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Business idea for exporting buckwheat husks from Russia to China

Export of buckwheat husks

In Russia:

  • In 2022, the sown area for buckwheat was increased by 15.1%.
  • Buckwheat is grown in 49 regions.
  • Domestic production of buckwheat fully meets the needs of the domestic market.
  • A ton of buckwheat costs 127 dollars.

In China:

  • 145 thousand tons of buckwheat husks are produced.
  • The demand for raw materials in agriculture and industry exceeds 600 thousand tons.
  • Wholesale buyers purchase buckwheat husks for 500 dollars.

Areas of application for buckwheat husks:

  • Feed supplement for livestock
  • Production of traditional pillows
  • Agriculture and crop protection
  • Furniture production
  • Packaging for cargo transportation

Advantages of doing business in China:

  • China did not support the disconnection of Russia from the SWIFT interbank communication system, nor did it support sanctions.
  • Foreign companies can engage in remote trade in China through the sphere of internet commerce.
  • Developed infrastructure for cross-border e-commerce.
  • Variety of routes and methods for transporting products from Russia.
  • Chinese government’s policy of reducing customs tariffs.
  • Numerous free trade zones, including one designed for cooperation between enterprises from Russia and China.
  • Relative financial stability between the two countries.
  • Alternatives to SWIFT include the Russian Financial Messaging System (SPFS), which is used by the Bank of China, and the Chinese Cross-Border Interbank Payment System (CIPS), which is used by over two dozen Russian banks.
  • Russian banks offer customers cobranded MIR-UnionPay cards.
  • China regularly reduces duties on a wide range of foreign products. In 2020, tariffs were reduced for 850 categories of goods, and in this year, for 954.

Types of organizational and legal forms in China

The two main forms are:

  • B2C, which involves direct product delivery to the consumer.
  • B2B, which involves organizing deliveries through a business partner who is responsible for representing interests in another country.

Taxation Features

In 2022, there are 4 tax rates in China:

  • General state rate 13% Applies to the sale of any goods.
  • Reduced rate 9%. Applies to the services of carriers and some goods.
  • The rate of 6% is charged for logistics and consulting services.
  • Export goods are not subject to VAT.

Chinese offshore zones (SEZ), which provide a 10% export, are traditionally treated as tax havens.

Financial reporting

When exporting goods, a Russian organization can apply a 0% rate if:

  • there is a contract with a Russian organization.
  • copies of customs declarations, the information from which is included in the register, can be submitted without the marks of Russian customs authorities of the place of departure.
  • Opening a bank account in China
  • The partner company provides information about itself to the bank.
  • The bank representative visits the company’s Chinese office to check the address and documents.
  • The bank issues the necessary documents to the company.
  • The exporting company applies to the bank with all the documents.
  • Opening an account.

Features of doing business in China

The country has its own social networks and messengers for business partnership, establishing and maintaining relationships:

  • WeChat. The most popular messenger in China. Communicate, make purchases, register marriages, and obtain certificates here. There are over 1 billion users on the platform. There is the opportunity to create a business account, and the Moscow authorities help entrepreneurs sell their products on this platform. To communicate with Chinese entrepreneurs, one must master WeChat. All dialogues and discussions take place in the messenger.
  • Weibo. The platform has fewer than a billion users, but the number of users is still impressive – over 560 million. It is something between Facebook and Twitter.
  • Doyin. An analog of the well-known TikTok, with more than 400 million registered users who can make purchases directly through the application.

In China, there is an equivalent of Google – Baidu, where contextual advertising can be launched.

In China, social networks have a strong influence. The market knows success stories that have happened thanks to Doyin, for which competent specialists are needed. There are practically no such specialists in the Russian market, so it is necessary to look for local SMM specialists.

The Mandarin language is the language of business in China. It is necessary to:

  • avoid insignificant small talk;
  • be cautious with gestures, as they can convey different meanings;
  • avoid embarrassing partners, as Chinese people don’t like to say “no”;
  • not take offense at intrusive questions about age, income, or marital status.

Negotiations. National peculiarities

In China, the development of “guanxi” – informal relationships, is important. The Chinese people think ahead 5 thousand years – this is a cultural feature. The behavior of a Chinese partner may seem slow. Chinese people note the sharpness and some callousness of Russian businessmen. It is very important to develop relationships – a kind word or praise will be noticed. Golden rules also apply – friendliness, politeness, precision in fulfilling agreements, and at the same time, control over the fulfillment of agreements.

In China, there is the concept of “chabudo” – “almost the same.” It means “it will do.” What seems important and obvious to us may be insignificant to the supplier.

A good deal is a worthy feast. When communicating with Chinese people, despite parity relations, adhere to Asian traditions of communication, do not allow sarcasm and irony regarding their ethno-cultural characteristics. Chinese people are a very proud nation, and one unsuccessful joke can ruin the whole project.

History, climate, historically established moral norms

Three climatic zones:

  • moderately continental (west and north), with hot summers and severe winters,
  • subtropical (central areas of the country),
  • tropical monsoon (southern coast and islands), characterized by very high humidity in summer.

The formation of national culture is significantly influenced by the climatic conditions of the people’s lives. The struggle against constant floods, droughts, and typhoons united people, forming the basic qualities of the Chinese nation:

  • collectivism,
  • cohesion,
  • discipline,
  • patience.

Due to natural disasters, people were constantly limited in resources, which led to the formation of such qualities among the Chinese as:

  • frugality,
  • pragmatism,
  • calculating.

In ancient times, all the basic ideals and values of Chinese national culture were formed, which are still observed today. Continuity, traditionalism, and closedness are among the most important features of the development of Chinese culture.

Organizational structure

The scheme of exporting goods to China in the form of B2B through a partner company with a business license does not imply the creation of a legal entity on the territory of the country, the development of an office, and the creation of jobs.

Development perspectives

Creating and building long-term relationships with a Chinese representative company will allow the development of an exporting company from Russia. The existing conditions for doing business in Russia-China will allow saving on office maintenance and employees within the country. The opportunities presented by well-known brokerage trading companies in China will allow placing the company’s securities for further business scaling.

On the stock exchanges of Hong Kong, Shanghai, and Shenzhen, the majority of Chinese IPOs are:

  • raised capital – 85%.
  • number of companies – 91%.

From January to August 2022, the IPO market in China grew by 44% year-on-year, to $58 billion, a record high, while in the US, there was a 92% year-on-year decrease. In 2022, China had 5 IPOs worth more than $1 billion and another one is in preparation. In New York and Hong Kong, there was only one such public offering, and none in Europe.