Without doubt, politically and economically, China will continue to grow in importance, a day rarely passes now where China doesn’t feature in news and business section headlines, but how can companies develop opportunities in China?
The attention being paid to China is unsurprising. China is still predicting its economy will grow by up to 8% this year: it has a vast surplus accrued over the last six or seven years, generated by the credit fuelled consumption and property ‘bubble’ that has been prevalent in the Western nations, which means it can finance its own fiscal stimulus from reserves as necessary. It is a main provider of purchasing power [government debt] to the ‘West’, added to which, China has a vast home market of almost 1.4 billion people, offering enormous latent growth potential. One carefully targeted recent stimulus, caused an instant 25% increase in new car registrations for example.
DEAL SOURCING MADE EASY
China is not just an investment destination for larger firms but represents a significant opportunity for smaller and medium sized companies that are sufficiently flexible and entrepreneurial. Any company with growth aspirations and a good quality management team would be wise to at least consider what China has to offer.
Deal sourcing (joint ventures, acquisitions, investments) in China is notoriously difficult with company information either unreliable, not in the public domain or spread across hundreds of sources in a variety of formats. As in more developed M&A economies, but to a greater extent in China, even established private and institutional investors/acquirers find identifying the right target companies to be ‘heavy going’. That though is about to change, BCMS Corporate opens in China shortly to provide Chinese business owners with exactly the same unique approach to selling all, or a proportion of their companies, as we provide to our clients in the UK, USA, Sweden, Turkey and Chile. For those unfamiliar with our approach, we represent vendors and assist them in taking their businesses to market, locate the most suitable potential acquirers and, negotiate a price which fully reflects the value of the business.
Our clients tend to be in the £1million to £75million turnover range and in China our focus will be no different. Much of the cross-border merger and acquisition activity in China to date has been focused on macro-deals but, the country is now very aware of the vital role its small and medium enterprises (SMEs) are playing, and will continue to play in future. In the most recent survey carried out in October 2006, findings revealed that there are more than 4.3 million SME companies in China. They contribute 58.5% of GDP, 50.2% of taxation, account for 75% of employment, 66% of patents and 82% of new products of the country.
This impressive resource is packed with opportunity and will undoubtedly be the breeding ground for some of the global brands in the near future. Some Chinese SME’s will grow to become some of the dominant players in their home market. Entrepreneurial activity and innovation is now very much part of Chinese business culture.
It may be that you are already active in China, either through an existing wholly-owned business, through a joint venture arrangement, or you may be outsourcing manufacturing or other aspects of your business to drive down costs and remain competitive – in which case you will know how rewarding a Chinese business partner can be. For many of you though, this may in fact be a completely new venture and as such, some further investigation beyond consideration of acquisition or investment opportunities will be needed. Useful contacts are UK Trade and Investment (UKTI) and the China-Britain Business Council (CBBC), they tend to work together very closely and both have a depth and breadth of expertise for existing or new entrants to the Chinese market. Trade missions are run frequently between the two countries but are unlikely to result in finding the right strategic opportunity at the first attempt. As a means of experiencing China for the first time though, they can be useful.
The BCMS Corporate service is not affiliated in any way but will be complementary to support, advice and practical assistance available through UKTI and CBBC. Once you have decided continued or new expansion into China is right for you and that an acquisition or investment is a likely part of that process, BCMS Corporate will be uniquely placed to identify relevant target companies from our soon to be launched proprietary deal-flow ‘intelligence’ service. During a recent visit to China, BCMS Corporate directors negotiated and signed important and exclusive co-operation agreements with ‘Equity Exchanges’, a national association for SME’s, Economic Development Agencies and key trade bodies
These agreements will ensure the smooth roll-out of BCMS Corporate (China) and will add to our own intelligence gathering service through exclusive and privileged access to many of the best business sale and investment opportunities in China.
MUCH IN COMMON
The Chinese are generous hosts and anyone traveling to China is assured of a warm welcome. There is, in our experience, a very good affinity between the British and the Chinese. Their way of doing business naturally lends itself to the more respectful, considered and patient approach that largely typifies the British way. This is not to be confused with indecision. If you have done your research and you clearly have something relevant to talk about, first meetings can move very quickly into meaningful and fast moving negotiations. The Chinese also have a particular regard for the British, our history and the achievements of what is, after all, a small island nation comprising less than 5% of the population of China.
The language barrier is a factor but the number of English speakers is increasing rapidly. There is a significant emphasis on teaching English in schools and there are many Chinese graduates, educated in the West, who have returned home, who understand both Western and Eastern cultures. Engaging a good interpreter or recruiting English speaking staff is therefore not particularly difficult. In times of economic uncertainty, those companies that take practical, decisive steps to enlarge their marketing skills and embrace new business opportunities around the world will find that it is still possible to thrive. China represents just such an opportunity and for some it will present itself as a golden opportunity to excel.