Recently, China’s consumption increases in the post-pandemic world and drives economic recovery. For Italian brands, doing business in China offers an excellent opportunity for high-quality products.
China was recognised as the Asian factory for the developed world in the past. Today China boasts a strong consumer market for quality products and services. In the first quarter of 2021, the GDP in China jumped to 18.3 percent compared to 2020, predicted to reach 9 percent annually. The economy has significantly recovered in the post-pandemic era and offers ample prospects for foreign brands.
Italian home and design are favorable sectors to seize the opportunities in the post-pandemic China market.
Piedmont Home & Design
In response to the post-pandemic era of the China consumer market, Turin Chamber of Commerce organised “Piedmont Home Design”. This business development project is dedicated to furniture & home design companies and aims to create housing models characterised by local products and cultural affinities between Piedmont and China.
Companies entering the China market must understand the dynamics and safeguard assets beforehand. Therefore, Piedmont Home Design has organised a series of six training webinars between June and July and in collaboration with Horizons Corporate Advisory (HCA), the international legal, fiscal, and strategic consulting group. The series is an analysing the opportunities, cultural nuances, and inevitable risks in the China market.
The webinar series features Dr. Lucia Myriam Netti, Regional Partner EMEA, Russia and Belarus of HCA, and Dr. Roberto Gilardino, Regional Partner, North Asia and additional countries of HCA, and lawyer in China. With Dr. Netti as the requested lead for the webinars, the two regional partners presented topics specifically designed for the sector.
The Silver Age of China; a consumer appetite for sophisticated environments and designs
The Piedmont Home Design project is organised in partnership with ChinaRoom – Polytechnic of Turin. The ChinaRoom is a center specialising in the study of architecture and urbanization in contemporary China. And the partnership signifies the importance of the project.
For the project, China Room cultivated a survey on the main housing trends in the China market. “The housing market in contemporary China is at a turning point – declares Dr. Francesco Carota, research fellow of China Room. The current Chinese President, Xi Jinping defined the economy of the New Normal, a moment of major stability for the country’s economic growth. The real estate market has entered a new era defined as the “Silver Age”. The phase ‘Silver Age’ projects the need to improve the quality of domestic life”.
In the Silver Age, real estate developers are establishing housing models for various occupants including singles, young couples, families with children, the elderly without children, and so forth. Housing spaces are gradually adapted to suit their varied lifestyles.
“Thus, these new housing models have emerged, among the traditional models, designed for standard families – continues Carota. Therefore, the furniture sector is currently aligning with the new housing models and new tastes in style. In recent years, increased trends characterised by ancient Western elements, Nordic style, or new industrial style in the home and design sectors are increasingly paving an appetite for more sophisticated style”.
As a result, such increasing market demand presents a prosperous market for foreign designers and architects. Though the opportunities should be seized with prepared and prudent plans – which are legally compliant.
In the Piedmont Home Design webinar series, Horizons focused on doing business in China for Home and Design and provided three areas of risk management, when investing in China.
Protecting the brand is fundamental and ensures the correct identity and visibility in the Chinese market.
Commercial contracts in China
Designers and architects must understand both the legality and cultural nuances to safeguard investments.
E-commerce is a must for all businesses in the digital world and established in the framework of strict Chinese regulations.
Intellectual property (“IPR”) protection is crucial in safeguarding the creativity of designers and architects. In the first webinar, Dr. Netti provided an insight into IPR protection and noted “Trademarks and patents are the main company assets. Moreover, the inventions can be fully leveraged and a distinctive mark can exclusively identify the business – all of which are significant economic advantages”.
Numerous reforms and updates in IPR legislation have strengthened the legal framework for IPR protection, especially following the accession to various international treaties. However, many areas remain subject to national discipline.
Dr. Netti explains:
“Generally, IPR protection in China is often considered risky and fragile. In reality, the current regulatory landscape offers significant tools to protect your IPR concretely. Timing is certainly important. For those entering the Chinese market, it is fundamental and necessary to safeguard their intellectual property rights immediately, -without any delay.
Entrepreneurs can utilise specific regulations provisioned in Chinese legislation. However, these rules are often unfamiliar to the entrepreneur due to the peculiarity of Chinese regulations”.
How contracts protect your investment
The second webinar centered on legal contracts. In China, the principles of law and contractual clauses are imperative in safeguarding investment. Overall, investors should carefully compose contracts including the agency, distribution, or technical assistance agreements. In this approach, the contract sets forth an essential legal framework and establishes the primacy of the projects and high-end products.
Dr. Roberto Gilardino highlighted in the webinar “As a world economic leader, China increasingly manages large fiscal transactions with foreign companies. As a result, regulations in China have rapidly adapted to the new needs of the global market”.
In enforcing contractual terms, the investor should not solely rely on continuous regulatory interventions or various treaties signed between the Chinese government and other foreign regions and contracts. Rather, a contract remain strongly influenced by the Chinese national legislation.
Culture also plays a significant role in doing business in China Dr. Gilardino states in the webinar:
“when drafting a contract with a Chinese counterpart, linguistic and cultural differences are crucial aspects to be considered. Often, the same contractual clause can be interpreted differently by the parties due to cultural nuances and language differences. Therefore, a detailed contract is required since clear and detailed context sets forth clear parameters, transparency, and trust between the parties.”
Dr. Netti added the topic by explaining:
“Often, we encounter skepticism among companies who are signing contracts with Chinese counterparts. Such skeptics are largely due to the distance between west and east, not only geographically, but also cultural and regulatory. As result, contracts are drawn accordingly to the local law often dispel the mistrust between parties.
A contract is a practical tool for investors. The key is understanding how to assert contracts, so the investment is protected. At Horizons, we have continuously operated according to the principle of identifying concrete and effective solutions, with full legal certainty”.
E-commerce: the digital economy and legal aspects
For the consumer market, e-commerce is rapidly the current and future of international transactions. In the third webinar, Horizons highlighted both the opportunities and legal precautions in the Chinese e-commerce landscape.
E-commerce transactions in China outpace the rest of the world and offer ample opportunities for design studios. Dr. Netti explains:
“the success of Chinese e-commerce has surpassed the world, the e-commerce market grew 27.5% in 2020 and predicted 21.0% growth in 2021. According to recent reports from market research firms, e-commerce will account for 52% of total retail sales in China this year”.
However, entrepreneurs should consider the legal implications in the e-commerce market. Specifically, ensuring maximum trademark and patents protection when goods are sold on e-commerce platforms in China.
Dr. Gilardino highlights in the webinar “With the development of e-commerce and digital marketing via social media channels, companies increasingly face online violations in intellectual property rights. Such violations can cause serious economic, as well as distort the market value of brands. For this reason, adequate protocols to protect intangible assets are increasingly necessary”.
Overall, implementing the right protocols is not only beneficial for architects and designers but also results in a higher market value for the designs. There is a large market for foreign home and design companies in China, however, companies should ensure the right legal foundations are established before entering the market.
If you have questions or concerns on Doing Business in China, please contact us at email@example.com to schedule a consultation session. Horizons can provide insight, expertise and the right solutions for you