City be­comes a hot spot for busi­ness to de­velop

China Daily (Canada) - - SHANGHAI -

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have to stay con­scious of the lo­cal taste here, and be aware not to be too ‘lo­cal­ized’, other­wise you will fail.” SCOTT MI­NOIE FOUNDER OF EL­E­MENT FRESH

and laffa-bread sal­ads be­ing made in an open kitchen.

His suc­cess sharply con­trasts to the string of well-known Western restau­rant chains that have failed to cre­ate brand aware­ness in a mar­ket where a grow­ing num­ber of mid­dle­class work­ers em­brace food with a Western fla­vor.

An in­vest­ment surge from the United States is be­ing called a “new wave of cap­i­tal mi­gra­tion” and is be­ing taken ad­van­tage of by small and medi­um­sized en­ter­prises (SMEs), de­fined as com­pa­nies with 500 or fewer em­ploy­ees world­wide.

They are rel­a­tive new­com­ers, with just about one-third hav­ing been in China for five years or less, ac­cord­ing to the an­nual sur­vey pub­lished in Fe­bru­ary by the Amer­i­can Cham­ber of Com­merce in Shang­hai on its mem­bers.

Only 36 per­cent of the SMEs re­ported be­ing in China for a decade, while 64 per­cent of larger firms said they had reached that length of time. A higher pro­por­tion — 37 per­cent —iden­ti­fied them­selves as SMEs com­pared to 26 per­cent a year ago.

The busi­ness pur­suits and con­cerns of SMEs are dis­tinct from larger firms, said Chris Wingo, founder of China Sage Con­sul­tants (Shang­hai) Co, whose firm helps SMEs from the US pre­pare and man­age their businesses in China.

“One of the big­gest driv­ers for SMEs to come to China was their larger busi­ness part­ners, namely multi­na­tional cor­po­ra­tions, when they started man­u­fac­tur­ing in China and wanted their sup­ply chain to be here with them. It was like a com­mand,” he said.

China has been on the radar for many smaller US en­trepreneurs since the late 2000s, he added. The Greater Shang­hai re­gion, which in­cludes neigh­bor­ing eco­nomic pow­er­houses Jiangsu and Zhe­jiang prov­inces, has at­tracted smaller businesses due to its ac­ces­si­bil­ity for global businesses, said Zhou Zhendong, pres­i­dent of Jiangsu East­man Heavy Ma­chin­ery Co Ltd.

“Shang­hai and the rest of Yangtze River Delta re­gion boast a strong net­work of dis­tri­bu­tion, sup­pli­ers, ex­ec­u­tives and en­gi­neers that are valu­able to our busi­ness,” said Zhou, whose com­pany is a Sino-US joint ven­ture of heavy-ma­chin­ery man­u­fac­tur­ing.

Zhou said Shang­hai has a track record of be­ing the most busi­ness-friendly city in China.

“Here you see a con­cen­tra­tion of equip­ment rental houses, con­struc­tion projects as well as com­po­nent sup­pli­ers. It’s easy for global cus­tomers to come visit and easy to at­tract skilled la­bor re­sources in­clud­ing man­age­rial-level can­di­dates,” Zhou said.

Ser­vice is the main char­ac­ter­is­tic of US SME com­pa­nies, the cham­ber’s sur­vey showed, with 76 per­cent reporting it as their main ac­tiv­ity com­pared to 43 per­cent for larger businesses. That co­in­cides with the city’s evolv­ing eco­nomic out­put, with more than 62 per­cent of its gross do­mes­tic prod­uct com­ing from the ser­vice sec­tor.

It also means op­por­tu­ni­ties in the seg­ment are much more wide­spread than man­u­fac­tur­ing, said Si­mon North­cott, prin­ci­pal con­sul­tant of Com­pet­i­tive Ca­pa­bil­i­ties In­ter­na­tional China (CCI).

“The trend in the last 15 years is that big MNCs (multi­na­tional cor­po­ra­tions) come here for man­u­fac­tur­ing and for ex­port. Now that the Chi­nese mar­ket is chang­ing to­gether with the de­mand of the Chi­nese them­selves, so we see big­ger shots in the ser­vice in­dus­tries such as in­sur­ance, med­i­cal care and con­sul­tancy,” he said.

Robert Theleen, who chairs AmCham Shang­hai and is CEO of the mer­chant bank China-Vest, which is based in the city, said that with China demon­strat­ing its com­mit­ment to eco­nomic lib­er­al­iza­tion through ini­tia­tives like the Shang­hai Free Trade Zone, it is only nat­u­ral that more firms are set­ting up in the coun­try.

“When you com­bine this im­prov­ing in­fra­struc­ture with the decades of ex­pe­ri­ence that Amer­i­can businesses now have in this mar­ket, it’s eas­ier for US com­pa­nies to profit from China’s growth, re­gard­less of their size,” he said.

Wingo from China Sage echoed that sen­ti­ment. Pro­posed pol­icy changes, in­clud­ing pro­mot­ing trade and fi­nan­cial lib­er­al­iza­tion, could even­tu­ally give big ben­e­fits to for­eign SMEs, in­clud­ing rea­son­ably priced fi­nanc­ing for cap­i­tal in­vest­ment and busi­ness trans­ac­tions and a more ef­fi­cient im­port process at lower costs.

“SMEs should be able to fo­cus more on the busi­ness at hand and less on in­ef­fi­cient ma­neu­ver­ing to get things done. You can imag­ine the in­crease in op­er­a­tional flex­i­bil­ity that the­o­ret­i­cally could be en­joyed within the FTZ,” he said.

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