China represents major opportunities for businesses in the Thames Valley – that was the message from a key seminar organised by The Business Magazine. Doing Business with China, held at the Madejski stadium in Reading in September, was a showcase for six influential speakers to address the audience of entrepreneurs, corporates and advisers. Sponsored by Barclays, the seminar is the first of a series planned by The Business Magazine.
Western businesses need to understand and respect Chinese culture if they aim to succeed in this eastern land of opportunity.
And, they need to recognise the important difference of trading with China, rather than trading to China.
Such key insights were among many revealed by the guest speakers.
Local business representatives at the free seminar also learned that building successful personal relationships frequently comes before any business trading relationships are discussed or decided. Yet building those essential personal relationships with Chinese counterparts can be full of cultural pitfalls.
Keith Warburton, CEO and founder of international consultancy Global Business Culture, explained that cultural differences could have a tremendous relevance and impact on the successful formation and continuation of business operations – because different people see things differently.
“Recognise that you are British and your background social programming is British. You are wearing spectacles with lenses manufactured in the UK and they colour the way you view the world. But, in China everyone is wearing Chinese manufactured spectacles.
“If you don’t know the appraisal criteria by which you are being judged, how can you successfully sell your products or services in China?’ he asked.
One of the biggest barriers to international trading is cultural difference, he stated, and every foreign market had its different cultures.
British banter and humour didn’t work well in China, hierarchical and social etiquette needed to be understood, and ensuring your Chinese business partner did not lose reputational ‘face’ was essential.
“Building relationships takes time and you have to go into China with that long-term approach.”
Warburton pointed out that British businesses aiming to do business with China should expect two constants: “Everything is possible; nothing is easy.”
It was a point that David Murray, The Business Magazine founder, highlighted later with a Chinese proverb: wàn shì k?i tóu nán: ‘All things are difficult, before they are easy.’
But, like Warburton and the other four presenters, Murray stressed the huge opportunities for UK companies of doing business with China – the second largest world economy currently growing at more than 6% per annum.
The Thames Valley already has strong links with China, Murray pointed out. “Not only is Green Park now the home of major telecoms company Huawei – whose UK presence since 2012 has contributed £956 million and 7,400 jobs to the national economy – but there are scores of Chinese companies in this area, from Hytera Communications to TP-Link.”
British business links with China actually go back centuries initially with tea and silk trading extensively through Guangzhou, the capital of the Chinese province of Guangdong, hence a prevalence of the Chinese language of Cantonese overseas, revealed Dr Kegang Wu of the British Chambers of Commerce LinktoChina programme.
His presentation was on Guangdong, like the Thames Valley a ‘southern powerhouse’ of its nation, although rather less comparable in UK terms.
Guangdong at 69,400 sq miles is much smaller but with 104 million far more populous than the UK overall (area 93,628 sq mi /pop 64.5m). In world economic terms Guangdong’s annual GDP of more than $1trillion, is above nations such as Indonesia, Saudi Arabia, Turkey and the Netherlands.
“Last year Guangdong’s GDP would have placed it in the top half of the G20 group of countries,” said Dr Wu.
Guangdong has topped the GDP rankings of China’s 23 provinces since 1989. The region also hosts the Canton Fair, with 1.1m sq m of exhibition space, China’s largest import and export fair. “Guangdong is where things happen.”
Both Dr Wu and Mark Hedley of the China-Britain Business Council (CBBC) highlighted the changes that are occurring in China today. Most notable was the ongoing government-led ‘opening up’ of the country to global trade and investment, with special free trade zones.
Today China has a focus on innovation and infrastructure improvement, a thirst for new technology, a desire for its companies to become more international, explained Hedley. Within the Chinese current five-year plan is a ‘Made in China 2025’ manufacture upgrading scheme, plus development of new land-based and oceangoing ‘Silk Road’ export trading routes – the One Belt One Road initiative into central Asia.
Predominantly a manufacturing region, Guangdong was already “a hotbed of international investment,” said Wu, but increasingly its companies were looking outward for help to develop and improve their business operations, and even to market their own branded products overseas. Opportunities for British companies were now much broader than ever before, added Hedley.
Despite China’s economy growing at an average 10% per year for the three decades prior to 2010, its GDP per capita remains well below those of the US, Japan, Germany and the UK. However, an affluent middle-class was fast developing, wages were rising, amid growing domestic consumer demand – notably for western branded goods.
Recent stock market fluctuations were not a cause for undue alarm, but should be regarded as a natural rebalancing of the rapidly growing Chinese economy.
This rebalancing was leading to “a new normal” for China,” said Hedley, while still producing an economic growth rate of which other countries would be proud.
Trading is two-way business
Doing business with China is often a two-way exchange, delegates heard, and Chinese investment in UK business know-how and the UK itself was also an area of growth.
While western business had sought the east for its mass manufacturing, and China still welcomes inbound business trading, China is now increasingly approaching the west to advance its own business interests.
A wide range of highly relevant advice and case studies was provided at the seminar from the other key speakers Lily Yuan Li of Reading-based Prospect China Services, offering Chinese business connections, training and strategic support; Yingni Lu of The 88 Initiative, linking Chinese and UK entrepreneurs and investors; plus Mark Hedley of CBBC, an SME sector expert who works closely with the British Chamber of Commerce in China, and UKTI.
Do you know your Renminbi from your Yuan?
Tee Cato, director of Trade and Working Capital for Barclays highlighted one other area of amazing Chinese growth – the importance of its currency.
Renminbi (RMB) and Yuan (¥) are the Chinese-equivalent of our British GBP and £ within the currency world, and increasingly the global business trading and banking world.
RMB is no different as a monetary unit from any another international currency, Cato stressed, but it is ‘special’ because China is now a very big global trading partner. Although RMB began to gain noticeable commercial use in 2003, it wasn’t till 2012 when the Chinese government started adopting banks outside China to clear RMB trading transactions, that “things started to move considerably,” Cato explained.
“In January 2014, RMB was the 7th largest world currency being traded. In May 2014 it was predicted RMB would be in the top five world traded currencies by 2017. It gained that 5th position in June this year.”
When further trading restrictions are lifted, the currency markets fully expect RMB to become as influential as American dollars (USD), added Cato.
Within British-Chinese trading transactions companies would also no doubt become involved with CNY (onshore RMB) and possibly CNH (offshore RMB). Plainly, any UK company used to dealing in GBP, EUR, or USD, but aiming to do business with China will need to be aware of the benefits, or not, of using RMB within their trading.
Cato suggested RMB business usage benefits could include lower financing and transaction costs, speedier payments, reduced FX exposure, improved supplier access and greater purchasing power.
Importantly, Cato revealed how financial and performance risks could be mitigated through the use of banking professional services and importantly the direct use of RMB when doing business with China.