The diplomatic relationship between Brazil and China began in the 19th century. This relationship became closer in the ’90s due to a more complementary commercial approach. Since 2009, China has been Brazil’s leading trading partner. The economic connections between the countries have brought them closer despite the great geographic distance.
Brazil is a crucial commodities supplier, whereas China provides mostly raw materials, supplies, and machinery to Brazil. China additionally plays a vital role in the Brazilian economy since it buys more than it sells. Since 2010, China is also responsible for heavy investments, especially in energy and infrastructure. In 2019, China invested USD 1.9 billion in Brazil, following the Chinese government commitment made at the 11th BRICS summit in Brasília to invest UDS100 billion.
From January to October 2020, 21.6% of all products imported to Brazil were from China. According to Mr. Yang Wanming, Chinese Ambassador to Brazil, more than 300 Chinese companies invested in Brazil, of which 25 ranked in the top 500 companies globally. The closer connections between the two countries are even more evident now with the joint efforts to elaborate a vaccine against COVID-19.
China considers Brazil as a strategic partner. This scenario presents an opportunity for Brazilian companies that want to expand their businesses to China, even more so after the country’s new Foreign Investment Law came into effect last year, which aimed to make foreign investments in China safer and easier.
Establishing a business in China can present a range of strategic benefits to Brazilian companies, especially to those that wish to partake in product import-export services or establish their operational focus on the Chinese market, from preparation to the distribution of their products services. Although not every company has the same needs, we list a few benefits of establishing a company in China:
- Access to foreign investment protection as a China-based entity
- Obtain Chinese-speaking skilled workforce
- Closer contact with Chinese suppliers
- Access to one of the biggest consumers markets in the world
Understanding the potential of these fruitful economic relations between Brazil and other Latin American countries, Mr. Thomas Wong, Partner of CW CPA, established a team entitled ‘Latin Department’ to serve Spanish and Portuguese-speaking clients. One of CW’s differentiating factors is that we offer experienced native-speaking advisors that attenuate the cultural differences, thus making the navigation through the complex Chinese market smoother.
To date, our Brazil Desk is a division under the Latin department, assisting various sizable Brazilian companies operating in China, with two Brazilian advisors, namely Kemelly Vera and Rafael Fraga. Our Brazil Desk focuses on international retailers, technology equipment manufacturers, and medium-sized traders that are sourcing components from mainland China. If you are looking to capitalize on China’s market opportunities, please contact our Brazil Desk:
Kemelly Vera | LinkedIn profile
Rafael Fraga | LinkedIn profile
Brazil-China Chamber of Commerce
The Brazil-China Chamber of Commerce (CCCB) aims to strengthen commercial ties between Brazil and China while contributing to effective communication between companies and entrepreneurs both in China and Brazil. It is equipped with a specialized team of professionals in Brazil and China, ready to meet affiliates and customers’ diversified demands.
CCCB advises its affiliates to overcome language and cultural barriers and recommend strategic solutions to facilitate business development and growth. They develop personalized services catering to the clients’ unique needs.
It is fundamental to aid the effective communication between Brazilian businesses, Chinese companies, and entrepreneurs. CCCB’s portfolio offers services including but not limited to:
- Market expansion analysis;
- Prospecting for suppliers and buyers in Brazil and China;
- International business trips;
- Suitability research;
- International trade fairs;
- Business intermediation.
In 2020, the Chamber strived to improve its products and services in response to the latest business transformation promoted by the global pandemic. It endeavors to ensure the quality of the services provided. Moreover, CCCB is proud to announce that it has achieved the expected growth of the year; with its cooperation with CW CPA‘s partner Mr. Thomas Wong (CCCB representative) to establish its presence in Hong Kong, the Chamber successfully launched its Shanghai office and business in the Greater Bay Area.
It is foreseeable that 2021 will still be under the significant influence of COVID-19. CCCB targets to deepen its cooperation with CW CPA to promote more flourishing China-Brazil relations in light of the unprecedented challenges.
The Growing Coffee Consumption in China Opens up Opportunities for Brazilian Coffee
Since 1820, coffee has been Brazil’s most exported product. In only 20 years, Brazil has developed into the world’s leading coffee producer, exporter, and consumer. Coffee-producing regions spread across 14 Brazilian states, with Minas Gerais and Espírito Santo as the top production states. The country cultivated over 60 million 60-kilogram bags of coffee beans in 2020, marking a sharp increase in production since the 2018 record of 50.90 million bags. Due to the excellent weather conditions, expansion of clonal seedlings, and improved crop management techniques, Brazil is forecasted to account for most of the world coffee production gain this year.
China’s Thriving Coffee Market
Known as one of the world’s fastest-growing countries, China’s relationship with coffee has been one of the lowest globally – an average of 5.4 cups per capita in 2019. Nevertheless, this phenomenon changed between 2008 and 2018, thanks to the growing influence of Chinese millennials. As the 1981 and 1996 generation make up most of China’s current population, their passport holding likely suggests their higher disposable income. With the modern penchant for travel, exposure to Western culture also changed the Chinese’s drinking habits from traditional tea to coffee. All these led to the impressive growth of China’s coffee consumption by 1032% in 2018. More notably, there is remarkable revenue growth of 15.6 billion yuan to 56.9 billion yuan between 2013 and 2018. It also projects and represents a 25% compound annual growth until 2023.
China’s coffee consumer market is a massive land of opportunity for Brazilian coffee. According to the United States Department of Agriculture (USDA), the domestic consumption of coffee in China is forecast to be 3.35 million 60-kilogram bags, which is about 17-20 cups of single-shot coffee per person. There is still much room for growth.
Although China herself also produces and exports coffee beans from the Yunnan coffee plants, coffee bean import still occupies a significant proportion in its coffee market. Currently, Vietnam is China’s major coffee importer, accounting for 65,100 tonnes of coffee imports in 2019. Simultaneously, Brazil’s coffee bean is exported to the country dramatically increased by approximately 110% in 4 years.
E-Commerce as an Entry Model to the China Market
E-commerce breaks through the reach limitation experienced by physical stores and product origins. It acts as an exciting promotion and retailing channel to bring businesses and customers together. Apart from retailing through the brand’s mobile application, both local Chinese and international corporations have been using Tmall.com as a stepping stone into Greater China. Launched in April 2008 as a spin-off from Taobao, Tmall.com is Asia’s largest e-commerce platform for brands to sell directly and penetrate the prospering China market.
To stand out from competitors, new coffee brands now learn to adopt e-commerce platforms with the hope of bringing in more businesses. For instance, in China, the Luckin Coffee brand launched a mobile app to streamline its operations and analyze customer preferences for promotional use. The brand’s innovative use of technology enables the corporation better to determine store locations, pricing, and market forecasting. The app allows customers to complete a remote, overall order from many coffee, non-caffeinated drinks, and light food. Before making their order, customers could find a brief drink introduction, such as its primary ingredients. Users can also customize their drink to their liking on the app to avoid miscommunication with the barista. Such a convenient and accurate way of making orders appeal to the new generation of coffee drinkers who applaud speed and convenience. Moreover, the app includes various mobile-exclusive discounts to connect further and retain current customers and attract new users. Thus, from Luckin’s case, we could see that the adoption of e-commerce platforms enables coffee brands to collect customers’ preferences to tailor their services and menus better and, eventually, boost retail sales.
SeeSaw Coffee, a Shanghai-based pioneer in specialty coffee, has successfully retailed its Yunnan and Latin American coffee beans online through Tmall.com. SeaSaw offers a wide range of coffee products like hanging ear drip black coffee filters and Italian-style freshly ground Yunnan coffee powder online to suit its customers’ needs across the country. Unlike other online marketplaces like Amazon, Tmall ‘recognizes’ the existence of “Flagship Stores”, which SeeSaw’s Flagship Store is similar to its standalone website.
The increasing popularity of coffee in China reflects the undoubted potential of the coffee bean industry. The improved living standards and quality of life will further contribute and stimulate coffee culture and consumption. Adopting e-commerce as an entry model allows and encourages Brazilian coffee farmers to actively engage with worldwide customers and expand their businesses and profits.
Written by Claudia Tam , Latin Department, CW CPA