Regional Differences of Chinese Market

SMEs Enter China: 

Regional Differences of Chinese Market 

Xiaotian Zhang 

Xiaotian Zhang Xiaotian (PhD, Zhang Econ. (PhD.exp) Cand) 

University of Tartu, Estonia 

University of Oulu, Finland

Xiaotian Zhang 

•Rajawali Fellow, Ash Center of Democratic Governance and Innovation 

Harvard Kennedy School, Harvard University, US 

•PhD. Cand in Economics, University of Tartu, Estonia 

•Visiting Scholar, Said Business School, University of Oxford, UK 

•PhD studies, Turku School of Economics, University of Turku, Finland 

•Visiting PhD, University of Southern Denmark, Denmark 

•Chairman of the Board, Raatuse International Trade Ltd/ABG 

Collection/Kina.CC 

•Lecturer in International Business, Oulu Business School, Finland 

•Guest Lecturer, University of Shanghai for Science and Technology, China 

•Member of AIB-UKI, EIASM, EIBA

Huaxi Village 

• Every family has a house of between 400sqm and 600sqm, cars, healthcare 

support, free education, each villager has minimum half to one million euro in bank 

• A 2.5 billion RMB (300 million euro) building “not a big deal” (382m high)

Huaxi Village 

• Building a “New Village in Sky” 

• Many families start to purchase private helicopters and village is purchasing 20 

aircrafts to open its own airlines 

• Building world’s 15 th tallest skyscraper in China (118 floors, 538m tall)


• 23 provinces, 5 autonomous regions, 4 municipalities and 2 special administrative 

regions of Hong Kong and Macau.

Regional Differences of Chinese Market


• China is spread across three types of mountainous regions. More than 40% of the 

country is at an altitude of over 200m. The highest point is Mt Everst (8,844m).




Region 

South 

China 

East 

China 

North 

China 

Central 

China 

Southwest 

Northeast 

Northwest 

Satisfaction with life 86.6 87.5 81.3 80.2 66.8 81.3 67.6 

Work hard and get 

rich 

33.3 31.6 30.7 34.6 42.3 44.2 67.1 

Live one’s own life 41.7 42.1 40.4 38.1 33.6 31.9 20.0 

Favor foreign brands 56.4 57.5 32.2 24.1 19.6 28.1 15.7 

Table 1. Psychographics of the local consumers 

(Sources: McKinsey & Company 2011)


Region 

Often eat in 

restaurant 

South 

China 

East 

China 

North 

China 

Central 

China 

Southwest 

Northeast 

Northwest 

85.8 84.5 81.3 51.6 42.3 36.2 19.1 

Dancing and music 50.6 51.9 30.7 34.6 42.3 44.2 67.1 

Traveling in China 41.7 42.1 40.4 38.1 33.6 31.9 20.0 

Traveling abroad 56.4 57.5 32.2 24.1 19.6 28.1 15.7 

Table 2. Lifestyle of the local consumers 



Region 

Speaks at least one 

foreign languages 

Been to foreign 

countries 

Often purchase 

foreign products 

Own foreign luxury 

products 

South 

China 

East 

China 

North 

China 

Central 

China 

Southwest 

Northeast 

Northwest 

51.7 52.5 43.8 32.3 28.1 29.9 10.2 

29.9 30.1 19.2 15.6 10.1 14.5 8.5 

30.2 28.9 23.6 20.5 15.2 15.3 6.5 

15.6 16.3 11.2 10.8 8.1 9.0 3.3 

Table 3. Internationalization degree of the local consumers 



Developed 

market 

Fast growth 

market 

Developing 

market


• South China-includes Guangdong, Fujian, and Hainan Provinces. This regional 

economy was the first to attract foreign investment with its four original special 

economic zones (SEZs), and become the most outward-oriented. 

• It has embarked on transforming itself from labor-intensive operations to high 

tech manufacturing. 

• Guangdong has become more integrated with the economy of Hong Kong. 

Fujian has many investors from Taiwan, and is renewing its ties with the island. 

• This region also represents the culture of the South, i.e.Min-Yue Culture, with 

plenty of contact with the outside world and great emphasis on mercantile 

entrepreneurship.



• East China-around the mouth of the Yangtze River, consists of the municipality 

of Shanghai and the provinces of Zhejiang and Jiangsu. This regional market is 

densely populated and highly urbanized. 

• It is China's industrial powerhouse, boasting more than 35% of the country's 

industrial output 

• The delta area is also sprawling with medium-size cities such as Wuxi and 

Suzhou that is the national center of textile and light industry manufacturing. 

• Known as the “head of the dragon”, Shanghai is the industrial and financial 

center of Asia and the gateway to the 300 million consumers in East China. 

• Consumers in this regional market are the most innovative and cosmopolitan, 

setting trends in fashion and lifestyles. 

• Representing the “Hai-pai” culture, well-known for having the best amenities 

and products for enhancing the quality of life



• North China-including Beijing,Tianjin, and the provinces of Hebei and Shandong, 

historically has been the geopolitical base of this country. This regional economy 

has been growing fast over the last few decades and attracted FDI-s from many 

countries. 

• With access to key government agencies, this region is making tremendous 

investment in industries such as telecommunications, computer technology, and 

pharmaceuticals. 

• Shandong is the biggest agricultural province in China and has some of the best 

township enterprises in China. 

• Consumers here are relatively conservative, yet are still open to new product 

ideas. 

• Beijing as the nation's capital also represents the culture of North China-the 

“Jing-pai” culture, attaching great value to the Confucian.



• Central China-includes the provinces of Henan, Hubei, Hunan, Jiangxi and 

Anhui, is the heartland of China with heavy emphasis on agriculture. 

• This region is relatively less developed than East China due to its landlocked 

location. In recent years, these provinces have been trying to energize their 

economies and catch up with coastal areas. 

• This region also has diverse local cultures in dialects, cuisine, and operative 

styles, etc. 

• With limited purchasing power, consumers in this region largely follow the 

trends in major metropolitan and coastal areas.



• Southwest China-including Yunan, Guizhou, Guangxi and the most populous 

province of Sichuan (over 110 million people), has always been of interest to 

foreign companies. 

• Even though its industrial output and huge population, most foreign firms find the 

consumer market there sluggish. 

• Headed by the new municipality of Chongqing, this region is expanding its 

economic base to develop various industries. 

• Known as the “Shangri-La”, attracting a huge influx of tourists every year. 

• With rich natural resources and better transportation infrastructure, this region 

has great potential as both a manufacturing base and a consumer market. 

• Relatively isolated from other parts of China, consumers have a slow pace of life 

and are less exposed to foreign goods.



• Northeast China-refers to the three provinces of Heilongjiang, Jilin and Liaoning, 

with the port city of Dalian. This region emphasizes heavy industries such as 

mining, automobile and machinery manufacturing found in its old industrial cities. 

• This regional economy has been slow in reforming its economy and state-owned 

enterprise. 

• Manchurian and Koreans are the biggest ethnic minorities in the region and have 

great impact on local cultures. 

• Northwest China-includes Shanxi, Shan'xi, Inner Mongolia, Gansu, Ningxia, 

Xinjiang, Qinghai and Tibet. Among the high mountains and expanding desert, 

this region has the largest geographic area yet limited arable land and industrial 

output. 

• To close the gap between the interior and the coastal areas, central government 

has launched a “Fupin” campaign and encouraged more investment in this 

region. Foreign investors have been given the same privileges previously.







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Chinese Market Entry 

Main Barriers & Solutions: Example of Estonia 

1. Language barrier 

Solution: 

•Combine both Estonian and Chinese human resources together 

•Build up the early communication via professional Chinese associations 

and agencies



2. Problem of “Where is Estonia?” 

Solution: 

•“Sale” Estonia first, and business comes secondary 

•Using famous references (Skype) and learn to title yourself 

•Go together with other countries within the region or union 

•“Come and see”



3. Disadvantages in economy and market size 

Solution: 

•Choice one city or one province instead of whole China to enter

Jiangsu Province 

GDP: 615 billion USD 

(Finland + Sweden) 

Population: 77 million 

Nanjing City 

GDP: 135.3 billion USD 

Population: 9 million 

Kunshan Township City 

GDP: 24 billion EURO 

Population: 1.5 million 

GDP per capital: 45,000 

USD



3. Disadvantages in economy and market size 

Solution: 

•Choice one city or one province instead of whole China to enter 

•Promote Estonia together with Finland, Sweden and other Baltic States 

as a whole package 

•Choose the advanced field to enter China or attract Chinese ODI-s 

(High-tech, logistic, tourism) 

4. Correct understanding of Chinese business culture is developing 

and changing due to the fast economic growth

Thank you! 

Official Personal Site: xiaotianzhang.edicy.co 

Email: xiaotian.zhang@ut.ee xiaotian.zhang@oulu.fi 

Zhang Xiaotian 

Xiaotian Zhang

Regional Differences of Chinese Market

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