Hiring Week

AWS China Team: Why China and Where to Begin

On May 14, Parimatch Tech held an online PMGO: Go Global! Conference dedicated to business globalization and entering new markets. At the panel discussion, Amazon Web Services Business Development Team Manager Shirley Li and Startup Ecosystem Builder Xiaolei Duan shared their expertise in hot business opportunities in China, Global-to-China landing road map, and startup use cases.

Maxim Liashko: One of our guests mentioned that the only country his company finds really challenging is China. We’d be interested to learn something about the kind of challenges and surprises that startups should expect when setting up in China and anything else they should know about the Chinese market.

Xiaolei Duan: The Chinese market offers great opportunities because we have a large population. And we have a unified market because the Chinese people speak the same language, which is Mandarin. 

With China’s rapid economic development over the past three decades, people’s incomes have been rising, giving them greater purchase power. And because of the well-established infrastructure, including energy, transportation, and the internet, the overall environment is very development-friendly for the private sector. Indeed, we have a large market that offers great opportunities. But, unfortunately, not everyone can benefit. We all have different strengths, and to position ourselves in a big market we also need to identify and exploit our unique value. In particular, emerging high-tech-driven industries need a good overall understanding of this market.

2021 Q1, China Primary Market Investment

In the first quarter of 2021, 2110 deals were closed in China’s primary market, which means they successfully raise money from VC firms. The top three hottest verticals accounted for around 60% of all the deals closed. Most of them were concentrated in three places: Beijing, Shanghai, and Guangdong province, where Shenzhen is located. Moreover, around 65% of the deals were from the angel round to Series B. And in the number of deals, we witness year-on-year growth of 33%.

Total investment grew by 90%, showing an increase in the valuation of startups. Deals were higher for venture capitalists, who also face fierce competition to invest successfully in very popular deals. The top three highest sectors included IT, healthcare & life sciences, and semiconductors & electronic devices. 

However, this doesn’t mean that these are the most suitable verticals for foreign startups to get their opportunities in China. I believe that for consumer brands, including food & beverages and fashion & beauty products, if you manage to find your niche market, the overall opportunity is actually quite positive.

But I would strongly suggest that you have a specialist local vendor to handle marketing and branding. And then for operations, you’ll also need an experienced local partner, or you could decide to do licensing.

High-potential industries

  • Healthcare and Life Sciences

Xiaolei Duan: Here, I’m mainly talking about consumer healthcare, not drug developments or medical devices—those are tougher. Consumer healthcare mainly refers to products like cosmetics, high-end physical medical screening, or genetic testing for cancer prevention as well as nutrition and related products. Healthcare products are much the same as regular consumer products because they also need advertising, branding, investment, marketing, and distribution channels.

  • Education

Xiaolei Duan: It offers a full spectrum from preschool to adult and professional education. This market is massive and fragmented, so I believe that every player can find a place in China. 

  • Manufacturing and industrial parts

Xiaolei Duan: It’s essential for any player, domestic or foreign, to find distribution channels. The most convenient way to create these channels is through mergers and acquisitions. You find a target company that shares your business approach, and then you can acquire or merge with it - this way, you can combine the advantages of both parties.

  • Deep-tech and semiconductors

Xiaolei Duan: I believe the current boom will continue for the next three to five years. Both local and national governments are offering preferential policies. To take advantage of these policy benefits, I strongly advise you to establish a joint venture with local Chinese partners.

Some verticals undoubtedly pose challenges. If you want to focus on those sectors, I suggest you think again and collect plenty of information before you make any decisions.

4 things you need to be aware of before making decisions

The first is the internet, which includes both B2B, SaaS, and B2C applications. You are going to face fierce local competition. As far as I know, no foreign companies—including the likes of Uber, Groupon, and eBay—have ever managed to enter the Chinese market.

The second is SaaS. Because of the very particular characteristics of local users, I think it’s quite hard for foreigners to compete on prices in the Chinese market. Apart from being better placed to identify popular features and market needs, the ability of talented Chinese developers and engineers to work harder and faster than their foreign counterparts means they can easily offer products at much, much lower prices.

The third is healthcare and medical devices. As I mentioned, to succeed in those sectors, it helps to have a strong local industry background because even though you may say, “I have the best products in the world, I have the most advanced technologies,” you still need to sell them, right? If the doctors don’t prescribe your drugs or devices, there’s no way you can sell your product. This is an impossible challenge.

The last point I want to make is about Fintech. It’s a highly regulated sector. Even local players stand very little chance of success—it’s excessively influenced by politics and comes with serious risks and uncertainties. I, therefore, recommend that foreigners avoid this area at all costs. 

How to find a local partner 

Of course, there are many professional service agencies in the market. But if you want to save money, I would recommend the following three channels.

First, most embassies and consulates in China have a commercial department that runs special programs to help their nationals set up firms or small and medium-sized startups and enter the Chinese market. They also have information and resources to connect you with potential local partners.

The second is cross-border accelerators and venture capitalists. I mentioned several of them here, like Hax (an international incubator focused on hardware devices), China Accelerator, and Miracle Plus. Miracle Plus (formerly Y Combinator China) now operates independently under its independent brand name. It also does cross-border investing. And of course, there are other investors and accelerators you can go to, and if you’re interested, we can also help you to bridge with those players.

The third channel you may want to seek help from is AWS China. Here, Shirley and I have a team dedicated to helping foreign startups to find opportunities in China.

How AWS China and partners can help you to better seize China’s business opportunities

 

Shirley Li: China has been opening up more sectors to foreign companies that previously were closed, including logistics, telecommunications, and finance. We strongly encourage you to stay tuned for all the new developments and to keep working closely with us.

Two fundamental issues faced by all foreign investors:

  • market entry requirements
  • the regulatory environment

At an early stage, our team, located both in the host country and in China, can provide an expert opinion based on your business domain. Our business development executives based in Germany cover the European companies and help them expand their businesses to China.

The AWS China team has specialist business knowledge in industries such as retail healthcare, education, transportation, manufacturing, and many other hot areas. We can also connect you with consulting firms that will assist you with business registration, including ICP license applications and taxation. We work closely with them ourselves, and they have an excellent track record of providing DDoS support.

For business application development and IT resource planning, AWS China has a sizable solutions architecture and a professional team across the country; we provide advice on compliance consultancy as well as the best services and architectures.

Finally, after the planning phase, we move on to the registration of service landing. AWS China account registration takes about an hour, so it’s quick and easy. We also have a team that provides free support for businesses that need ICP filing for their external-facing websites. The process usually takes about two weeks. Once you have an AWS China account, you’re all set to use our service to serve your customers here. 

AWS China Activate program

Shirley Li: The program provides startup companies with the resources they need to get started quickly and easily. Resources include services credit, support credit, and service training. 

In 2020, the AWS China program issued 1.15 billion credits to support more than 60,000 startups go global. I’d also like to mention the EdStart Program, which is designed to enable EdTech startups to move faster through cost benefits, technical training, and support, and also provides EdTech experts for our global community. These experts help you move from ideation to implementation and establish your business. The EdStart Program helps EdTech companies build very secure, scalable, cost-effective solutions so that you can deliver better services to your end customers.

In terms of technical enablement, we constantly provide an architectural review to ensure your AWS spending remains cost-effective. And for training and certification, China is also covered by the AWS global initiative to help nearly 30 million people strengthen their tech skills with free cloud computing by 2025. We hope that we’ll also be able to extend that service to you. The startups also need someone to help them provide a go-to-market resource.

 The thing that companies care about the most is the compliance challenge in China. We are therefore going to provide a consultancy service to help our customers to be compliant in China. The enterprise-connect program can bridge you to Chinese enterprises and their customers who might also be looking for your services and offerings.

Global to China Startup Use Cases

Firefly

This is an education technology startup founded in London. They offer a learning experience platform connecting teachers, parents, students, and school administrators. So they have millions of users globally, and they have been deploying their services on AWS China since 2019. We help them to better understand the regulations and compliance requirements, and also to reach potential customers in China.

Canva

A very famous unicorn from Australia, Canva is an independent software vendor that offers its design-on-demand application to more than 15 million active users globally. And from the code, you can see here, I would also like to add one more.[D7]  The company also said they saved loads of time thanks to AWS cloud computing resources in China. And, if they had used any other services, the launch would probably have been delayed for another year.

DeNA

They come from Japan, and they are supported by our gaming solutions and robust resources. They serve fast-growing game players and have no worries at all about resource capacity. 

Maxim Liashko: You mentioned you give consultations. What can we consult you about, what information should the startup prepare for this, and are these consultations free? 

We provide free consultations. By contacting us, clients can take advantage of our extensive experience of working with other startups who have come to China.

We also have experience in IT infrastructure and website solutions. We can, therefore, advise on DOS, data residency, cross-border transport, compliance, regulation, and cybersecurity.

For business, we provide general professional services. We always strive to do our best because we care about our reputation. We have a vast range of prices, and every business will find the solutions they require.

Useful resources about AWS China

Shirley Li: Here are some additional resources you may want to look into for further information. We hope this is helpful, and please don’t hesitate to reach out to us if you have any questions.

AWS China Startup website https://www.amazonaws.cn/en/edstart/?nc2=h_ql_st_ed

AWS China Gateway https://aws.amazon.com/china-gateway/

Global-to-China contact [email protected]

AWS China website https://www.amazonaws.cn/en/

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