Summit aims to expand China-Austin business
Event to bring Chinese investors together with local counterparts.
Joe Canterbury helped establish Starbucks in China.
Frank Krasovec built a net- work of Domino’s and Subway restaurants around Shanghai.
Steve Papermaster spent eight years on a key U.S.-China economic initiative under then-President George W. Bush.
All three live in Central Texas, where the usual perception of local businesses in China focuses on Dell Inc. and the region’s other large multinational companies. Yet they and a small collection of other area investors and entrepreneurs are quietly expand- ing the ties between the economies of Austi n and China.
“There’s probably a lot more going on between Austin and China than most people in Austin realize,” said Canterbur y, who now helps run Appconomy, a firm that develops a range of apps for
Chinese consumers. It has offices here and in Shanghai.
Efforts to strengthen ties could see a significant boost this week at the China-U.S. Private Investment Summit, which comes to Austin for the first time after two previous iterations in Dallas.
The conference will bring in a group of investors from “smaller” Chinese cities, who will meet with U.S. investors and companies — about half of them local — looking to expand in China. Former President Bill Clinton is scheduled to deliver a keynote address Tuesday evening.
Papermaster, Krasovec and many of the summit’s sponsors have lived in Austin for years. Others, like Canterbury, moved here more recently. But all of them wanted to continue pursuing opportunities in China, lured by the speed and size of the market there.
“There’s a lot of peo- ple like that you’d be surprised about,” Canterbury said.
Austin-area companies exported $527 million in merchandise to China in 2013, putting the Asian country ahead of Mexico as the Central Texas region’s second-largest trading partner after South Korea.
But the export and business data doesn’t capture the growing connections forged by a growing list of investors — most with years of experience in Chinese markets — who call Austin home.
That list of local investors will add a member this spring when Jay Riskind moves to town. As executive chair of the summit, Riskind is bringing in dozens of investors from so-called tier-two and tier-three cities in China.
Austin has some fitting parallels with those “smaller” Chinese cities, including size. Tier-two cities are larger, with more than 5 million residents, but the tier-three cities start at around 2 million residents, roughly the size of the Austin metropolitan area’s population. And they’ve become a key engine of economic growth in China.
“Austin is now getting into that wave,” Riskind said. “I think that’s perfect timing for Austin, to be positioned alongside the tier-three city growth in China.”
‘A big dynamic force’
Listen to Papermaster and others who directly invest in China, and the numbers they throw out start to sound almost comical.
Analysts estimate more than 500 million smartphones are in use throughout the Chinese market this year, at least 1.5 for each American citizen. Passenger vehicle sales are expected to top 21 million this year. The country has more English-speaking citizens than the United States does.
“Unmistakably, just on the facts, this is the greatest scale up at that size of any country in the history of the planet,” Papermaster said. “But it’s also not new in a sense. You’re dealing with a 5,000-year-old culture. ... As a culture, it’s not new to them to be a big dynamic force.”
Companies simply can’t ignore a market so dynamic. Papermaster took BSG Corp. and Perficient into China in years past, and now runs Appconomy in partnership with NeuSoft, one of the country’s most prominent tech companies.
While a company might decide to stay out of China, he said, “you’re simply naive if you’re ignoring it.”
Still, he and ot-hers said, it’s not an easy market to enter. The market has matured, but corruption, bureaucracy and intellectual property theft remain valid business concerns. And cultural differences can lead to problems that might not arise when entering markets in, say, the European Union.
Moving east
The increasing maturation of the market makes it a lot easier to work through the challenges — but the sheer size of the consumer market opportunity remains the real draw.
“The world has moved west, west, west until it moved east,” Papermaster said. “The growth is in Asia and it’s going to be in Asia for quite a long time.”
Yet the group of local investors active in China remains relatively small and, as often as not, they know and work with one another. To wit, Papermaster and Canterbury work together on Appconomy. And Canterbury, meanwhile, is working with Krasovec to build on the nascent China presence of Stubb’s Barbecue.
“It’s obviously growing and that’s great,” said John Scott, co-owner of Stubb’s. “But they love Western brands if they’re authentic.”
Stubb’s initially opened a restaurant near a promising new development in Shanghai. But when the Chinese government bought out the developer and changed plans for the neighborhood, Scott said, Stubb’s was left with a high-rent space in a low-traffic area.
But Scott, Krasovec, Canterbury and their partners have found a new location and are reloading. As one of the few Texas barbecue places in a massive open market, they’re feeling pretty good.
“Beyond Texas, the real opportunity is China — in spite of the complexity and in spite of it being far away,” Canterbury said. “The reality is you can go much faster and build a much bigger business (there) than you can in your own backyard.”