News - Midlands
Eastern promise
As you cannot fail to notice from the reams of column inches devoted to the subject, the prospect of lower manufacturing costs and rapidly growing markets mean the Far East is a major talking point throughout the business community today.
Quite simply it's boom time for China and India, opening up a wealth of opportunities in both countries for UK business. China saw gross domestic product (GDP) growth of 9.5 per cent in 2004 and it recently overtook Italy as the world's sixth largest economy. The UK's main exports to China by sector are electronic equipment and components, IT, precision instruments and metals/ores.
According to UK Trade & Investment, India is the UK's 15th largest export market. And it has identified 19 proactive sectors where it believes there are real opportunities for UK companies to increase their profitability and international competitiveness. The sectors include aerospace, automotive, creative industries and media, financial services and IT services.
For a British service provider or manufacturer wanting to export or set up a partnership in the Far East, it can, not surprisingly, all seem pretty daunting. Lack of country knowledge, culture, language and time differences as well as baffling regulations and a wad of bureaucracy are enough to discourage many. UK exports to China are valued at over £32bn, yet this figure compares poorly to our European counterparts in Germany, France and Italy.
Peter Nightingale is chief executive of the China-Britain Business Council (CBBC). The organisation has been established for 50 years and was set up with the express aim of encouraging and assisting trade between China and Britain.
Nightingale explains: "We set up to help British companies do business in China because China is such a distant and difficult market and you need all the help you can get. There's been lots of changes in those 50 years but China is still a difficult market. With huge developments and the growth of the country our job becomes even more necessary."
The CBBC has expanded rapidly in the last few years and now has five offices in the UK and nine in China. The organisation can assist companies with a wide range of services including research, specialised interpretation, translation and can even set up meetings and programmes in advance of a visit as well as accompanying people when they visit China on business.
Nightingale says: "People talk about China in one breath but it's bigger than Europe. A province could be regarded as a country and the different provinces are in different stages of development and have different needs.
"You can't just fly out to China and once you get to your hotel room in Shanghai pick up the Yellow Pages and start phoning. That's not how it works."
The CBBC also has a launch pad scheme that allows companies to set up in China for a year and try out the market to see if there's true potential for them. The scheme allows businesses to set up from one of 50 desks provided by CBBC throughout China for a fixed cost. It means businesses don't have to worry about uncertain location costs and other charges while testing the market and the CBBC can even provide a locally-based member of staff to run the desk.
Nightingale says: "We can help with company registration in China, as it's quite a bureaucratic process. Many companies who have used the launch pad system have found it to be very helpful and quite often take on that first local member of staff to be their first manager."
Those looking at exploring the Chinese market can also benefit from the services Chinalink has to offer. Operating from the Liverpool Chamber of Commerce, Chinalink can assist companies throughout the UK looking to trade with China. Chinalink's director Dr Kegang Wu says the organisation has two aims, the first to promote trade between the two countries and offer a comprehensive advisory service, and the second to support trade missions both into China and into the UK.
Wu says: "This service can help with setting up joint ventures or negotiating technology knowledge transfer. The China Business Club is something we use as a vehicle to educate smaller businesses and bring awareness of the Chinese market. We have bi-lingual solutions for people who want to set up a Chinese website or need material translated into Chinese. We lobby the Chinese government for some public projects as well."
But what services exist for those looking to neighbouring India? Although there's no national specialist India-Britain business council in the UK, a lot of information and advice can be accessed via local chamber of commerces and regional development agencies such as Advantage West Midlands.
Okay, so you've done your research, checked out the market and are ready to export. Just one thing left - the language, or rather your inability to speak the local lingo. Well, you are probably not alone as a recent report released by the House of Lords European Union committee confirmed. It reported how British business will be "severely hampered" in the global marketplace because language skills in the UK are falling so far behind those of its competitors.
Learning a language takes a lot of effort and time, something that most busy business people don't have. But the language barrier need not be a complete barrier to trade. English is very widely spoken in India, with many skilled workers and management personnel considering it a necessary feature on their CVs.
In China the situation is more complex as the country has over 200 languages and dialects. Andrew Halper is a partner at law firm Eversheds and an expert in China. As a Chinese practitioner he spends 20 per cent of his time in China, the rest is spent in the UK advising businesses on a whole range of legal issues from merger and acquisition issues to Chinese employment law and intellectual property issues.
Halper is a fluent Chinese speaker and spent seven years living in Beijing. He says that while learning Chinese would be very helpful to businesses trading there, it's often not practical. Instead he believes what is more important to companies is to find an interpreter who can not only understand both languages but can also understand the business and what you are both trying to achieve. He says: "There's a saying in Chinese, tong chuang yi meng, which means same bed, different dreams. It describes a common mistake of trying (continued p24)
to enter into a venture with someone without ensuring you have common
objectives.
"But do make the effort to learn a little bit of Chinese. It will impress and reassure your Chinese partners that you are really making an effort and also it gives you an insight into aspects of the Chinese culture. You might be surprised how helpful learning just ten sentences can be."
So having cleared that hoop, what about finance? Ken Ackroyd, head of global trade services at Fortis Bank says that doing business in the Far East requires a different tool set to the UK as traditional credit management tactics such as invoice finance and credit insurance may not be available or only on a limited basis. Ackroyd explains: "Invoice finance may only be available to international debtors, headquartered out of China. Alternatively, a bank may only provide invoice finance services if the debtor also banks with them."
When it comes to getting your money, think prevention rather than cure says Kevin Curran, partner at the Smith Partnership, and a specialist in international debt recovery. He says: "My advice to companies is to spend as much energy as possible checking the other company's ability to pay. Use tools like Dun and Bradstreet and go that extra mile, spending that extra £3200 if needs be, especially if you are entering into a credit agreement worth thousands of pounds. It's a false economy not to do it."
Curran also recommends using facilities like letters of credit and considering taking out trade indemnity insurance. "It will guarantee the money and in some cases the cost of it is worth factoring into your costs as it means that you will be doing business that is secure," he says.
One major consideration for importers from the Far East is the funding gap. The gap between paying and being paid can be stretched enormously by factors such as distance, shipping times, the requirement of overseas suppliers to be paid cash before despatch and for overseas buyers to insist on extended credit. The average shipment time from China, for example, is 28 days, but can be longer.
David Houghton, regional sales manager, corporate banking services, Royal Bank of Scotland, explains: "All importers have to look at how they manage the payment of the supplier against how they obtain payment from their own end customer for the goods produced. Also taken into consideration should be the length of time to process goods through customs, but also the cost of freight, which recently has increased because of the shortage of shipping supply."
Research, trade missions, advice - according to Farah Baksh, business development director of RSM Robson Rhodes' national manufacturing and technology group - you can never over-prepare a move into the Far East. She says: "Getting in to the Chinese market may be expensive, but getting out could prove even more costly. However, companies that have done their homework, understand the Chinese culture and have good advisors in place shouldn't encounter too many traumas along the way. But it's vital to be prepared, just
in case."
Quite simply it's boom time for China and India, opening up a wealth of opportunities in both countries for UK business. China saw gross domestic product (GDP) growth of 9.5 per cent in 2004 and it recently overtook Italy as the world's sixth largest economy. The UK's main exports to China by sector are electronic equipment and components, IT, precision instruments and metals/ores.
According to UK Trade & Investment, India is the UK's 15th largest export market. And it has identified 19 proactive sectors where it believes there are real opportunities for UK companies to increase their profitability and international competitiveness. The sectors include aerospace, automotive, creative industries and media, financial services and IT services.
For a British service provider or manufacturer wanting to export or set up a partnership in the Far East, it can, not surprisingly, all seem pretty daunting. Lack of country knowledge, culture, language and time differences as well as baffling regulations and a wad of bureaucracy are enough to discourage many. UK exports to China are valued at over £32bn, yet this figure compares poorly to our European counterparts in Germany, France and Italy.
Peter Nightingale is chief executive of the China-Britain Business Council (CBBC). The organisation has been established for 50 years and was set up with the express aim of encouraging and assisting trade between China and Britain.
Nightingale explains: "We set up to help British companies do business in China because China is such a distant and difficult market and you need all the help you can get. There's been lots of changes in those 50 years but China is still a difficult market. With huge developments and the growth of the country our job becomes even more necessary."
The CBBC has expanded rapidly in the last few years and now has five offices in the UK and nine in China. The organisation can assist companies with a wide range of services including research, specialised interpretation, translation and can even set up meetings and programmes in advance of a visit as well as accompanying people when they visit China on business.
Nightingale says: "People talk about China in one breath but it's bigger than Europe. A province could be regarded as a country and the different provinces are in different stages of development and have different needs.
"You can't just fly out to China and once you get to your hotel room in Shanghai pick up the Yellow Pages and start phoning. That's not how it works."
The CBBC also has a launch pad scheme that allows companies to set up in China for a year and try out the market to see if there's true potential for them. The scheme allows businesses to set up from one of 50 desks provided by CBBC throughout China for a fixed cost. It means businesses don't have to worry about uncertain location costs and other charges while testing the market and the CBBC can even provide a locally-based member of staff to run the desk.
Nightingale says: "We can help with company registration in China, as it's quite a bureaucratic process. Many companies who have used the launch pad system have found it to be very helpful and quite often take on that first local member of staff to be their first manager."
Those looking at exploring the Chinese market can also benefit from the services Chinalink has to offer. Operating from the Liverpool Chamber of Commerce, Chinalink can assist companies throughout the UK looking to trade with China. Chinalink's director Dr Kegang Wu says the organisation has two aims, the first to promote trade between the two countries and offer a comprehensive advisory service, and the second to support trade missions both into China and into the UK.
Wu says: "This service can help with setting up joint ventures or negotiating technology knowledge transfer. The China Business Club is something we use as a vehicle to educate smaller businesses and bring awareness of the Chinese market. We have bi-lingual solutions for people who want to set up a Chinese website or need material translated into Chinese. We lobby the Chinese government for some public projects as well."
But what services exist for those looking to neighbouring India? Although there's no national specialist India-Britain business council in the UK, a lot of information and advice can be accessed via local chamber of commerces and regional development agencies such as Advantage West Midlands.
Okay, so you've done your research, checked out the market and are ready to export. Just one thing left - the language, or rather your inability to speak the local lingo. Well, you are probably not alone as a recent report released by the House of Lords European Union committee confirmed. It reported how British business will be "severely hampered" in the global marketplace because language skills in the UK are falling so far behind those of its competitors.
Learning a language takes a lot of effort and time, something that most busy business people don't have. But the language barrier need not be a complete barrier to trade. English is very widely spoken in India, with many skilled workers and management personnel considering it a necessary feature on their CVs.
In China the situation is more complex as the country has over 200 languages and dialects. Andrew Halper is a partner at law firm Eversheds and an expert in China. As a Chinese practitioner he spends 20 per cent of his time in China, the rest is spent in the UK advising businesses on a whole range of legal issues from merger and acquisition issues to Chinese employment law and intellectual property issues.
Halper is a fluent Chinese speaker and spent seven years living in Beijing. He says that while learning Chinese would be very helpful to businesses trading there, it's often not practical. Instead he believes what is more important to companies is to find an interpreter who can not only understand both languages but can also understand the business and what you are both trying to achieve. He says: "There's a saying in Chinese, tong chuang yi meng, which means same bed, different dreams. It describes a common mistake of trying (continued p24)
to enter into a venture with someone without ensuring you have common
objectives.
"But do make the effort to learn a little bit of Chinese. It will impress and reassure your Chinese partners that you are really making an effort and also it gives you an insight into aspects of the Chinese culture. You might be surprised how helpful learning just ten sentences can be."
So having cleared that hoop, what about finance? Ken Ackroyd, head of global trade services at Fortis Bank says that doing business in the Far East requires a different tool set to the UK as traditional credit management tactics such as invoice finance and credit insurance may not be available or only on a limited basis. Ackroyd explains: "Invoice finance may only be available to international debtors, headquartered out of China. Alternatively, a bank may only provide invoice finance services if the debtor also banks with them."
When it comes to getting your money, think prevention rather than cure says Kevin Curran, partner at the Smith Partnership, and a specialist in international debt recovery. He says: "My advice to companies is to spend as much energy as possible checking the other company's ability to pay. Use tools like Dun and Bradstreet and go that extra mile, spending that extra £3200 if needs be, especially if you are entering into a credit agreement worth thousands of pounds. It's a false economy not to do it."
Curran also recommends using facilities like letters of credit and considering taking out trade indemnity insurance. "It will guarantee the money and in some cases the cost of it is worth factoring into your costs as it means that you will be doing business that is secure," he says.
One major consideration for importers from the Far East is the funding gap. The gap between paying and being paid can be stretched enormously by factors such as distance, shipping times, the requirement of overseas suppliers to be paid cash before despatch and for overseas buyers to insist on extended credit. The average shipment time from China, for example, is 28 days, but can be longer.
David Houghton, regional sales manager, corporate banking services, Royal Bank of Scotland, explains: "All importers have to look at how they manage the payment of the supplier against how they obtain payment from their own end customer for the goods produced. Also taken into consideration should be the length of time to process goods through customs, but also the cost of freight, which recently has increased because of the shortage of shipping supply."
Research, trade missions, advice - according to Farah Baksh, business development director of RSM Robson Rhodes' national manufacturing and technology group - you can never over-prepare a move into the Far East. She says: "Getting in to the Chinese market may be expensive, but getting out could prove even more costly. However, companies that have done their homework, understand the Chinese culture and have good advisors in place shouldn't encounter too many traumas along the way. But it's vital to be prepared, just
in case."