By Michael Darch
Two days of listening and discussions at the Chinese Enterprise Outward Investment Conference showed the Consider Canada City Alliance team the challenges of Chinese investment abroad. One speaker from a large natural resource company addressed some legitimate issues that Chinese companies must address when investing abroad, and particularly in Canada. Laws and regulations are different whether for health and safety standards, labour, the environment and financing.
It was clear that the Chinese regard Canada and Australia as being business friendly. That does not mean that there are not standards and regulations to meet. It does mean that they are transparent and apply to all companies. As western multinationals have well learned, success will only be achieved by understanding the local business environment and regulations. As Chinese companies expand throughout the globe, understanding the business culture and environment in countries being invested in is critical to success, as is the use of professional service firms that understand the local markets.
The expansion of Chinese enterprises into global markets is no longer limited to State Owned Enterprises. Increasingly expansion involves Small and Medium Enterprises (SMEs), publicly traded companies and privately held companies. Many of these companies, although large in terms of revenue and employees, have operated almost exclusively within the Chinese market. Venturing out into global markets is often a cultural and financial shock.
All of our members have come prepared. Experience in other markets has taught them one big lesson: assume nothing. Most Chinese investors have successful companies in the China market, but few have significant experience in open and competitive global markets. Canada is rated as one of the easiest places in the world to do business, but that in itself does not sell product or guarantee success.
All of our member cities have developed “soft landing” packages. These range from introductions to professional services firms in the region to incubator packages that include office space, mentoring and financing. Key to the Consider Canada approach is to treat the Chinese investor as a partner. Capturing a foreign direct investment is important, but only represents the beginning of a process. True success is measured by creating a long term, sustainable and profitable investment.
Soft landings and sustainable, mutually beneficial relationships played a critical role in our discussions with Chinese investors. Short term “wins” are important, but the focus of Canada and our member cities is long term success.
(Michael Darch is the founding President of Consider Canada City Alliance Inc.)