The Flanders-China Chamber of Commerce (FCCC) has published the second volume of “FCCC Members’ Portraits in China”. The booklet includes 17 portraits of member companies active in China. The China-based managers of those companies talk about how their firms became active in the country and the difficulties and pitfalls they faced to become successful in the largest and most challenging market on earth. They offer valuable insights and lessons about how to do business in China. Each manager interviewed makes a list of “do’s and don’ts” based on their own hard-won experience. “All of them, without a single exception, enjoy their work and stay in China, despite less pleasant phenomena such as the worsening air pollution,” says FCCC Chairman Bert De Graeve in his introduction.

Some of the companies presented in “FCCC Members’ Portraits in China” are well known, such as Volvo Car, which is now part of Geely Holdings. But the story of how the company is building two car plants in China has never been told as extensively before. Other companies, such as Huiyin Group, which is active in the solar power industry, and Klako Group, which is guiding its clients to become successful in China, are not so famous, but have an equally fascinating story to tell.

Trying to write a write a book “Doing Business in China for Dummies” is futile, one of the managers told the Flanders-China Chamber of Commerce. More fundamental than that is an underlying attitude. Respect the Chinese you come into contact with and be interested in their culture. Remember, he added, that you are and will always remain a guest in their country. Above and beyond the usual tips and tricks, the managers telling their story in this booklet show the right attitude to become successful in China.

“The growth of the Chinese economy is slowing down a bit,” says Chairman Bert De Graeve in the introduction, “but at 7.8% last year, it is still growing strong to offer a myriad of opportunities.” For those companies which have not yet taken the step to open a representative office, set up a subsidiary or form a joint venture, it is probably not too late yet to enter the Chinese market. “Do your homework” is one of the most frequently tendered pieces of advice for companies contemplating their first steps on the China market. One might as well start with “FCCC Members’ Portraits in China, Volume 2”.

FCCC members can receive one copy free of charge.

List of interviews (companies in alphabetical order):
ACEA (Dominik Declercq), De Wolf & Partners (Philippe Snel), Eurbridge (Jan Van der Borght), Huiyin Group (Juha Ven), Jones Day (Sébastien Evrard), Klako Group (Kristina Koehler), LMS (Luc Pluym), Moore Stephens (Andries Verschelden), Neuhaus (Frédéric Linkens), Orientas (Dirk Laeremans), procurAsia (Etienne Charlier), Proviron (Vanessa Doms), Soudal (Eddy Vloeberghen), Urban Stream (Sébastien Goethals), Volvo Car (Koen Sonck and Benoit Demeunynck), White Pavilion (Raf Vermeire), and Wyatt & Wang (Jacques Borremans).

Chinese banks’ income from fees and commissions increased by 24% in the first three months of 2013 compared with the same period in 2012, a significant improvement on the 17% rise between 2011 and 2012, according to Geoffrey Choi, Financial Services Partner at Ernst & Young Hua Ming. “Such income from intermediary business accounted for only 23% among Chinese lenders, suggesting huge room for further development if compared with international counterparts,” he said. In 2012, net profit growth of Chinese listed banks was 17%, down 12 percentage points from 2011. In the first quarter of 2013, profit growth fell to 13%, compared with 25% during the same period last year, Choi said. Affected by the ongoing interest rate liberalization process, the net interest margin continued to fall. “Banks must continue to optimize their international capital allocation, alter the development mode which seeks profits based on consumption of capital and improve their capacity to accumulate capital,” Choi said. Liu Shiyu, Vice Governor of the People’s Bank of China (PBOC), said earlier this month that the major Chinese banks might see a capital shortage of CNY40.5 billion in 2014 if they kept growth and internal financing at current levels. The Ernst & Young report found that the listed banks had increased client numbers and online/mobile banking transactions substantially last year. By the end of 2012, Industrial and Commercial Bank of China (ICBC) had 315 million
electronic banking customers. The proportion of its online business to total transactions has reached 75.1%, while its mobile banking business has increased 54.5% compared with the year earlier, with transaction values jumping nearly 16 times. Online transactions at Bank of China (BOC) rose nearly 33% year-on-year, while the number of mobile banking clients at China Merchants Bank (CMB) surged 115%, the China Daily reports.

The Hong Kong Mercantile Exchange (HKMEx) has suspended activities and handed back its trading license to regulators two years after opening as it had no sufficient cash to cover nine months of operations, a requirement set by the Hong Kong Securities and Futures Commission. The Exchange will however go ahead with a planned USD100 million rights issue and be ready within months to reapply for the trading license. HKMEx Chairman Barry Cheung said the closure would have no impact on investors and that client contracts would be honored. HKMEx was working with LCH.Clearnet to arrange settlement pricing on the exchange’s roughly 200 outstanding contracts. Chairman Cheung said the rights issue would solve the Exchange’s financial problems. “This exercise will raise USD100 million. It will be sufficient to meet the SFC’s requirements as well as to support the exchange’s operations for the next three to four years,” Cheung said. The next few months would be spent redefining strategy, finalizing the rights issue and closing negotiations with potential strategic shareholders in a bid to reapply for the license. The Hong Kong Mercantile Exchange’s failure to come up with a viable gold futures business proved to be its undoing as it wilted under competition from more established domestic and international exchanges, market participants say. Originally designed to be a platform for fuel oil futures, the HKMEx ended up being an exchange for gold contracts. HKMEx’s daily transaction volume amounted to about USD19.5 million, only a fraction of the daily turnover of USD7.7 billion to USD10.3 billion on its rival, the 103 year-old Chinese Gold & Silver Exchange.

Goldman Sachs is set to raise USD1.1 billion with the sale of its remaining stake in the Industrial and Commercial Bank of China (ICBC), the world’s largest bank by assets. Goldman earned net profit of USD7.72 billion on its seven-year investment. The move is the sixth disposal of ICBC shares by Goldman, bringing to an end the strategic partnership the two banks had established. New York-based Goldman bought a 4.9% stake in ICBC for USD2.58 billion before the Chinese bank’s initial public offering in 2006. The disposal could ease the capital pressures on Goldman. It also lets the bank lock in its gains at a time when Chinese lenders are set to report slower growth in net earnings as bad loans build up and interest rate deregulation sets in. ICBC’s first quarter net profit climbed 12% year-on-year. The sale by Goldman, despite repeated assurances over the past few years that it was a long-term investor in ICBC, was expected to affect confidence in the shares of Chinese banks, analysts said.

The National Development and Reform Commission (NDRC) has revised its policy guidelines to encourage more foreign investment in the industrial upgrade of the country’s central and western regions. The new guidelines, which will become effective on June 10, include details of favorable policies and incentives being offered in mostly labor-intensive industries and service sectors. The guidelines expand the type of eligible foreign investment being encouraged, and added another 173 key target sectors. They now cover a total of 500 types of sectors, across 22 provinces and regions. The vehicle-assembly sector, which was removed in the previous version of the guidelines, has been re-included. However, the new list strictly prohibits any investment into the industrial transfer of highly polluting and high energy-consuming projects in central and western areas. The new set of guidelines replaces a previous version issued at the end of 2008, and is the third version since first being introduced in 2000. In the first four months of this year, the use of foreign funds in central and western areas rose 5.7% and 25.7% respectively, while it fell 1.1% in eastern regions, although the absolute amount was still relatively small. Combined foreign investment in central and western provinces totaled USD19.2 billion in 2012, around 17.2% of total investment, a significant increase on the 4.2% in 2008. Chengdu has become a bridgehead for foreign investors entering the market. According to a survey of 420 U.S. companies operating in China, conducted by AmCham Shanghai, Chengdu is the most popular second-tier investment destination for U.S. companies, the China Daily reports.