getting more and more challenging.

How Chines Government Helps the IT Sector?

While it's difficult to understand all subtilities and Chinese laws all of a sudden, Alessandro Cormio, the founder of Naturality Digital - a reputable IT company with offices in China says that there are three main directions on this topic: 

1. Investment in research and development: AI and 5G on top of all.

2. Support for entrepreneurship: Plenty of initiatives to support entrepreneurship and innovation, including tax incentives, funding for startups, and the establishment of innovation hubs and incubators.

3. Encouragement of investment: establishment of special economic zones and other incentives to attract domestic and foreign companies.

Shenzhen and Shanghai - The Chinese Heaven for IT Companies

Shenzhen has been the fastest-growing city in the world in the last few years, and it keeps pushing forward. At the same time, Shanghai is the most populated and international city in China.

Alessandro considers that both should definitely be considered in the top cities in the world for IT development.

About the Chinese Local Talent Pool

Not too easy to answer this question. From my point of view, there's still a lack of people with high skills in certain things. Too many tend to specialize too much and follow a specific standard, not being beneficial to flexibility and creativity.

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This article was created together with Alessandro Cormio - Co-Founder of Naturality Digital, which is one of the leading digital marketing agencies with offices in Italy, Switzerland and China.