China Business Conference 2017: A Review
By Jessica Cheung, Ken Ross and David Martin
On 28th March, over 400 delegates from the UK and China attended the 5th China Business Conference, the leading annual China business event in the UK, organised by the China-Britain Business Council.
Against the backdrop of Brexit, China and the UK have the unprecedented opportunity to develop an even closer trading relationship. This year’s conference developed in this special context, with sessions on everything from equipping new entrants to the Chinese market, to examining the attractiveness of the UK as a destination for Chinese investment, to exploring specific marketing trends in digital and innovation in China and much more.
Lord Sassoon, Chairman of the CBBC, opened the conference by bringing Premier Li Keqiang’s reconfirmation of a more open China in the future. 'Premier Li promised any foreign company that scales up in China a level playing field in return… and he said that China must not protect an outdated domestic service industry.’ Lord Sassoon also stressed CBBC’s role in pushing bilateral trade between the UK and China.
Prime Minister Theresa May, in her opening video address, discussed how the strengths and expertise of the UK are well matched to China’s development needs. ‘While British businesses are well placed to provide the goods and services that China will demand as its economy continues to develop, from our world-class university, and our global leadership in finance, and professional services, to the expertise and experience, we can bring them to help China to transform its infrastructure.’ Under the golden era of post-Brexit bilateral trade talk, Mrs May urged business leaders to help strengthen the UK-China relationship.
HE Ambassador Liu Xiaoming, the Chinese Ambassador to the UK, talked about the agendas of both China and the UK in 2017. While China will have a number of important national events to set the scene for the future development of the country, the UK will work hard to become a freer and more open nation under Brexit. Under the circumstances, Mr Liu provided helpful advice to conference delegates, ‘I hope you would look into the economic development strategies of both China and Britain and identify the matching points and converging interests.’
Gordon Orr, Board Director of Lenovo, Swire and CBBC, and a well-known China expert, provided a very comprehensive and in-depth analysis of China’s economy in 2017 in his keynote speech, covering the recent resilience of the country, the key themes for driving the economy, as well as the potential threats to the Chinese economy. His suggestion to delegates was that ‘As you are building your business in China today, it’s more important to think about which region to go in and what’s the underlying economic momentum.’
UK and Chinese Business - A Conversation
Led by James Kynge, Emerging Markets Editor and Associate Editor of the Financial Times, this plenary explored the challenges and opportunities for UK companies entering the China market, and what it was like for Chinese companies in the UK. Gudjon Reynisson, CEO of Hamleys, Britain’s most famous toy store, and Andrea Ghizzoni, Europe Director of WeChat, China’s most widely used social media platform, joined this fascinating conversation.
Given Hamley’s recent success in China, Mr Reynisson shared his practical tips for doing business there. ‘It is important to have a strong local partner to be a success in China as they bring you network and local knowledge,’ He said and, ‘as a British brand coming into China, you have to be humble and accept that what’s popular in central London may not work in Nanjing, China.’ He also explained the challenges in logistics and management of stock for running his retail business in China.
Mr. Ghizzoni wowed the audience by introducing Wechat’s popularity in China. ‘There are one million financial transactions per minute in Wechat.’ As a multi-functional social media platform offering chat room, information sharing and online payment functions, Mr. Ghizzoni explained how Wechat penetrated into the daily life of Chinese people, most of whom were daily active internet users. He suggested that Wechat would be a perfect marketing channel for Chinese customer oriented UK companies and for new entrants to the China market.
Building Britain - Prospects for Capital Flows from China
CBBC Chief Executive, Stephen Phillips, chaired this session which looked not just at the flows of investment into the UK but also partnerships in third markets along Belt and Road and around the world.
These areas were further expanded upon by Giles Blackburne, Associate Professor at Leeds University, who introduced the CBBC report he had worked on in 2016 detailing 21 case studies of UK-China cooperation in 10 countries – projects worth US$21bln. Belt and Road ‘is a reality with projects starting to happen in the Pakistan and Gulf Central’ according to Nick Ogden, Partner, Head of Client Relationships, Infrastructure, Pinsent Masons.
‘London has always been a centre in raising capital for global projects and will continue to be so,’ added Simon Wilde, Senior Managing Director, Macquarie. This is further reason to be optimistic about UK-China collaboration on Belt and Road.
Looking at investment into the UK, the panel discussed the recent increased scrutiny of China’s outbound investment; less trophy and more strategic was the message. To attract Chinese investment into UK projects, the UK needs to get better at explaining the tangible outcomes and ROI for the investor said Christopher Walters, Senior Consultant – Development and Regeneration, London & Partners. Find the right people in China, build solid connections and think long-term.
British Brands – Winning China’s Curious New Consumers
China’s economic growth rate is higher than 6%, and official policy is pushing for a shift towards increased consumption to drive GDP increases. While China’s economy is experiencing a significant adjustment, Chinese consumers are following the trend of change by showing their growing enthusiasm for online shopping and cross-border e-commerce. Facilitated by CBBC’s Assistant Director in retail and consumer, Jack Porteous, this breakout session explored the ways for winning China’s new consumers amid the era of digital boom and globalisation.
Echoing the new consumption-driven economic model, Duncan Innes-Ker, Regional Director Asia of Economist Intelligence Unit confirmed that there is further room for huge economic growth in China with some comprehensive data. However, he advised that UK business should consider avoiding first tier cities like Beijing and Shanghai and ‘be flexible and explore less sophisticated markets in other cities.’
Sohail Shaikh, Managing Director Asia of Mothercare agreed with Innes-Ker’s view as he has acquired many of his customers from second tier cities. He added that ‘online is 70% of our market.’ But the China market was not a cash cow in his opinion, 'they want the quality; they want the authenticity; and they want a fair price at the same time.' It requires a lot of hard work to win the Chinese customers.
Mark Batty, Head of International Development at Boden shared his insights for Chinese customers about their strong appetite for cross-border goods. 'Dispute all the English text on our website, they still buy from us.' Seizing this opportunity, his company has achieved success in the China market by adding new language and local flavours to their website.
China Digital Specialist, Tom Griffith of Qumin, also expressed his point of view about the Chinese Consumer, 'From research to purchase, digital fits in all steps of Chinese consumers’ decision.' The statement was well proven by the success of the online shopping giant, Alibaba. Leah Zhang, Senior Business Development Manager of Alibaba explained at the session that the company's success lay on innovation. Leah introduced a number of Alibaba’s creative initiatives, ranging from the ground-breaking Global Online Shopping Festival to the intriguing virtual reality shopping experience on their platforms.
Developing your China Market Strategy
As part of CBBC’s ongoing commitment to assist new-to-China exporters, three sessions at this year’s China Business Conference focused on the challenges and opportunities associated with exporting to China for the first time.
The first session was chaired by Avi Nagel, China Business Advisor at CBBC, and focused on developing a China market strategy.
CBBC’s Jeff Astle commenced the session by providing a broad overview of the China market. Highlighting a range of key developments, from Made in China 2025 to the Belt and Road initiative, Jeff argued that UK firms which adopt a granular and considered approach will discover ‘a new wave of opportunities’ in China.
‘Be prepared’ was the central message of Mark Ray of Sovereign Group. Mark stressed the importance of market understanding based on past experience, secondary and primary research, and clearly-defined objectives.
Paul Stepanek of Complete Manufacturing and Distribution emphasised persistence and flexibility, and asserted that ‘5 star’ ratings in the China market can only be maintained through quality, customer service and delivery.
Simon Mackinnon of Sinophi Healthcare wrapped up the session by arguing that information, strategic thinking, risk management, and alignment with government policies are all crucial in developing a ‘sustainable competitive advantage’ in China.
Entrepreneurship & Innovation as a Driver of the UK-China Partnership
‘Since the 13th 5-year plan China is clearly committed to innovation’ so says Jiang Sunan, Minister-Counsellor, Embassy of the PRC in the UK. He continued by introducing the 3-step plan that that will see China ‘become a world power in science and technology by 2050’.
And the innovation agenda will play a key role in UK’s new industrial strategy. Both China and the UK recognise the importance of innovation as a driver for economic growth and an imperative to solve current and future global challenges. Underlining this understanding and the need for greater collaboration, both countries agreed last year to develop a joint strategy on innovation.
This session, chaired by Nathalie Cachet-Gaujard, Director - Education & Innovation at CBBC, looked at UK and Chinese strengths and the potential areas for collaboration.
‘The UK has long been a leader in research and innovation’, according to Alistair Tebbit, Head of Government Affairs, UK RELX Group. The UK accounts for 3% of R&D spend and 4% of researchers globally, yet produces 12% of the world’s articles and 16% of the most highly-cited articles and ranks #1 in terms of publication quality. China on the other hand is rapidly emerging as a science nation and its research outputs have increased 14fold since 1996. Raising the profile of UK innovation going forward is best achieved by collaboration with countries like China.
The conversation then moved into the practical steps for start-ups to get traction and grow. For investment in new companies China is already a key consideration. ‘More capital was raised in China that in the US in 2016’, said Tom Butterworth, Director of Early Stage Banking, Silicon Valley Bank (UK). He continued that in 2006 three deals in tech with Chinese investment were done in 2006 in Europe but by 2016 that figure had mushroomed to 66. Whilst the landscape is evolving very quickly with increasing interest in early-stage technology, ‘Chinese companies investing in start-ups in the UK still tend to look for companies beyond the early start-up phase and closer to market’ added Simon Bond, Innovation Director, SETsquared Partnership who gave an example of seed investment into one of SETsquared start-ups.
Whilst panellists all agree that the potential for successful collaborations in innovation is huge and the market is developing very fast, some of the challenges were also discussed during the Q&A, including the importance of finding the right partner, developing a strategy to manage and protect Intellectual Property, ensuring commonality of language and objectives and fully understand the market potential.
The Changing Taste of China – Digital and Innovation as the New Drivers for Food and Drink Sales
Facilitated by Claire Urry, Executive Director of CBBC, this session explored the changing trends for food and beverage in China and the evolving landscape in online retail and food culture behind the trend.
Nick Miles, Head of Asia-Pacific of IGD revealed the encouraging sales figure of his company, ‘there is 31% sales growth per year.’ Nick explained that the reasons for such growth were multi-fold, including an expanding young middle-class, well-travelled Chinese consumers and reliable access to the internet. Ed Salt, Managing Director of Delamere Dairy, who made outstanding sales in China in goat and cow milk products, complemented Nick’s point that ‘health is a big drive for the market’.
Antoaneta Becker, Director of Food & Drink Sector from CBBC, who has lived in China on and off for more than two decades, explained her observations in the changing taste of Chinese consumers. ‘All of these conventions that people like me who went to China 20 years ago had to get used to, have now been completely reserved. For example, you have coffee being enjoyed and appreciated. Starbucks has introduced coffee in such a mass way.’ But still, incorporating Chinese food culture in marketing strategies for China was suggested in the conversation.
The challenges for food exporters doing business in China were shared by Tim Render, Director of Food and Farming of DEFRA. ‘The food and beverage marketing is always complex as it is a highly regulated market.’ Nonetheless, he assured that the UK government was working in every way to build relationships with the Chinese officials with a view to creating the best regulatory environment for UK business.
Practical Guide to Doing Business in China
Chaired by CBBC’s Avi Nagel, the second session on the challenges and opportunities for companies new to the China market focused on practical issues and solutions.
Pierre Gargatte of Koehler Group highlighted vital practical considerations such as defining business scope, licensing, setting up a registered office address, establishing corporate structure, opening bank accounts, and approaching HR issues. Pierre also underlined the continuing relevance of Hong Kong in terms of investment structuring and the importance of patience and cultural understanding when operating in China.
‘There is no reason why you need to have IP nightmares in China’ was the key message of Tim Smith of Rouse. China has made remarkable progress with regards to intellectual property and an effective IP strategy is now both critical and affordable for companies entering the China market. A range of resources are available to assist with IP issues including the Innovation & Joint R&D in China Toolkit developed by CBBC in partnership with Rouse.
Access to China’s Peter Heather concluded the session by discussing international IT solutions in China. Peter provided an overview of digital platforms and ‘BAT’ (Baidu, Alibaba,Tencent), urging listeners to ‘understand your platform’, before focusing on website development and the importance of market research, accurate translations, mobile-friendly websites and QR codes.
Hong Kong - The Creative & Tech Innovation Hub in Asia
As the traditional door for entering China and now a fast growing tech startup hub in Asia, Hong Kong is a strategic location for which UK entrepreneurs always have an interest in learning more.
This session was started by Priscilla To, Director General of the Hong Kong ETO in London by bringing out Hong Kong’s core advantages, including the rule of law, an independent judiciary, free flow of information, as well as a low tax system. According to Priscilla, Hong Kong is also committed to develop itself into a technology hub and ‘£52 million has been invested to promote Hong Kong as a smart city’. Martin Barrow, Director of Matheson and Co. Ltd, joined Priscilla later in reassuring Hong Kong’s openness and competitiveness as Asia’s world city.
During the session, four entrepreneurs, who had experience in doing business in Hong Kong and China, gave their positive impressions about Hong Kong during the later conversation. Jane Ollis, Global Director Sales & Marketing of Quvium UK liked Hong Kong as it ‘set the door at the Aisa’s biggest market.’ Cherriss Firbank, Sales Manager at The Cambridge Satchel Company thought that ‘Hong Kong has always been the forerunner of new products.’ Louise Leonard, Partner of 1.0 Co Ltd, ‘considered Hong Kong as a driver for a business innovation’. Anton Christodoulou, Global Chief Technology Officer of The Imagination Group Limited, said that his company likes Hong Kong so much that theyhave had an office in Hong Kong since 1968.
Andrew Seaton, Executive Director of The British Chamber of Commerce in Hong Kong concluded the session by affirming Hong Kong as a perfect place for technology related investments due to its excellent intellectual property protection, free access to the internet and the freedom of speech.
'Healthy China' – Delivering Integrated Care
The Healthcare session at this year’s China Business Conference centred around the outcomes of the recent mission to China in December 2016 and highlighted the range of opportunities that exist for UK organisations across the integrated health and care sector in China.
The Healthcare market size was about GBP£ 0.5 trillion in 2016. It is forecast to increase to GBP£ 1.6 trillion in 2030.The sector is booming with CAGR of 20-30% over the last 2- 3 years.
Chris Born, Senior Healthcare Specialist at Healthcare UK, outlined the scope of the opportunity and how Healthcare UK, working with CBBC, is helping UK organisations engage with counterparts in China in 3 key areas: Hospital Planning, Design, Build and Operate; Training and Education; and Clinical Services.
Emma Sheldon, Group Marketing Director of Vernacare Limited, provided her unique insight on establishing a presence in the market; and Mike Robson, Health, Social Care & Enterprise Director at Agencia Consulting Ltd, shared his initial experiences of exploring the opportunities in China for his company.
Dr Richard Lewis, Partner and Healthcare Lead, Ernst & Young LLP and Daljit Lally, Deputy Chief Executive, Northumbria Healthcare NHS Foundation Trust rounded off the session examining the lessons China might draw from international experience in implementing integrated care; and giving a case study of a project on “Better Hospital Support for Integrated Medical and Social Care (IMSCE) for the Elderly in China Using UK Experience” with Xiangya Central South University Hospital in Changsha, Hunan Province.
China Digital & Ecommerce Workshop
The third session on the challenges and opportunities for companies new to the China market was chaired by Mark Hedley, China Business Adviser at CBBC, and focused on digital & ecommerce.
Mark Hedley began by providing some statistics to frame the discussion: there are already more than 730 million internet users in China. And yet internet penetration is only around 53% in China, meaning that significant growth potential remains.
Chris Townsley of CDNetworks argued that a ‘fundamental challenge’ for UK brands in China is website performance and latency. The average load time for foreign websites in China is 30-33 seconds, which has serious implications for brand trust and loyalty, conversion rates and, ultimately, revenues. The solution is to use a specialist content delivery network (CDN) which can act as a digital superhighway, reducing latency and delivering the best possible end user experience.
Qumin’s Tom Nixon provided further insights into digital marketing in general and WeChat in particular. Tom summarised the ways in which Qumin had enabled three key clients to develop effective WeChat strategies using techniques such as geotargeted advertising, concluding that ‘there has to be a unique strategy for every business’.
Aman Anand of Ispirare discussed the ways in which digital marketing had enabled the Lyla Loves accessories brand to take off in China. As an alternative to JD and Tmall, the team behind Lyla Loves focused on a niche digital platform called HiChao which offered highly effective content marketing. Aman wrapped up by urging listeners to be adaptable, organise IP, look closely at distribution models, read contracts carefully, and employ Chinese native speakers.
Alok Sharma MP, Minister for Asia and the Pacific, emphasised Britain’s keenness to develop as a more open country for international trade in the closing plenary. ‘We are forging a new global role of Britain as one of the most outward looking and free trading nations in the world,’ the MP said. Alok was also optimistic about the prospect of doing business in China from his personal observation during many of his visits to the country.
Gordon Luo, Chief Executive of Huawei UKheld a positive view of the UK-China business relationship under Brexit. He said, ‘while uncertainties exist in some areas of global economy, the business relationship between China and the UK is stronger than ever.’ On the back of their £1.3 billion investment in R&D in the UK in 2012, Huawei would invest another £10 million in the UK in partnership with local universities for 5G innovation centres.
‘China is in the world, and the world is in China.’ Stephen Perry, Chairman of The 48 Group Club gave this powerful statement as the last speaker of the conference. Stephen explained China’s influence for global economy from the Belt and Road Initiative, from the China-Saudi Arabia collaboration projects to China’s support for Africa’s coming industrial revolution. Finally, he urged business leaders to take the lead to influence the government to create a more open and favourable trading environment.
CBBC would like to thank our event sponsors: Huawei, Talent Spot Group, CDNetworks, Access to China, SAM-AR-KAND, Qumin and London & Partners
To view pictures of the conference, please click HERE.