No need to fear the unknown: the trade potential of China for Flemish SMEs
8 aspects which Flemish SMEs will need to take into account
There is no reason to be afraid of China. Embrace the country and a whole new world will open up to you. This is the key message which Hans Crijns, Professor of Management Practice at Vlerick, wishes to pass on to Flemish SMEs after his exploratory trip to the land of dragons and emperors in the company of around 30 Flemish entrepreneurs.
For many Flemish SMEs, doing business in and with China is a fairly alien concept. Either they are not really bothered about it, or they would like to but don't quite have the courage to make the leap. However, the iGMO members who went to China with Hans Crijns, each with their own background and experience and curious to find out about the opportunities available, learned that there was no need to be afraid. In fact, some are already actively doing business with China. Several have opened a branch or a production unit there, and others are importing to or exporting from China. For many participants, however, it was virgin territory waiting to be explored. “Most of the participants expected the trip to enable them to shift up to a higher gear”, says Hans. “This took various forms, from strengthening their existing market position to opening a branch or entering into trade relations.”
As well as getting to know the Chinese business sector, the main aim was to see and experience China as a country. Hans: “We gained an unbelievably broad picture of the country's culture, politics, society and economy. A picture which, as the trip continued, remained reasonably consistent and was constantly strengthened. China is not better or worse, it is just different. Many of the pre-trip prejudices simply disappeared like snow in the sun. There was also a lot of respect within the group for pioneers such as Vyncke, Soudal and Nuscience and the work they have already done.”
The trip has certainly fuelled the desire to do business with China. Of course, it is not equally easy for every sector to gain a foothold here. Road construction (and the construction sector in general) still largely tends to use the local market. For the time being this is still a protected market, but according to Hans it would be a good idea to remain alert and follow developments closely.
So should we really feel threatened by China? Not according to Hans: “The people in the group were not afraid, but it has certainly opened their eyes. There was a great deal of admiration for what the Chinese have achieved, but also the realisation that people are going to have to do more than dip their toes in the water in order to take part. We can no longer take the liberty of ignoring China. This market, which is huge both in terms of purchasing and sales, cannot be ignored by a single manager, even the manager of an SME.” But whether or not the Chinese will be able to keep up this evolution for another 20 years, say, is debatable.
8 things which Hans Crijns thinks you should know as a Flemish SME wanting to do business with China.
1/ China is big
With 1.3 billion inhabitants, China is four times the size of the European Union. It's a real giant of a country.
2/ There’s no such thing as one big China.
China consists of 31 provinces, each of which is far larger than Belgim. They differ greatly both geographically and politically and each has their own approach. When it comes to the administrative hierarchy alone, there are 7 levels: state, province, county, city, town, village and family. You have to take every level into account if you wish to do business in and with China. The government has a very prominent presence in the business sector.
3/ In China they make it happen
The Chinese work in a very systematic way. The image of China as a developing country has been outdated for quite some time. According to Hans Crijns: “Suzhou, for example, has grown into a city with 13 million inhabitants and no less than 23 university campuses in quite a short time. A lot of companies are also based here, distributed between the residential districts and sociocultural centres. It's a kind of Chinese Silicon Valley, but bigger and there are dozens of places like this all over the country.” It goes without saying that there are also negative aspects to this huge expansion. For example, the road construction sector works on the basis of 4 levels, one above the other, in order to cope with the huge amount of traffic. Alongside pollution, the ageing population is one of the main challenges faced by modern China. There are certainly opportunities here for anyone who can come up with feasible solutions.
4/ Confucianism is deeply ingrained in every Chinese person
This goes way back in the country's culture and history and the Chinese are very proud of it. They are not familiar with imperialism, and in this respect they are similar to Belgium.
5/ State-owned enterprises versus privately-owned enterprises
There are 2 kinds of companies in China. SOEs or State-Owned Enterprises (50%), in which the government has a stake. The other 50% are POEs or Privately-Owned Enterprises. These emerging companies are young and dynamic and form potential trading partners for us, but at the same time are also a possible source of competition.
6/ Huge difference in values from Europe
Here, a great deal of emphasis is currently placed on achieving a good work-life balance. In China, the main focus is on hard work. The Chinese do not see themselves as separate from their company and tend to sleep and live there with their entire family. According to Hans, this has nothing to do with poverty but is related to the culture. They feel that they are contributing to the growth of their country, forming part of a larger movement.
7/ Import is more important than export for China
China wishes to attract foreign investments and is making a great deal of effort to facilitate this. For example, a free-trade zone is being created in Shanghai, a kind of paradise for tax-free imports from abroad.
8/ Low costs as well as innovation
China is more than just a low-cost nation. It combines low costs with innovation, which is a significant reason for entrepreneurs to do business with China.