goglobal - china
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The Greentech Sector in China - Inbound and Outbound Investment.TRANSCRIPT
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Go Global:
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Bigger. Greener. China.
Daniel Seemann
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GO GLOBAL CHINAPage 2
China has become the world’seconomic engine in times of crisis. Thisis also true for the greentech sector,which is growing at a faster pace thanin many other countries around theglobe. However, China still has somework to do.
The past two years have been times of
growth and expansion for China’s green-
tech markets. Although the greentech
sector still faces macroeconomic chal-
lenges, China’s overwhelming need for
energy and environmental technology
continues to foster its rapid growth.
“China's strategy over the past 20
years was to build, build, build and
grow. Now, there is a strong focus on
energy and efficiency,” says Ellen Car-
berry, co-founder and Managing Direc-
tor of the China Greentech Initiative
(CGTI), the only platform between China
© China Tours
GO GLOBAL CHINAPage 3
and international partner companies
dedicated to identifying, developing and
promoting green technology solutions in
China. It was formed by 500 decision
makers from 100 organizations.
CGTI has just released their 2012
China Greentech Report, which summa-
rizes their institutional point of view for
Greentech in China.
Green growth with risks
ahead
Several macroeconomic challenges were
identified for China’s greentech markets
in the report. One big obstacle is the
focus on state-led growth in the energy
sector that may especially harm those
greentech industries dominated by
smaller private companies, such as
solar or energy services. In addition,
a general drop in Chinese exports has
particularly hurt manufacturers in these
energy sectors.
Furthermore, a frugal monetary po-
licy, together with a gradual decline in
investment and infrastructure spending,
has hurt financing for greentech-related
projects. And finally, demographic shifts
are increasing labour costs across the
greentech sector. Nevertheless, the re-
port predicts that this might lead to
greater innovation and automation in
renewable energy manufacturing and
consolidation in other energy fields.
Changing energy policy
Since 2011, the Chinese government
started to react to these circumstances
by lifting targets for energy efficiency,
solar and wind. In addition, the country
enacted new policies in the area of
energy taxes and carbon trading. How-
ever, in other areas such as biofuels,
progress has faced setbacks or has
been uneven. Still, based on targets in
the 12th Five Year Plan, the report pro-
gnosticates that China’s energy mix will
slowly shift from coal to other fuels.
This is based on strong macroeco-
nomic facts. When it comes to energy,
China already has to import over half of
its oil. The country is also heavily reliant
on coal, which produces high emis-
sions of carbon and other air and water
pollutants. Another major impetus for
a changing energy policy in China is a
rising public awareness, following a
number of major pollution incidents in
2011.
Invest locally,
export globally
China initiated several policies to sup-
port the domestic greentech industry.
But 2011 also saw the continuation of
an earlier trend, with the renewable
energy sector dominating outbound
Huxingting Tea House at Yu Gardens
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GO GLOBAL CHINAPage 4
investments and companies going
abroad to deal in this area.
2011 also saw a new push for inves-
ting in basic infrastructure abroad –
such as European water and power grid
utilities – to achieve asset diversifi-
cation and financial returns. The report
states that in the future, China will con-
tinue to deploy its capital, labour and
technology abroad, deepening interna-
tional collaboration and cooperation in
the area of greentech.
Greentech market
opportunities
CGTI identifies different sectors in
which the greentech industry might
grow in the future. The size of conven-
tional energy in China’s energy mix is
still huge – and although the govern-
ment continues to restructure the coal
mining industry, it will continue to
experience strong growth. The nuclear
and gas sectors will also continue pro-
fiting from government policy support
in the future.
However, stricter emission stan-
dards will affect coal plants, and the
government will introduce carbon tra-
ding pilot programs. And despite large
investments in the sector, China’s
domestic gas production is stretched to
the limit and has not kept up with
consumption, increasing reliance on
imports. These developments could
make energy from renewable sources an
incremental alternative for the future of
China’s energy supply.
Low priced renewables,
limited funding
2011 was a positive year for renewable
energy in China, especially for solar
and wind energy. In that year, the Cen-
tral Government published concrete
installation targets for renewable energy
by 2015, doubled the surcharge rate for
renewable energy and introduced spe-
cific carbon reduction policies.
However, Chinese solar module
makers suffer from severe overcapacity
problems and squeezed profits, as the
demand from European and U.S. mar-
kets for Chinese module sales weakens.
To help absorb excess solar produc-
tion, the Chinese government stimu-
lated its domestic market by raising the
feed-in tariff for solar power. In the
wind sector, China installed a capacity
of about 18 gigawatts in 2011. Biomass
power generation also experienced ra-
pid growth thanks to favourable policies.
Given the high cost of renewable
energy projects, limited funding sources
have become a bottleneck for project
development. Debt – such as bank
loans and bonds – is currently the main
source for wind and solar financing,
but good terms are only available to
the largest enterprises or state-owned
enterprises. At the very least, there is
direct financial support available from
the Chinese government for wind and
solar energy – including tax credits,
preferential land-use policies and low-
interest loans.
The biggest smart power
grid ever
Energy efficiency targets and the rising
share of renewable energy in the coun-
try’s energy mix represent a big chal-
lenge to the Chinese power grid as it is
currently designed and operated. For
this reason, China has begun with the
construction phase of its “Strong and
Smart Grid Plan”. It aims to establish
Shanghai, China Ellen Carberry
© S
iem
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AG
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riva
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GO GLOBAL CHINAPage 5
the world’s largest smart power grid by
2020, including ultra-high voltage lines
and distribution networks in urban and
rural areas, remote monitoring, two-
way communications and an electric
vehicle (EV) charging infrastructure.
China’s energy storage market con-
tinues to grow consistently. Using the
potential of the expanding smart grid,
this sector has the potential to improve
the connectivity of intermittent rene-
wables, such as wind and solar. Yet,
high costs, unproven technology and a
lack of governmental policy direction
make storage a tough sell over the next
few years, as CGTI reports.
Electric mobility
on the rise
China’s automotive market is the
world’s largest and is growing rapidly.
However, it will still be dominated by
conventional vehicles for the next
decade, as indicated by the CGTI
report. Yet cleaner transportation is an
important element of China’s plan to
reduce carbon emissions and use of
fossil fuels. To improve fuel efficiency,
China continues to raise conventional
vehicle emission and fuel economy
standards. In contrast, there have been
few developments in the past year on
biofuels.
China focuses a strong policy sup-
port on electric vehicles, which has
raised expectations for the growth of
the EV industry in the country. Several
companies have already taken the lead
in the development of the battery-char-
ging segment by building infrastructure
for EVs across the country.
The Chinese greentech
forest
“China is like a vast forest, a vast
ocean. It is a rapidly changing market,
where information and relationships
are not transparent,” explains Carberry.
“Because of that problem, CGTI was
created. The annual reports can be
taken as a compass for understanding
China’s rapidly changing greentech
market.”
The Chinese market could become
more and more interesting for inves-
tors, notably from Germany. “China
and Germany will become an economic
intersection for the future,” Carberry
says. “This is especially true for the
mindset and the innovation power of
both countries.”
It is an opportunity not to be missed
by German greentech entrepreneurs –
especially in times of crisis.
� www.china-greentech.com
Beijing, Beijing Opera
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GO GLOBAL CHINAPage 6
Europe has emerged as a keydestination for Chinese outboundabroad. In the second quarter of 2012,the region received US$5 billion ininvestment – up from US$ 1.7 billionin the first quarter – and accounted for48 percent of all mergers & acquisi-tions and 95 percent of all non-resources deals.
Indeed, Chinese companies are diversi-
fying their investment profiles world-
wide into a range of industries beyond
the traditional outbound areas of ener-
gy and natural resources. This reflects
the range of experience and goals
among investors in the People’s
Republic of China (PRC): while some
are seeking to increase their market
share or procure a steady supply of raw
materials, other investors are aiming to
expand their knowledge base, acquire
new technologies, expand their busi-
ness scope and/or tap new markets for
their products.
The challenges for
outbound investors
In undertaking an outbound invest-
ment project, Chinese companies and
individuals are inevitably faced with
challenges at each stage in its lifetime.
These range from fundamental matters
such as understanding the language
and culture of the target jurisdiction, to
complex matters such as how to work
with local management personnel, how
to finance business development, how
to operate within the local legal frame-
work, and how to resolve disputes. As
with any area of business, the details
of every transaction are different and
present a unique set of issues to
address.
It is particularly critical to conduct
solid due diligence at the beginning of
a project, to understand the tax impli-
cations of an investment, and to have
China Goes Abroad:
Challenges and Opportunities
The CGA Team
© China Tours
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GO GLOBAL CHINAPage 7
access to knowledgeable consultants
and legal advisors. As has been well-
reported, it is also often the case that
Chinese investment in foreign coun-
tries or new industry sectors face resi-
stance by local officials or community
groups. It is thus critical that new
projects have the right government
relations and public relations strate-
gies, so that relevant stakeholders are
informed and on board with the new
Chinese partners.
Working towards
a solution
Jesse Chang, Managing Partner of the
Chinese firm TransAsia Lawyers, has
advised on PRC-related investments
for nearly 30 years. While representing
Chinese clients with regard to their out-
bound investment projects, Jesse rea-
lized that there was no comprehensive,
convenient source of information for
investors to consult about the ques-
tions and challenges that they face in
“going abroad”. Together with his col-
leagues from TransAsia’s outbound
investment practice, Jesse has launched
ChinaGoAbroad.com (CGA), a platform
dedicated to providing practical, autho-
ritative data to PRC investors.
CGA was co-founded by TransAsia
and the China Overseas Development
Association (Association) under the
National Development & Reform Com-
mission (NDRC, the PRC ministry in
charge of inbound and outbound
investments). The Association joined
the project after the NDRC decided that
CGA’s website was not only useful, but
was critical to the success of Chinese
investments abroad.
The NDRC’s endorsement of CGA
followed the appointment of Mr Zhang
Guobao as the new President of the
Association. Mr Zhang was formerly
the Vice Chairman of the NDRC and
head of the National Energy Bureau.
His appointment reflects the importance
to the NDRC of outbound investments,
and how CGA is aligned with the
Association’s mission to support such
transactions.
CGA offers numerous services to
outbound investors from China, inclu-
ding advice on making overseas trans-
actions from leading international ser-
vices providers and information about
industries worldwide that are of specific
interest to Chinese investors. They also
offer details of actual investment
opportunities around the world, the
ability to connect directly to service
providers, and the opportunity to make
connections during workshops, con-
ferences and other events.
The platform also enables service
providers and industry experts to reach
out to one another offline and form
teams to support Chinese companies
in “going abroad”. The provision of
informative, reliable, and easily acces-
sible information and advice in this
manner is just one important way of
helping Chinese investors to interact
globally and encouraging outbound
investment.
� www.chinagoabroad.com
Chongqing, China
© Siemens AG
China: Inbound & Outbound Investment
The CGA Team
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GO GLOBAL CHINAPage 8
Opportunities for investment between China and Europecontinue to abound, with European companies seeking toaccess China’s consumer market and build good relationswith the world’s new economic power-house, and Chinesecompanies seeking to expand their knowledge base anddiversify their businesses overseas. However, in both casesit is important to be well-prepared and thorough: while thefinancial newspapers are full of success stories and high-profile deals, in reality few achieve their full potential.
Setting the stage
The central government in China has placed a significant
emphasis on outbound investments as a sustained policy. In
large part, this is due to the country’s need to secure a relia-
ble and long-term supply of natural resources. To a lesser
extent, it is due to swelling foreign exchange reserves and
upward pressure on the Renminbi. Meanwhile, businesses,
and even governments across the globe, are actively seeking
Chinese investors to help bolster their economies, many of
which are still recovering from the global financial crisis.
Notwithstanding the explicit “Going Abroad” policy of the
Chinese government, and the efforts that have been made to
increase access to foreign exchange and streamline domestic
approvals, the outbound investment process itself remains
complex, unpredictable and time-consuming. This is true of
both the internal and external procedures required of Chinese
investors. As a result, investments involving Chinese entities
are often delayed, or fail altogether. Just as Chinese investors
must anticipate this difficult approval process when underta-
king projects abroad, their foreign partners are advised to
study and understand it thoroughly.
Meanwhile, even as political and economic reforms have
opened up further opportunities to foreign investors in China,
subtle shifts have taken place in the environment for compa-
nies seeking to invest in the People’s Republic of China (PRC).
While the desire for foreign technologies and know-how
remains strong, Chinese companies, government officials and
consumers alike have become increasingly sophisticated and
selective with regard to how, and with whom, they do busi-
ness. For example, localization through training and overseas
higher education is creating a strong, multi-lingual force of
managers in Chinese companies. This has clear advantages
for those companies as they explore investments overseas. It
makes it easier for investors from outside China to interact
with them; but it also means greater competition among foreign
enterprises, experts and job-seekers in the PRC market.
To stand apart from the crowd and conclude transactionssuccessfully, it is important for any investor venturing intoa foreign country – including to or from China – to be wellprepared. This sounds obvious and easy, but in practicedemands focus and dedicated resources.
� Identify clear goals, and prioritize them.� Select and identify the right opportunity:
know your partner’s background.� Make sure your company qualifies for the bid and/or
meets local regulations.
� Think carefully about the market consequences both at
home and abroad.� Understand labor laws and employment regulations: do
not assume that what applies in one’s home country will
apply in the target jurisdiction.� Become familiar with the local business environment,
community, customs and practices. � Be flexible and innovative – this will help you deal with
issues you could not anticipate.� Surround the project with good advisors.
Doing business internationally: be prepared and open-minded!
From “Made in China” to “Designed in China”:
China’s seven StrategicEmerging Industries
Patrik Lockne
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GO GLOBAL CHINAPage 10
In March 2011, China announcedits 12th Five Year Plan. The aim of theplan is to see China develop from aneconomy driven by investment andexport of manufactured goods towardsone that is more innovative andwhere domestic consumption drivesgrowth.
To achieve this, China will need to
create consumer confidence by streng-
thening social security, make sure
growth is more evenly distributed, and
foster a new set of industries. A popu-
lar way of phrasing the change is to say
the country wants to go from “Made in
China” to “Designed in China”.
The Chinese government is hoping
that seven Strategic Emerging Indus-
tries will generate 15 percent of Gross
Domestic Product (GDP) by 2020. They
are: alternative energy, biotechnology,
information technology, advanced
equipment manufacturing, advanced
materials, alternative-fuel cars, and
energy-saving and environmentally
friendly technologies. Three of the
seven are directly related to sustaina-
bility issues.
This means foreign cleantech com-
panies looking to China for sales or for
Research & Development can expect a
great number of policy changes.
First, the good news: companies in
these industries can expect favourable
tax policies, easier access to capital,
increased willingness among state-
owned enterprises to invest in solu-
tions, and a welcoming attitude from
local authorities who will eagerly com-
pete to attract foreign investment and
know-how.
However, companies can also expect
increasing Chinese competition, price
pressure from local manufacturers,
demands for technology transfer and
perhaps even an increased risk of intel-
lectual property rights violations as do-
mestic companies scramble to compete.
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Beijing, China
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GO GLOBAL CHINAPage 11
It will be impossible to ignore the
Chinese market, particularly for com-
panies in new industries where stan-
dards have yet to be firmly set and
established. Given the size of the
Chinese market, what becomes a stan-
dard there could well become a global
standard.
The Chinese government, in con-
trast to some Western counterparts,
can also afford to take a long-term
approach to economic development.
This is very beneficial in cleantech
areas, where initial investment may be
large and the returns some time away.
Companies looking to do business
in the Chinese market should do their
homework. Try to get an understanding
of what is happening in your specific
industry. What policy tools will be
used? What are the main companies
and government agencies and how do
they work together? What are the main
challenges for China in this industry?
What does China want to accomplish?
Once this is understood, the compa-
ny should try as best possible to show
how it can contribute. Demonstrate
how your offering supports the direc-
tion China wants to take its economy.
To which Strategic Emerging Industry
does it correspond? How does it
address the challenges there?
An economic five-year plan may
sound like an anachronism, but in an
economy that is still dominated by
state-owned companies, and where
government actively directs economic
development, they still play an impor-
tant role. It will pay off to know what is
in China’s plan.
Li River near Guilin in southern China
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© private
Patrik Lockne has worked as a com-
munications consultant since 1997,
and was based in Beijing from 2006
to 2012. He helps clients in industries
ranging from aviation to beverages
with corporate communications and
public affairs. He has also chaired the
European Union Chamber of Com-
merce in the China Marketing and
Communications Forum. He currently
works as a PR consultant for the
Swedish PR agency Springtime, which
is part of the GlobalCom PR Network.
About the Author
Lost in
Wibke Sonderkamp
GO GLOBAL CHINAPage 12
In terms of culture and communication, there is no
such thing as “The European Market” that so many
companies are looking to cover today. You’re looking at 27
member states with 23 official languages and centuries-old
cultural differences. It’s helpful to define a number of focus
countries and expand the outreach step by step.
Local expertise is key. It is advisable to define an
umbrella strategy which is then locally adapted and
executed in the European key markets. This would include
preferences of customers, partners or investors in each mar-
ket.
Localization vs. translation: An ever-present challenge
is the many languages in Europe. A professional local
“translation” is therefore a critical success factor. Translators
should understand the topic so they are able to grasp the
meaning and message of the content. They should then trans-
fer this into a local version which should be more than a pure
translation and should take local aspects into account. This
includes simple things such as text structure or popular buzz-
words, as well as small content changes e.g. by including
local angles or references.
Communication channels and preferences differ from
market to market. Ask your local partners to recom-
mend channels; or whether you should choose between a
print, online and social media focus, phone or e-mail contact
or personal meetings vs. conference calls.
Backing up brand value: editors in many European
countries expect a lot more proof of marketing messa-
ges than, for example, in the USA. Make sure to include pro-
ven facts and figures, certifications or test results into the
communication.
Be prepared to be questioned about the proprietary
claims and quality of your offerings. Although Chinese
products have gained a lot of respect in certain industries,
many consumers are still biased by years of reports of
Chinese copies.
Be aware that there is a growing consciousness regar-
ding the sustainability of products among European
consumers, who look into production conditions, materials,
energy demand, etc.
Don’t expect advertisement or brand campaigns to
work 1:1 across continents. The audience’s taste as
well as the signals and meanings of images, colors and mes-
saging can be totally different in China than they are in
Europe.
Define clear goals and expectations with your clients
or communications consultants in order to avoid unre-
alistic expectations and to focus on key targets.
Work out a clear and transparent cost structure sho-
wing exactly what the budget includes and what it
doesn’t. Unexpected extras are very problematic and can en-
danger the relationship.
Interest is growing in inbound and outbound investmentacross continents, with European and Chinese companiesdiscovering the market potential for their products andsolutions abroad. Communication is becoming a key factorfor success in a market where the proven methods and mes-
saging of the home market can hardly ever be translated1:1. A campaign that has been a huge success in Chinamight leave European customers totally puzzled, and viceversa. Many companies are faced with the challenge ofadapting their marketing, PR and communications tactics
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Marketing and Communications in Europe: 10 Dos and Don’ts
GO GLOBAL CHINAPage 13
Patrik Lockne
Don’t treat China as a single market, treat it like a
continent. There are large variations – more so than
in all of Europe – both when it comes to purchasing power
and knowledge about product categories and brands. Unless
you have massive resources, focus on a narrow area, perhaps
a single city.
Chinese customers sometimes value your offering in
a way that is different from what you are used to.
Perhaps at home you discuss the total cost of ownership with
customers – in China, upfront cost may be more important.
Prepare to educate.
Find out what government plans there are relevant
to your product category. The Chinese economy is to
a large extent directed by the state, so keeping abreast of
regulations and policy will be important.
Talk to your customers to find out what their needs
and expectations are. Don’t be surprised if you have
to adjust both product and messaging, as the Chinese market
is often different to your home market.
Communicate that you are taking the Chinese mar-
ket seriously by selecting a good Chinese brand
name, using highest-quality translations, localized photos,
etc. Don’t just use material from somewhere else, it won’t be
taken seriously.
Don’t expect to get free recognition by customers
just because you have a foreign brand. It doesn’t
impress Chinese customers the way it used to.
The Chinese media market is huge and has a frag-
mented geography and readership. Don’t expect to
advertise your way into the market, as it will be hard to reach
a narrow audience through paid media. Focus instead on a
strategy that aims to get your customers talking and influen-
cing one another.
Don’t accept having to pay journalists to write. If you
find you have to, you should rethink which journa-
lists you are talking to, and if the news or information you
offer is interesting enough. The same ethical standards on
relations to media should apply to China as to other markets.
Take online and social media seriously. In a country
as vast as China, online media offers good coverage,
and Chinese internet users are very active in sharing their
experience with products and services. It is necessary to have
a strategy that takes this into account.
Prepare to be copied. The Chinese market may call
for special efforts to make sure customers can
verify that the products they purchase are genuine.
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to a new market situation. This is especially true in the fast-growing renewable energy market, where machines andcomponents make their way from Europe to China, whilemany large-scale production products from China toEurope.
Below are a few initial Dos and Don’ts provided by commu-nications experts who help companies successfully bridgethis communication gap in their every day work.
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translation?
Marketing and communications in China: 10 dos and don’ts