Business Climate Confidence in China 2018. My takeaways and notes

This is an invited article by Laura Blanco Puebla, whose Linkedin profile can be found aquí.

Just a few days ago, in June this year the European Chamber released their yearly China Business Confidence Survey, offering valuable insight into trends of global business confidence in this country. China remains positive territory for European companies with some challenges ahead.

Here are my notes of the 66 page report:

  • China’s market is increasing in sophistication. Chinese firms are seen as equally or more innovative particularly in professional services and consumer goods. More about the subject here: https://www.linkedin.com/pulse/proudly-made-china-how-country-dragon-paving-solid-path-blanco/ ).
  • As domestic R&D capacity increases so does IPR protection, and as Chinese companies strive to expand globally pressure on the government to provide effective IPR protection increases. There are a lot of changes still to be made.
  • Government environmental protection measures perceived as stronger: new environment-linked targets and increased authority given last year to the Ministry of Environmental Protection.
  • Doing business in China is becoming more challenging overall, particularly in Tianjin and Shanghai. Nanjing and South West China are perceived as friendlier. Regulatory obstacles are expected to worsen in the next 5 years.
  • Unfair treatment of foreign invested enterprises (FIEs) vs local firms is still a concern. Perceptions are the most positive in Nanjing, Shenyang and Southwest China and the most unfavourable in Beijing and Shanghai.
  • Internet access, restrictions on the usage of VPNs and lack of transparency over the implementation of Cybersecurity law create persistent business concerns, damaging R&D activities and communication with their Western subsidiaries.
  • Increasing issues in retaining talent: high expectations on salary/package and talent being snapped up by competitors are two of the main challenges to hiring local talent. Air quality and career opportunities are relevant to attract foreign talent. Changing work permit procedures are also a barrier to attract foreign talent.
  • Belt and Road Initiative (BRI): civil engineering and construction sectors see strong opportunities, as do financing and legal firms. Amongst the top concerns are transparency, lack of suitable projects and insufficient information.
  • A large share of small – medium enterprises (SMEs) still receive unfavourable treatment compared to multinationals (MNCs). As a result, there is untapped potential in SMEs in innovation and access to opportunities.
  • Market access and regulatory barriers are important concerns especially in the pharma, legal, and financial services. Restricted market access sometimes limits foreign investment in China. Expanded market access has however been pledged at the World Economic Forum in Jan 2017. Implementation is perceived as slow.
  • The CAI (EU-China Comprehensive Agreement on Investment) needs to be completed to give EU more confidence in their investment plans.

 

This post expresses my own opinions based on European Chamber Business Confidence Survey 2018 (www.europeanchamber.com.cn). I’m not receiving compensation for this post.

I work at Höganäs AB (www.hoganas.com).

You can download the report here: http://www.europeanchamber.com.cn/en/publications-archive/568/European_Business_in_China_Business_Confidence_Survey_2018

Pictures by Emily Ji and Yannick Benichou.

If you liked this summary let me know by clicking the thumbs up icon. Feel free to post comments or questions.

Great discussions at 2018 China-Sweden Forum towards Circular Economy

This is an invited article by Laura Blanco Puebla, whose Linkedin profile can be found aquí.

On the 14th and 15th of May 2018 I joined the China-Sweden Forum towards Circular Economy in Nanjing, Jiangsu Province in China. The event was hosted by China Association of Circular Economy and the Embassy of Sweden in Beijing.

china international business Asian hispanoasian yolanda gonzalez
Laura Blanco Puebla at the event

I was glad to participate as it meant an opportunity to understand first-hand from the original source and get a high quality introduction to a field that, although well connected to environment, I have not explored in detail. Amongst the keynote speakers were Chief Policy experts, Professors, Deputy Directors from the Ministry of Enterprise and Innovation in Sweden and the Embassy of Sweden, Directors of Environmental Companies, representatives from China Association of Circular Economy (CACE) etc. The program concluded with the visit to Nanjing Kaiyan Electronics and China’s Everbright International, examples of modern facilities operating in the fields of recycling and green power.

The Circular Economy (CE) is a mode of economic development that follows the principles of ‘Reducing resource use, Reusing and Recycling’. Although proposed many years ago it was formally accepted by the Chinese central government in 2002. As the world’s largest manufacturer China sees the worst effects of waste production and resource extraction, not to mention the consequences of pollution on human health. However China’s government has become really serious about enforcing its environmental laws and, in that line, is pushing harder towards a more sustainable economic model.

It’s not business as usual

Last year inspection crews from the environmental bureau shut down tens of thousands of polluting businesses and factories all over the country. Also, from the start of this year China banned 24 kinds of solid waste imported to the country. These are just two examples that illustrate China is already prioritizing protection over GDP.

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Chinese CE strategy is deployed at three levels:

  • Clean production enterprise-wise
  • Implementing industrial ecology in industrial zones (which also serve as demonstrators)
  • Develop eco-cities

The examples presented at the Forum in development zones and industrial parks are living examples of China’s determination and adoption of CE principles.

Opportunities to boost cooperation. Chinese and Swedish clean tech solutions

Swedish companies are known to be frontrunners in making use of sustainable solutions in their respective industries both in their operations and in their value chains.

During the company presentations and the business match-making session it was clear that there are already great ongoing projects such as the WWF & H&M’s joint effort on promoting sustainable water management (Water Stewardship). Their plan takes the whole value chain into account including specific objectives of raising awareness, increasing knowledge on water impacts, engaging internal and external stakeholders and influencing government policies.

Swedish technological breakthroughs and experience are definitely key factors in contributing to a faster adoption of CE in China.

Learning from China and with China

The two things that came to my mind after listening to the presentations were the massive scale and capacity to implement. About the former, in challenge lies opportunity and about the latter I am very confident that China will grab the bull by the horns. Their achievements with initiatives like the eco-industrial parks will be a valuable road-map, and, as has been stated by experts and also during the Forum countries along the Belt and Road where recycling is in its infancy will need senior experience and technical support. This is in line with the ambition of Chinese companies to operate at a wider global scale.

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There are also of course enormous obstacles that currently hinder a transformation to a CE such as institutional, market, organizational, behavioural and technological. CE in China also requires specific management (legislation, consumer’s behaviour, technology, cooperation with other countries, intellectual property protection, indicators for assessment, impact on prices and taxes… etc).

 

Afterthoughts

I personally enjoyed participating in the Forum and I think it was a great success. I believe we were left with more questions than answers which means they truly triggered the audience’s interest.

These past days after the Forum I have been mulling over these ideas:

  • As a strong believer in education, Universities outside China could fully benefit from the learning opportunity here. I found some initiatives already such as the one from ISIGE (http://www.isige.mines-paristech.fr/institut-superieur-ingenierie-gestion-environnement/news/envim/circular-economy-workshop). There are surely others. Those great teachers and professors out there may like to add some further ideas on this (?)… The point is I am certain CE will generate exciting careers and business opportunities and we want our younger generations to be on the loop as soon as they possibly can.
  • CE is an inevitable way to innovate and be more inclusive with the whole business ecosystem. It is potentially a great way to create value and to move from a generation of revenue created by mainly selling products to revenue created by selling improved services. At the same time the dynamics of supply chains could potentially be heavily disrupted…
  • Partnerships will be key because CE involves so many disciplines and fields and a smarter way to get there is to find and nurture the right alliances.

This post expresses my own opinions and I am not receiving compensation for it. I work full time at Höganäs AB.

If you enjoyed this post please let me know by clicking the thumbs up icon. Feel free to comment or to ask any question, I’ll do my best to comment back to you!

You can download Höganäs Sustainability Report here: https://lnkd.in/dU3CvqE

Acknowledgements to Ms. Ma Jinjin from China Association of Circular Economy (www.chinacace.org ), Höganäs AB (www.hoganas.com ) Communications Department for advice and diffusion, Business Sweden and Embassy of Sweden in Beijing.

 

Proudly made in China. How the Asian giant is determined to make a name in innovation

By Laura Blanco and Yolanda Gonzalez *

China used to copy Silicon Valley, but now Silicon Valley copies China’ said Li Len from Zhubaijia

Zhubaijia is a Beijing and Shenzhen based start-up operating similar model to the 2008 founded San Francisco Airbnb. While Zhubaijia started only in 2012 they quickly grasped the pressing needs of travellers helping them out to plan the entire trip, not just housing. The paradox behind was that Airbnb just mirrored same service only a few months ago.

Last month Xi Jinping called for stronger efforts to make China ‘a country of innovators’ at the 19th National Congress of the CPC in Beijing.

How do we, as guests working and living here, see the daily evolution towards a highly innovative China?

A polyhedron with many faces

China’s ability to innovate happens in various ways, sometimes all at once

There is an increasing interest in technology sophistication but even more important for a massive market like this one are the cost cutting and the process innovation. Reduction of production, delivery, and supply chain costs are three variables well understood by Chinese entrepreneurs.

Not only technology but business model innovation or adaptation to new unmet customer needs also pay it big in China. If the idea or service really solves some problem or makes life better, the massive scale of Chinese market provides plenty of room for volume based success. And fierce competition sharpens up creativity and keeps companies and entrepreneurs vividly alert for constant iterations.

A rising star example of sharing economy are bike sharing companies

Mobike and Ofo both started in 2015. Today they have both more than 100 million registered users. Cheap, omnipresent, dockless, environmentally friendly and a solution to congested traffic are reasons to bring the bikes back to the cities. And all that in the era we thought the car was the main character in the ripe for disruption transportation industry. The business explosion was such that industry standards had to be released recently to manage the rapid growth of related start-ups (more than 50 today according to Shanghai Bicycle Association). Today Ofo is valued at 1 billion USD and Mobike at 3 billion (https://www.cbinsights.com/research-unicorn-companies ).

All things are difficult before they are made easy by some App…

Jack Ma (马云), founder and CEO of Alibaba plans to convert Tianjin (largest coastal city in northern China) into a cashless city as he declared in June at the first World’s Intelligence Conference in the same town. Cashless payments can be used in plenty of services.

Today China’s top of electronic payment is WeChat

WeChat (微信) by Tencent has 963 million monthly active users (https://www.statista.com/statistics/255778/number-of-active-wechat-messenger-accounts/). They have been constantly improving their customer experience since their launch in 2011, outperforming its Western counterpart WhatsApp. Alipay (Jack Ma’s version of Elon Musk’s cofounded Paypal) is a close second option and Baidu (百度) and QuickPass (银联闪付) offer a similar template.

And ‘easy’ makes money big time. But e-payments are also a vehicle to combat tax evasion and corruption. And once you enjoy the convenience of digital payment solutions you wonder why the Western countries have been left behind by China in this regard.

Next step is being facial recognition. KFC has already been testing ground and also other firms.

A deeper focus in high tech

Some interesting achievements that illustrate China’s current state in regards of technology:

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Drons in Changsha (Hunan province)
  • China is home of four of the world’s 10 largest Internet and technology companies: Alibaba, Baidu, Tencent and Xiaomi.
  • China has filed more than 8000 A.I. (artificial intelligence) patents in the five years to 2015 (https://asia.nikkei.com/Business/Trends/China-AI-patent-submissions-shoot-up ). Meaning this a 190% growth rate outpacing other leading markets… and these are just the early days of A.I.
  • FAST, the world’s largest radio telescope is in China (Guizhou province), a 500m aperture spherical facility that surpassed the 300m Arecibo Observatory in Puerto Rico that assisted Princeton Nobel prize-winning astronomer Joseph Taylor. And they have begun operating it already.
  • China has seen an extremely rapid rise in drone growth in terms of production and usage. DJI Dajiang Innovations with HQ in Shenzhen and offices in China and all over the world is the leading firm in civilian drones by keeping approximately 70% of the market.
  • China high speed railways exceeds 22,000 km in total length. It is also the only country that operates bullet trains with a speed of 350 km/h. This convenience in commuting is also helping the rise of China’s secondary cities.

More Universities competing worldwide

According to Reuters Top 100 Most innovative Universities 2017, China has gone from one university on the list in 2015 to two in 2016 and now three in 2017 (Tsinghua University climbed 15 spots to #51, and Peking University climbed 10 spots to #60). Then the third, Zhejiang University, appears on the list for the first time at #100. Considering the speed of things in China one could think we will see rapid improvements in this field too.

China is also offering scholarships and programs to attract more foreign students.

China will continue to invest in development driven by innovation and will continue to have strong Governmental support. Above all the positive attitude and willingness to achieve will take China far. And there is a big lesson here: it’s time to understand China to their fullest potential and strengthen the cooperation.

The dragon is awake!!

Chinese Dragon. Business Hispano-Asian Business Consulting

(*) Laura Blanco (Shanghai) and Yolanda Gonzalez (Changsha, Hunan), China, November 2017

We wrote this post ourselves and it expresses our own opinions. Laura works at Höganäs AB and Yolanda at Hispano Asian / Changsha Lulian Business Consultants. We have no business relationship with any other company mentioned in this article.

We’d like to show our appreciation to John Moon for assistance. Thank you also to the people who provided us with pictures: Xiaomin Jiang (picture of Westin Bund Center), Yannick Benichou riding an Ofo bike in Beijing and Zahara Teng also from Höganäs using WeChat quick pay function at a convenience store.

Thank you for reading our post! If you enjoyed it please let us know by clicking the thumbs up icon. Feel free to comment or to ask any question, we’ll do our best to comment back to you!