2016.06.09 poseidon per workshop eurasia 2016 en

KNOW-HOW DEMAND AND TRENDS IN THE CHINESE MARKET:

A SYSTEMATIC APPROACH TO ACHIEVE SUCCESS

Poseidon Advisory (Shanghai) Co., Ltd

9 June 2016

•  Poseidon Advisory (Shanghai) Co., Ltd originates from Massimo Tavernari’s vision to offer practical operational support to Italian companies wanting to expand and improve their business in the Chinese market.

•  Poseidon’s mission is to provide Project Management services to guide companies throughout their oversea development with a team of experts dedicated to each project.

•  With its 10+ years of China experience, its team (made of both local and international talents) and its solid contact network, Poseidon is qualified partner for all companies who believe modern China is a market with huge possibilities and a platform for further expansion in Asia.

•  Thanks to this long experience in China, we have been able to develop a methodological approach based on objective feedback and concrete results.

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About us

Workshop Eurasia 2016 ROMA 9-10 June 2016�

•  Over the years Poseidon has managed to connect Italian companies ready to achieve success in the Chinese market with many local opportunities, leveraging its own winning methodology and the important contact network built with close local ties.

•  Poseidon established important agreements with Chinese industrial parks. Poseidon is now official partner of the China Ningbo Ecological Park, inaugurated on October 15th 2014 during the joint visit of Italian Prime Minister Matteo Renzi and Chinese Prime Minister Li Keqiang.

•  Poseidon helped successfully establish 4 WOFEs and 1 Advisory Company in China and 1 Trading Company and 2 Advisory Companies in Hong Kong.

•  Poseidon Advisory has shared its resources and abilities to solve logistical and administrative problems, making decisions regarding production, managerial and plant processes.

Our Experience

3 Workshop Eurasia 2016 ROMA 9-10 June 2016�

D e v e l o p s c r o s s b o r d e r b u s i n e s s opportunities in Asia, Middle East, Africa, Europe and Latin America in many different sectors: Renewable Energy, China Outbound Investment, Commodities Brokering e Company Internationalization

International Partnerships


International consulting firm specialized in Legal Counsel, Tax and Accounting, expert in Chinese Law and IP protection with offices in Japan, Singapore and Hong Kong

WINH (World In Your Hands) is a leading cross border business consultancy that operates as Poseidon Advisory’s main partner for internationalization in India

Independent financial advisory agency focused on Mergers & Acquisitions, Debt Advisory & Restructuring, Strategic Advisory and Financial Modelling

•  The China Ningbo Ecological Park, created thanks to the efforts of the Italian Ministry for Economic Development and the government of the city of Ningbo, has been inaugurated on October 15th 2014 by Italian Prime Minister Matteo Renzi and Chinese Prime Minister Li Keqiang.

•  Located in Yuyao, between the cities of Ningbo and Hangzhou in Zhejiang province, the park covers a total area of 40 sq. km.

•  The goal of the CNEP is to promote cooperation between Italy and China for the modernization and technical innovation of local companies in the manufacture, service, education and new technology fields.

•  On March 5th 2016 Poseidon Advisory and Sino-Italy Ecological Park Management Committee signed a cooperation agreement to create new opportunities in China for Italian companies.

China Ningbo Ecological Park


China Ningbo Ecological Park


China 1.0 to 4.0 - Economics

•  Low cost of labor made China very attractive for was attractive for foreigner investments, encouraged also through Joint Ventures in Special Economical Zones

•  Development driven also by privatizing big State Owned Enterprises

•  Chinese Yuan used only in the domestic market and its exchange is severely controlled by the Central Bank

CHINA 1.0 ( 1978-2006 ) ERA OF LOW LABOR COST AND RAPID GROWTH


•  Development driven by big public Investments while State Owned companies are still leaders in the market

•  Increase in Wholly Owned Foreign Enterprises formation

•  The cost of labor grew over 70% in 6 years •  CNY-USD exchange rate was allowed to fluctuate

within a pre-fixed range •  IPOs opened in Shenzhen and Shanghai Public

Stock Exchanges

CHINA 2.0 ( 2006-2012 ) ERA OF CAPITAL

•  Internal market development, not export, is the key to growth

•  Keep the yearly growth to 7.5% RATE and control the unemployment and inflation

•  Labor cost grows 10% per year •  China is on the way to become the 1st largest

economy world-wide.

CHINA 3.0 (2012-2015 ) ERA OF SUSTAINABLE DEVELOPMENT

•  New 5 Year Plan is aimed to promote industry 4.0 technologies and giving foreign capitals more access

•  China needs to invest in advanced technology production systems and the Internet of

•  Private enterprises become the main driving forces •  SOEs are being merged and integrated to create

30 companies able to be global leaders

CHINA 4.0 (2015-2020 ) ERA OF THE KNOW-HOW AND TECHNOLOGIES





China 1.0 to 4.0 - Economics


•  Focus on economic development without including the necessary social reforms

•  Export economy creates mass production areas where environmental and safety regulations are not enforced

•  Cheap cost of labor meant average salary and spending power was still extremely low

•  One child policy tips the demographic scale in terms of gender and age


China 1.0 to 4.0 - Society


•  With the rising of salaries there is a great improvement of life quality

•  Spending power rises and starts to gain traction in the overall economy scale.

•  Rise of number of millionaires •  University education is increasingly easy to access

and sought after


•  Strong development of internal market as the key to growth, consumerism is encouraged but lavish luxury spending is frowned upon

•  Further push to improve the unemployment and inflation

•  While the younger generation is extremely technology savvy, the overall population is ageing quite fast


•  New mobile technologies are expanding and are the primary force to connect with consumers

•  A climate of innovation is emerging, with more and more new start-ups, technologies and patents originating from China and expanding globally


China 1.0 to 4.0 - Society






•  China’s government policies enforced up to now have created an extremely quick economic and social growth: in 50 years China has made the same progress that countries in the West made in 200 years!

•  China has now a much more educated population, with better life expectancy and a stronger purchase power.

•  However, a third of the Chinese population still lives in poverty and the economic progress had a huge impact on the environment.

•  Moreover, China’s government has to be faithful to the promise of a continuous improvement of social conditions and salary growth.

•  A way for China to sustain this transition is to acquire know-how from abroad in key strategic sectors like industrial automation, medical equipment and pharma, environmental technology and electronics.

Current China Know-How needs


5.512.3

21.226.5

55.9 56.5

68.874.7

87.8

107.8116

0

20

40

60

80

100

120

140

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

2004-2014 China ODI

•  According to Chinese Ministry of Commerce, in 2014 Chinese companies have overall invested 116 billion dollars in 156 countries and by 2020, the value of ODI (Outward Direct Investment) will be between 2,500 and 2,600 billion dollars.

Big SOEs and technological transfer


•  Of these investments, almost 90% can be traced back to SOEs.•  The SASAC (State-owned Assets Supervision and Administration

Commission) is planning a drastic reduction of the total number of SOE from 112 to 40.

•  The goal is to create companies who can achieve the status of global leaders in their sectors and concentrate the country’s resources on the most competitive industries.

•  The transfer of know-how is therefore an essential part of China’s process to enter the global spotlight.

Big SOEs and technological transfer


•  A potential European partner can enjoy important advantages in a cooperation with a Chinese company, and especially with a SOE.o  The possibility to acquire a privileged entry point in the Chinese marketo  The possibility to cooperate with a partner who can provide resources

for immediate economic growth and who can invest in development of new projects

•  There are several safeguards mechanisms that can be implemented to protect European partners from the potential damages of any illicit know-how acquisition or IP infringement.

•  The extreme dynamism of the Chinese and Asian market in general, and the need for fast solutions create a environment that challenges Western SMEs to improve their company strategy and productivity.

Advantages for European partners


•  A quite hot topic is how to guarantee the protection of a company trademark and know-how.

•  Trademark protection can be secured in several ways:o  Extension of the validity of a registered international trademark, since

China honors the agreement of the Madrid Protocol.o  Registration of the trademark in China, through a procedure requiring

around 18 months from application to final confirmation•  Other ways to protect a trademark when approaching the Chinese market

are:o  Registration of the local web domain .cn and .com.cno  Creation and registration of the trademark in Chinese characters

through transliteration and/or localization of the original name to avoid illicit appropriations from third parties.

Trademark and Know-How protection


•  For patent safeguard, since the European registration does not automatically apply in China, there are 3 possible courses of action:o  File a patent Registration in China. Foreign companies are required to

act through local approved agencies o  File a patent Registration in a country recognizing the Paris Convention

and then file a patent registration in China within 12 months (6 months for models and decorative designs)

o  File for international patent registration according to the Patent Cooperation Treaty (PCT) through the European Patent Office or any National Patent office in an EU country, specifying also China as country of validity

•  Protection of company knowledge not covered by patents can be assured through signing non-disclosure agreements with relevant guarantees and by being in control of technical support processes.

Trademark and Know-how protection

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•  It becomes clear then that every SME who wants to successfully approach China has to follow the below steps:o  Trademark registration in China and company know-how protectiono  Market analysis to verify the real interest for products and services,

alongside with creating the relevant commercial material, dedicated website, company presentation and case history in Chinese language.

o  Signing agreements with selected and verified partners to create distribution networks or production facilities in China

•  These steps are important and always necessary, regardless of the industry, the approach to the market or the intended type of legal entity.

Methodology for approaching China


•  There are several ways to approach the Chinese market as a company:o  Set up a trading company and a local office to manage the sales/

distribution network o  Set up an O2O service supported by a local warehouseo  Set up a Joint Venture with a solid local partner. This solution, if

properly executed, can offer many immediate advantages in terms of development possibilities and faster ROI.

o  Set up a WOFE. This solution, while on one side protecting the investors’ independence, requires a bigger time and resource investment.

•  Furthermore, there is also the possibility to start cooperating with Asian partners, and in particular with Chinese ones, through the Horizon 2020 programs.

Ways to approach the China market


Horizon 2020

HORIZON2020

PARTNERS: WHO CAN PARTECIPATE*

ACTIVITIES NEEDED

*One of the partner has to be the project leader and can be different from the entity who proposes the project to the other partners

The registration is needed to find and check tenders, to be visible on the Available Partner’s database and to be the Project Leader

SCOPE

Promote the cooperation between transnational (also EU/CHINA) partners to develop solutions that can be used to improve life quality. The final project results have to be products that can be sold on the market. The project are Bottom Up and financed by the EU

Research Institutes

SME Investors Multinationals and large Companies

Enterprises Networks

Universities

Use the website to:• Find interesting open tenders• Find partners

Write a PROPOSAL, in accord with the TENDER, providing all the documentation needed (agreement between partners, business plan, action plan etc.)

Wait the EU commission approval.Use the money for the project implementation according with the partner’s agreements and Action Plan.

Registration on the website


•  Building lasting partnership is one of the most important activities in order to access the Horizon 2020 program

•  The partnership needs to satisfy all the specifications for the intended project in terms of resources and technical competencies

•  To build partnerships it is possible to select resources within the Horizon 2020 database or involve external entities

•  It is essential to verify the effective competencies and skills of the potential partner involved

•  Since the project requires different entities to cooperate on agreed activities, it is very important to adopt a cultural approach to problem solving and team management and also to identify and share project specifics and timelines.

Building partnerships


•  This is the reason why the creation of a legal and managerial framework becomes essential.

•  The managerial framework is necessary to define timelines and roles and responsibilities in order to not only to secure the project approval but also to smoothly carry out the project implementation within set parameters.

•  In our opinion, is even more important to create a strong legal framework.•  Beyond establishing project cost and profit share, this step is imperative to

put in place all the necessary measures to safeguard the know-how for all the concerned parties.

Legal and managerial framework


Massimo [email protected]

Fabrizio [email protected]

Poseidon Advisory (Shanghai) Co., Ltd.

Suite 1726, 17F, 818 Nanjing West Road, 200001, Shanghai, China

Contacts

2016.06.09 poseidon per workshop eurasia 2016 en

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