CME recently participated as a co-sponsoring organization of the PBB Global Logistics Mission to China on April 4 to 21, 2001.

The mission, which included visits to Hong Kong, Nanning, Shanghai, Suzhou, Wuxi, Nanjing and Beijing, was hosted by city and provincial governments and the China Council for the Promotion of International Trade. Mission members represented a cross section of Canadian business including manufacturers, software developers, legal services, traders and resource industries.

The business program focused on introducing members to leading Chinese business enterprises, as well as government decision-makers at both municipal and provincial levels.

The economic development of China is advancing rapidly and Canadian companies cannot afford to ignore either the Chinese domestic market or the potential competition that is and will continue to come out of China. Today, China is no longer considered a poor country having surpassed per capita income of $800 (U.S.) for the first time in 2000. In major industrial cities such as Shanghai, the per capita income reaches over $4,000 (U.S.).

A recurring theme throughout the mission was the need for foreign capital to upgrade and restructure existing industries. This was particularly applicable to the automotive sector, machinery, chemicals and textile industries. New technologies and investment are being sought for the IT sector, biotechnology, mineral processing, forestry, food processing, environmental equipment and technologies, tourism and pharmaceuticals.

The mission visited the city of Tong Xiang, the site of the joint venture manufacturing facility of Whiting Equipment Canada Inc. Rudi Kroeker, President, led the group through the plant, which manufactures heavy industrial equipment for the Chinese market and offshore customers. Kroeker explained that it took his company five years of concerted effort to identify the right joint venture partner in China, and considerable investment has been required over the last few years to achieve profitability.

It is important to avoid investing in smaller cities where there can be too much political influence and demands for employing relatives and friends. It is also important to have good advisors and to have your own advisors write contracts. According to Kroeker, the Harvard rules of negotiation work in China, and it is essential to focus on options for mutual gain. As he put it, if you need to go to litigation, the business venture is over.

Keys to Success in China

• Investigate the Chinese market thoroughly;
• Spend the necessary time to identify and get to know the right partner;
• Use Canadian legal advisors with Chinese expertise;
• Be prepared for some "unusual" business methods;
• Take the time to build your relationships;
• Visit the market several times before confirming relationships;
• Always be the major shareholder or sole investor in an investment situation.

Increased Confidence

It is expected that China's accession to the WTO will increase the confidence of foreign companies while intensifying competition. The new environment will also raise standards and profitability. It is also expected that many of the state owned enterprises will be sold off (a process already underway), while others may collapse overwhelmed by the competition. Given the growing size of the middle class in China and the demands for upgrading of infrastructure and technology, Canadian firms can find markets for their products and services, but must be ready to develop flexible approaches to doing business.

I must commend Michael Scott of PBB Global Logistics for his efforts to bring Canadian business to the forefront of the global community and for encouraging CME for join forces with PBB to offer this outstanding opportunity to member firms. It's no wonder his company is one of the 50 best managed companies in Canada.

Plans are underway for the next mission, so sign up now for the limited spaces and find out what China has to offer to your company. Doreen Ruso is Vice President, International Trade Development, Canadian Manufacturers & Exporters.