Smaller businesses must find some way to sustain their profitability or face market exclusion and eventual closure. One such lifeline is the presence of Chinese suppliers which offer access to a wide array of products at competitive prices. In February, the country reported that its manufacturing activity had expanded at the fastest pace in more than a decade.

The allure of these suppliers lies primarily in their ability to offer cost-effective manufacturing solutions without compromising quality. Small businesses can expand their product ranges, maintain margins, and acquire unique items that set them apart from mainstream marketplaces. Business owners can access these suppliers through online B2B marketplaces, like 1688, or may choose to travel in person to trade fairs in China, like the Canton Trade Fair. At the fair, an array of China-produced products are showcased by their manufacturers, many of which could spur business growth. Approximately 200,000 foreigners attended the November 2023 event in person, and the online platform was attended by 6.6 million overseas visitors.

1688, an Alibaba Group business, serves as a B2B platform connecting international manufacturers and wholesalers with wholesale buyers in China. Specialising in diverse industries like apparel, electronics, and home furnishings, it facilitates sourcing and online transactions, providing businesses with access to a broad range of products for bulk purchasing.

“We decided to start sourcing from 1688 as we found there was a huge range of factories from China on this platform that can really enable savings from their competitive costs, without making any compromises on quality,” said Mark Brookfield from Sunrise Accessories. “We could select products that are in the range of goods that we usually buy to wholesale in Australia.”

The challenges of switching suppliers

Travelling to China to source new suppliers can be expensive for Australian and New Zealand businesses, especially when it comes to attending trade fairs of global interest that last weeks. It involves the costs of travel, accommodation, and time spent away from managing the day-to-day operations of their business. The language barrier can hinder face-to-face negotiations, while cultural differences and differing business practices might complicate agreements and contracts. Even conducting business purely online can be subject to the same problems.

After a deal is struck, things may not necessarily be smooth sailing. Vetting suppliers for quality, reliability, and ethical standards to ensure compliance with bodies like the Australian Competition and Consumer Commission (ACCC) is crucial but also challenging from a distance. Coordinating logistics, ensuring quality control, and managing shipping and customs processes add layers of difficulty, too.

Reliance on foreign suppliers, particularly those in China, introduces risks related to geopolitical tensions, trade regulations, and unexpected disruptions such as those seen during global crises or natural disasters. For example, in August 2022, a heatwave in the country led global manufacturers like Volkswagen and Foxconn to suspend their operations to save power after a spike in demand for air conditioning put pressure on the local grid. Issues like intellectual property protection and maintaining ethical manufacturing practices also pose challenges when dealing with suppliers from different countries.

Despite the risks, Australia and China continue to have a strong relationship, with a study by the University of Melbourne finding that 58 per cent of Australian companies still identify China as a top three priority for global investment. Indeed, in November 2023, Prime Minister Anthony Albanese visited China and said that “significant progress” was made in relations after talks with President Xi Jinping. China is also planning to remove tariffs on a number of Australian products to help improve the relationship between the countries.

Easing the transition with WorldFirst

While the source of some challenges may be out of a business’s hands, steps can be taken to ease the transition to Chinese suppliers. Choosing to do business remotely and hiring local sourcing agents can reduce travel costs and marginalise unreliable suppliers. Human translators are also vastly more valuable than online tools for communication, and the risk of unexpected supply chain disruptions can be mitigated by diversifying product lines, conducting thorough risk assessments, and keeping abreast of geopolitical developments.

But an integral part of success is the smoothing over of international payment processes to ensure that business owners deal with invoices efficiently and suppliers are paid quickly. Paying manufacturers in their local currency eases the financial burden of currency conversion fees and FX fluctuations, improves supplier relations and trust, and enhances operational efficiency – ultimately giving businesses more scope to tackle other challenges they cannot prepare for.

Leading global fintech company WorldFirst connects businesses around the world with fast and affordable payments, and offers an easy way to achieve smoother commerce with its World Account, explicitly designed for cross-border businesses trading in multiple currencies. With their World Account you have access to local sort codes, account numbers, and IBANs, working to reassure partners, minimise conversion charges, and reduce fees associated with cross-border trade. They also aid businesses in currency risk management by offering tailored hedging solutions, enabling e-commerce businesses to protect themselves from currency volatility and maintain stable pricing during economic uncertainty.

WorldFirst is currently the only provider in the market to connect to the cross-border payment solution for 1688. This purpose-built link to 1688’s network of ten million suppliers in 1,700 categories provides businesses with direct access to a wide array of products at competitive wholesale prices.

The integration also supports global selling on major marketplaces like Amazon, Wish, AliExpress, Lazada, and Shopee and facilitates direct deliveries to warehouses in China or international shipments managed by logistics partners. Online sellers can pay suppliers and collect from various marketplaces all within a single account, making reconciliation and preparation of tax returns much simpler. Furthermore, once the World Account is synched to Xero or NetSuite, businesses benefit from streamlined financial management, saving on time and accountancy fees.

With WorldFirst’s competitive exchange rates and transparent fees at lower rates than local banks, businesses can optimise costs while ensuring swift and reliable payments. There are no transaction size limits or hidden charges, and payments are transferred on the same day and fully comply with international trade regulations.

“WorldFirst has been a great help with this transition as we found most of the smaller factories in China did not have US accounts to pay their invoices,” said Mr Brookfield. “This way we could transfer CNH straight to their Chinese account, which is much easier for us.”

WorldFirst is a global fintech that connects businesses around the world with fast and affordable payments, access to international marketplaces, flexible currency risk management tools, working capital, and a deeper understanding of cross-border payments and global markets. The latter enables its relationship managers to provide insights into payment trends and preferred trading methods in different regions, helping businesses adapt their strategies. The Australia-based team is ready to help with any inquiries or visit the WorldFirst website, or for more information. Discover how you can take advantage of overseas suppliers with WorldFirst today.

The post The rise of Chinese sellers in sustaining small business profitability appeared first on TechWire Asia.

Another option is to add new products to help attract a wider customer base and grow the market share. However, this strategy can strain resources and even dilute the brand identity if not executed carefully. Additionally, it may take time for these new products to gain traction and contribute to the bottom line, which could impact short-term financial results.

One promising growth strategy is international expansion, as it allows e-commerce businesses to tap into new markets and diversify their revenue streams without immediately resorting to price wars or stretching resources too thin. Yet this path is not without obstacles, including currency fluctuations, complex regulations, and evolving payment trends. To navigate these effectively, e-commerce businesses can leverage purpose-built tools like overseas or local currency accounts. While this may seem a minor detail, having access to these accounts when venturing into international expansion can directly impact profitability.

The stagnation of e-commerce

The e-commerce industry has famously been one of exceptional growth since the mid-1990s, corresponding with the launch of giants like Amazon and Alibaba. The demand for more convenient shopping experiences and technological advancements propelled this boom, transforming how consumers make purchases and businesses operate. In 2021, 2.14 billion people shopped online – about 28 per cent of the world’s population – compared to 1.32 billion in 2014. However, more recently, the seemingly exponential curve of sales has flattened. Customers are becoming more frugal due to inflation – two-thirds of respondents to the US Consumer Pulse Survey 2023 said it was one of their top three worries – causing the industry’s growth to stagnate.

While established e-commerce platforms with global customer bases may be able to weather a drop in sales, the same cannot be said for small and medium businesses. Inflated operating costs, like raw materials, shipping, and labor, will also erode profit margins and have a negative impact. Smaller businesses often operate on tight budgets, so any cost increase can hit profitability hard. Retailers that rely on imported goods may also be overly affected as foreign currency can depreciate in times of inflation. For example, just before Sterling dropped to a record low last year, the cost of imported goods increased by 5 per cent.

In challenging economic conditions, smaller e-commerce businesses may want to investigate expanding internationally to increase their customer base. Global cross-border e-commerce sales are forecast to grow twice as fast as global e-commerce sales in general over the next seven years. Thanks, in part, to the rise of convenient and secure digital payment methods, consumers are more comfortable buying goods online from anywhere. They also expect access to a broader range of products to be available for purchase at any time they choose.

International expansion: The challenges

However, this is not a risk-free solution for retailers. Currency fluctuations can significantly impact pricing, profit margins, and overall financial stability. Conducting business overseas also involves navigating complex regulatory compliance issues.

Trade rules and regulations vary considerably from one country to another, touching everything from import and export procedures to product labelling and safety standards. Environmental compliance can be similarly complex, including restrictions on packaging materials, waste disposal, and carbon footprints associated with shipping.

It is imperative that e-commerce businesses expanding internationally stay up-to-date with these regulations and ensure that their operations comply, as failure to do so can result in delays, fines, or even legal consequences. In 2022, over $2bn of fines relating to anti-money laundering (AML) compliance in banking were administered globally. AML checks are often associated with international payments because they present a higher risk due to the complexity and cross-border nature of such transactions.

Another challenge is keeping up with global payment trends and providing localized payment options for customers. Mobile wallets, contactless payments, and buy-now-pay-later are just a few examples of modern payment methods growing in popularity at different rates in different parts of the world. Cash has been king in Japan for decades; however, this year, the use of coins has dropped as banks have started charging for large deposits.

Buy-now-pay-later is also expected to account for nearly a quarter of all global e-commerce transactions by 2026, up from 9 per cent in 2021. To attract customers in a new jurisdiction, e-commerce businesses should offer the preferred payment options and adapt their marketing and customer service strategies to the area. Building trust with international customers is crucial, and this often involves providing multilingual customer support and transparent pricing that includes any import duties or taxes.

How local currency accounts can help

But e-commerce business owners should not allow these challenges to put them off international expansion. Taking a step-by-step approach can make the process feel less daunting, methodically researching target markets, ensuring compliance, and adapting to evolving payment trends before launching into new territories.

There are tools designed to alleviate some of the headaches associated with this kind of endeavor so decision-makers can focus more of their attention on strategic growth. One is an overseas currency account from leading foreign exchange (FX) and international payments company WorldFirst. Its localized currency accounts provide a natural hedging solution for managing finances in multiple currencies, and its staff specialize in helping businesses navigate the complexities of global trade.

Foreign currency bank accounts are valuable tools for businesses involved in international trade, primarily because they enable businesses to manage currency exchange rate risk more effectively. For example, US businesses operating globally can accept payments in foreign currencies like Euros, Pounds Sterling, or Australian Dollars. By maintaining these earnings in their respective foreign currency accounts, businesses reduce their exposure to potential losses resulting from unfavorable currency exchange rate fluctuations and avoid the immediate need for currency conversion into US dollars.

WorldFirst accounts provide local sort codes, account numbers, and IBANs, effectively creating the impression and ease of having local bank accounts in various countries. This simplifies the process of receiving payments in different currencies while eliminating the need to set up and manage several foreign bank accounts, which can be both time-consuming and costly. E-commerce businesses can seamlessly charge payments in the local currency of their customers, ensuring a hassle-free customer experience.

Local banking adds to the business’s profitability by avoiding expensive conversion charges. By holding foreign payments in the original currency, there is no risk of incurring additional costs due to unfavourable exchange rate fluctuations. Double conversion fees, where the bank charges for converting to the company’s domestic currency and then back to the foreign currency for expenditures in the foreign market, are also effectively eliminated.

As mentioned, businesses engaging in cross-border e-commerce often grapple with fluctuating currency prices that can impact pricing and profit margins. With a WorldFirst account, companies can lock in exchange rates through robust hedging solutions like forward contracts, providing e-commerce businesses with a means to protect themselves against currency volatility. This feature is particularly valuable in times of economic uncertainty, as retailers can maintain stable pricing and preserve their margins.

In addition to simplifying international finances and mitigating currency risks, WorldFirst’s local currency accounts empower e-commerce businesses to operate more efficiently in global markets. With connectivity to over 100 global marketplaces, users can make one-off or scheduled payments to individuals or send funds to up to 200 suppliers with just a single transaction. This efficiency is especially important for businesses with high transaction volumes or those managing complex supply chains.

WorldFirst is licensed with ASIC and holds customer funds in segregated accounts for their peace of mind. Its team of experts is accredited and has a deep understanding of cross-border payments to support its clients. They can help businesses navigate the complex landscape of international trade regulations, ensuring that account holders remain compliant with the laws of each target market. Moreover, WorldFirst’s expertise in global markets and payments can ensure e-commerce businesses stay ahead of evolving payment trends. The team can provide insights into the preferred payment methods in different regions and help retailers adapt their payment strategies accordingly.

Businesses can open up to ten WorldFirst local currency accounts for free and pay suppliers, partners, and staff in 40 currencies with no hidden costs. Discover how to expand your reach with WorldFirst by today.

What to look out for to avoid expensive overseas supplier payments when expanding your e-commerce business internationally:

• Exchange rates: Keep an eye on exchange rates to ensure you make payments at the most favorable times. Currency fluctuations can significantly impact your costs.
• Hidden fees: Be aware of any hidden fees associated with international payments, such as intermediary bank charges or receiving bank fees. Transparent pricing is essential.
• Conversion costs: Avoid double conversion fees by holding foreign payments in their original currency whenever possible. This helps eliminate additional costs due to currency conversion.
• Forward contracts: Consider using forward contracts to lock in exchange rates and protect your business against currency volatility. This can help maintain stable pricing and preserve your profit margins.
• Compliance: Ensure that your international payments comply with the laws and regulations of each target market. Non-compliance can lead to fines and legal consequences.
• Payment trends: Stay up-to-date with payment trends in the regions you’re expanding into. Different markets may prefer specific payment methods, so adapt your strategies accordingly.

The post Are Local Currency Accounts Key to International eCommerce Expansion? appeared first on TechWire Asia.

It doesn’t help that the U.S. government is investigating another Chinese firm, ZTE, for supplying equipment to Iran, which it is in conflict with.

The Economist has a feature on the challenges faced by Huawei in the face of scrutiny, which details how Huawei has been working closely with private security firms and governments in initiatives that will help persuade potential partners and clients of their products’ security. The Banbury, UK-based Cyber Security Evaluation Center works closely with British signals-intelligence agency GCHQ.

Even Huawei suggests a proactive approach to security. “Believe no one and check everything,” says John Suffolk, former CIO of the British government and now Huawei’s global cyber-security officer. However, experts say that security flaws are difficult to find, and can sometimes be subtly embedded in the code, and possibly included by accident. As such, doubts remain.

But with these doubts, there is concern that knee-jerk nationalism like banning equipment manufacturers may “balkanize” IT. Experts even cite the fact that almost all other telecoms manufacturers produce their goods in China and source components from firms like ZTE and Huawei, which means banning Chinese goods will result in a false sense of security. If Chinese companies wanted back-doors, they could put these in place in components supplied to American, European and other brands.

For its part, Huawei is trying to project a more open image, by publishing what can be considered an annual report. However, corporate details are still “murky” and governments are still wary that the Chinese government may be bankrolling Huawei’s business efforts in the aim of opening security holes in foreign communications infrastructures.

Even China is worried of so-called digital Trojan horses in telecommunications equipment. “Both [countries] believe that the other will seek to exploit the supply chain to introduce vulnerabilities into networks and infrastructures,” said a statement by the China Institute of Contemporary International Relations and the U.S.-based Center for Strategic and International Studies.

Still, the ball is in Huawei’s hands, says Cambridge university professor of security engineering Ross Anderson. Huawei would have to lead the clean-up effort, which should help improve its trust rating in the international community.

The post Huawei ‘Spooks’ Governments Due to its Dominance appeared first on TechWire Asia.

The study is based on publicly-available information, and highlights how Chinese commercial firms and foreign partners provide the Chinese military access to cutting-edge research and technology, Reuters reports.

According to the report, China is “fully engaged in leveraging all available resources to create a diverse, technically advanced ability to operate in cyberspace.” This includes attack, defense, and network exploitation activities, including intelligence collection.

[People’s Liberation Army] analysts consistently identify logistics and [communications, command and control] infrastructure as U.S. strategic centers of gravity, suggesting that PLA commanders will almost certainly attempt to target these systems [with cyber-weapons], likely in advance of actual combat to degrade [U.S.] capabilities in a conflict.

This capability has the potential to cause a “catastrophic failure of systems and networks supporting critical infrastructure for national security or public safety,” says the report. Further, “Chinese capabilities in computer network operations have advanced sufficiently to pose genuine risk to U.S. military operations in the event of a conflict.”

PLA exercises increasingly include network attack, network defense, electronic countermeasures, and psychological operations operating alongside ground, naval, air, and strategic missile forces.

The U.S. has taken an official stance as being concerned over Chinese espionage via computer penetrations, saying that “Chinese actors are the world’s most active and persistent perpetrators of economic espionage,” in a declassified report to Congress by the Office of the National Counterintelligence Executive.

The recent reports notwithstanding, U.S. officials have deems themselves still ill-equipped to deal with cyber-warfare vulnerabilities. Deputy Defense Secretary Ashton Carter says funds are not the problem, and that the concern lies with “[figuring out] productive ways of doing it.”

Aside from military concerns, the analysis likewise points out how Chinese authorities have the ability to penetrate U.S. telecommunications supply chain, through which the military could create secret “back doors” or “booby traps” in vital systems.

Meant to aid in creating cyber-security legislation, the 136-page analysis by the Northrop Grumman Group will be used by American lawmakers in drafting laws that aim to improve security among U.S. networks, such as the U.S. Transportation Command (TransCom), which was pointed out as a likely target for a pre-emptive attack. TransCom provides cargo and logistics support to the U.S. armed forces, but has to run on unclassified networks due to tight integration with commercial logistics providers. As these are Internet-based, these could be vulnerable to cyber attacks, the report says.

The post Chinese Cyber-Warfare Capabilities a Threat to U.S. Military – Report appeared first on TechWire Asia.