A few weeks ago I attended a conference on Asia, organized by Export Development Canada (EDC) and the Canada China Business Council (CCBC).
The keynote speakers included EDC’s vice-president and chief economist, Peter Hall and the CCBC’s chairman, David Fung, who used concrete examples to show why it’s important for Canadian businesses to be present on the Chinese market. He also explained that companies that don’t venture beyond Canada’s borders will have a tougher time dealing with the competition than those that take some risk by seizing the opportunities available on this massive market. Mr. Fung, himself an entrepreneur, advises exporters to step up their efforts to compensate for the weakness on the U.S. market and to capitalize on the fact that Canada is considered a part of the Asian-Pacific Rim.
Peter Hall concurred, adding that other countries in South-East Asia also offer excellent business opportunities that Chinese companies themselves are exploiting. He is also optimistic about the growth outlook after the lull that followed the pickup fuelled by the government’s stimulus plan during the recession. Questioned about the strength of the Canadian dollar, Hall replied that a strong loonie is just one more reason for companies to diversify their exports, although in his opinion, this situation won’t last long. He believes that by next year, our currency will be trading just below parity. Incidentally, for those who are interested, Peter Hall will be in Laval on May 31 for the Let’s Talk Exports event organized by the International Business Centre with EDC.
However, what most caught my attention was a testimonial by a Quebec entrepreneur who in just a few years succeeded in setting up an independent plant in China that employs 100 workers and that serves the global market, including China’s. Here’s his advice to those looking to establish themselves in China:
1- Create a Chinese rather than a Canadian company. The WOFE (Wholly Owned Foreign Enterprise) model works well here. Avoid joint ventures unless both parties invest an equal amount.
2- Hire a good local manager and pay him well.
3- To avoid excessive requests from officials, avoid dealing with them directly on regulatory matters. A trusted local employee is better placed to do this and will cost less.
4- Fragment and compartmentalize pertinent information in order to protect your intellectual property.
5- Have enough capital available to back your project.
6- Make sure to have an effective fund transfer mechanism in order to avoid surprises and service interruptions. EDC can be helpful in this regard.
7- Don’t transfer old technology if your goal is to differentiate yourself and remain competitive longer.
8- Since you can never be sure about the environmental liability, avoid buying out another company or an existing plant because you think it’s a good deal. A new company with a foreign name is also more appealing on the Chinese market.
9- Expect the authorities to demand more of you than of a Chinese company regarding compliance with environmental or social regulations.
10- While the ratio of Chinese to Canadian engineers is 40:1, we are way ahead in terms of expertise and capacity for innovation. However, Chinese engineers make up for this by being hard workers.
The Quebec entrepreneur seemed very happy with his decision to set up on this market, something that had become unavoidable since many of his customers had a presence there and he had to get closer to them. The fact is that this happens to many companies, which are increasingly a part of an integrated global supply chain.
In the near future, I’ll tell you about a workshop I attended on India, a market brimming with opportunities but challenges too.
Samir Naoum
