China standard of living has been levered up exponentially over the years that it’s now the one of the top few economies in the world. Through the decades, the standard living of China has been rising and consumers are changing their needs and wants. The Chinese no longer seek for basic needs such as food and shelter According to Maslow’s hierarchy of needs, higher standard of living has fulfilled Biological and Physiological needs of the consumers thus the Chinese are moving up the level and demanding more compared to the past.

Hence, a lot of foreign investors in China are no longer just producing their goods in China. Most foreign companies are now marketing their products in China itself due to the large population demand. With a population of 1,313,973,713 (July 2006 est.), labor is not an issue in China. With a huge consumer base and increasing economy, many foreign investors are fighting for a piece of the China market.

The Chinese cherishes relationships among people. They believe that with good relationship comes trust which will lead to mutual success. Hence, the Chinese businessmen will ensure a strong and stable relationship with their business partners before carrying out any dealings with them. This way of doing business often causes conflicts among foreign investors and the locals. Foreign companies need to understand and familiarize themselves with the Chinese culture. If not, miscommunications can ruin any potential business deals and mess up the whole plan on China market entry.

Chinese uses the phrase “guan xi” to represent relationships of any kind. “Guan xi” is an important concept as the Chinese believe working with people whom you can trust can ensure a smoother business ride. Furthermore, it will be more relaxed and easier to communicate to business partners whom you have a close relationship with. The wonderful thing about “guan xi” is that even though the business parties involved are unable to continue working together, the parties will continue to maintain the relationship between them on a personal level. The Chinese do not believe that the end of a business contract ends a personal relationship. Thus, there are many companies in China who either have partners and employees whom they have a good relationship with.

However, many foreign companies do not understand why the Chinese would mix business with personal matters. One of the reasons could be that most foreign companies are from an individualist nation thus they are not used to mixing personal and business relations together. Hence, for foreign companies to invest in China, they would need to find either a local party or consulting firms to establish a network in China especially when negotiating with the locals and the government.

E-commerce in China will lead that country’s economy into a new era where customer focus, responsible business practices and innovation are the determinants of success rather than cultivating relationships with people in high places.

As the western world began to embrace e-commerce in the mid-1990s, China could do little more than watch. The concept of buying from strangers at the click of a mouse was the stuff of science-fiction.

There was no online banking available, no credit cards, and internet access was only possible if you were one of the few with a phone line – and even then it was painfully slow, and expensive.

What westerners consider a simple task – posting a package – mean long waits in long lines at the post office. State run organizations, which included the whole Chinese retail system, were inefficient, and low disposable incomes meant improvements were a low priority.

In its infancy, China’s e-commerce was driven by businesses that saw the opportunity for finding both suppliers and buyers. When it entered the World Trade Organization, companies on the fertile east coast of China, where businesses had begun to flourish, saw the internet as key to connecting to trade partners.

2003 is seen as a milestone year for e-commerce in China for two reasons. Firstly, the country’s first generation of internet users was graduating from universities, and they were quick to grasp the concepts of online commerce, shopping and gaming.

A healthy consumer culture was the result of increasing disposable incomes, and the previously state run retail outlets were no longer able to cope.

Secondly, major investments in China were being made by international e-commerce companies. This created real competition for the first time between local and foreign companies.

To instill trust in both buyers and sellers of online traders, escrow systems were developed, and real-time chat enabled them to get to know one another before confirming deals.

This was a very important feature, because the cultural history of the Chinese society saw relationships as one of the most important channels in establishing trust.

By 2007 for the first time the amount spent on online transactions surpassed the cash taken by physical retailers in China. And in a departure from the way online purchasing progressed in the west, users of online payment systems exceeded the number of credit card holders.

2008 has seen the trend towards a new type of business, conducted by entrepreneurs, niche marketers who deal directly with niche retailers, cutting out the middlemen. Many of these are buying in bulk from China and selling to the west. Individuals from the west are embracing the “drop, ship” concept – marketing products that are fulfilled and shipped from China.