roundtable
is the world’s second largest importer, so they are not just selling products, and FDI (foreign direct investment) is also significant. I was at this year’s London Fashion Week where it was said that 20% of participating companies are from China. In the Shenzhen promotion seminar, I learnt that 40% of wearable products made in China are from the City of Shenzhen. You’ve got to look at which province or market is best for your company,” he said.
Robin Stevens at Crowe suggested: “Choose provinces that are likely to have the most traction for your products and which have a track record of international trade. After all, a company could easily spend its whole life trading with just one province, for example Guangdong, Henan and Shandong, because the populations in each are larger than any European country. See what Chinese government incentives are available. These used to be based on particular regions to help them catch up with others. Now, incentives are based more on specific industries where growth and development are required. Do your detailed planning and research in advance, including using UK resources such as the Department of International Trade and the China British Business Council, so you maximise your chances of success.”
Where to start
Christopher Lethbridge at the China British Business Council said: “First, get a clear understanding of your value proposition for doing business in China. And remember, there is growing competition, from Australia, Canada, New Zealand, the rest of Europe, the US and domestically. For example, you can walk into a Chinese supermarket and find hundreds of brands of bottled water from around the world – but what is the differentiating factor? Decide on your USP (unique selling point) so you can target your approach – or you could get lost very quickly.”
Prodrive designs and builds racing cars and has done a number of deals with Chinese manufacturers as it takes tentative steps towards greater involvement with potential partners. Commercial director Max Vialou-Clark said: “We’re not yet ready to consider moving any of our UK manufacturing in China, but we are engaging with potential customers in China.”
Charles Kendall Freight’s managing director Peter Sunderland said that there is more than one road to China, including via free-trade zones. “We advised a Cambridge-based company to move its depot from the UK to a free-trade zone in China to make its supply chain more
effective, which was very successful. But you first have to clearly understand the rules and regulations,” he said.
Joint venture benefits
Yingni Lu is a director at specialist advisory firm EcoLeap, which brings UK and Chinese companies and investors together. She thought joint ventures should be an important consideration for UK businesses: “The points others have raised make a lot of sense – you need to know why you want to go there, what value you will bring to China. The most important step after that is to look for a suitable partner you can trust to work with, but without rushing into a partnership.”
When businesses develop trading links with China they shouldn’t forget about practical details, like tax, advised Crowe partner Robert Marchant: “Deals often get done but the company’s tax team only finds out later. There could be questions around registration and how much tax will be due, which could erode profit margins on a deal. So, be prepared, find out the tax rules, work out what you will need to pay and when.”
SME opportunities
Tread with caution was the general consensus for SMEs eyeing the Far East. Stuart Stoter from UK Export Finance said: “Six or seven years ago, many SMEs – from start-ups to well-established businesses – were talking about trade with China. These days, I rarely hear the topic mentioned. That could be because SMEs are well established trading in China and it’s no longer a big deal. And perhaps the number of companies that had tried and failed has been winnowed down. Success comes from taking your time – SMEs should take a long-term, strategic approach.”
Lu added: “I work with research sector companies looking to export to China and the Far East. The challenge is to match UK expectations with those of the Chinese client. In our experience, UK businesses do best by shopping around, especially in provinces that are attracting UK research organisations and universities, and which are ready to sponsor research in the UK.”
China is keen to attract businesses and talented people, agreed Wu. “Chinese provincial governments are busy going around the world looking for talent. China has realised that the next stage of its development is all about advanced technologies and services, which depends on human capital. China wants to attract the best and the country is rolling out the red carpet if you are well qualified. I think UK service industries could have a field day working with China in the next 10 years,” he thought.
Continued overleaf ... THE BUSINESS MAGAZINE – NOVEMBER/DECEMBER 2018 Eric Yu
John McLean
Peter Sunderland
Robert Marchant
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