Webinar: “China’s 14th Five-Year Plan and what it means for EU businesses” – 29 April 2021
May-04-2021 By : fcccadmin
The Flanders-China Chamber of Commerce organized a webinar on ‘China’s 14th Five-Year Plan and what it means for EU businesses’ on 29 April 2021.
Ms Gwenn Sonck, Executive Director of the Flanders-China Chamber of Commerce, welcomed the participants, and introduced the speaker, Mrs. Iris Pang, Chief Economist, Greater China, ING Bank. She joined ING in 2017 and is often interviewed by the media. Before joining ING she held a similar position at Natixis and OCBC Wing Hang Bank. She holds a PhD in Economics from the Hong Kong University of Science & Technology, a Masters in Commerce from the University of Oakland and a Bachelor in Economics from the University of New South Wales. Mrs. Pang will share her insights on the impact of the 14th Five-Year Plan on China’s economy and the likely consequences for China’s relationship with Europe. In 2020, China became the EU’s biggest trading partner overtaking the U.S. Foreign investment in China has increased by 6.3%. China overtook the U.S., regaining the title of the world’s top destination for FDI and will also be one of the main drivers of the world’s growth this year. More business opportunities will also arise after ratification of the Comprehensive Agreement on Investment. It is the most ambitious agreement that China has ever concluded. It will offer broader market access and a better business environment for investors in Europe and in China. European companies active in manufacturing will see new business opportunities. There will also be more opening up in the services sector.
Mrs. Iris Pang, speaking from Hong Kong, said that the 14th Five-Year Plan can be summarized in three important points:
Technology means that China addresses the threat of not having enough technology imports from the U.S. and its allies. They need to build their own self-reliant technology, which does not mean the top-notch technology, but more advanced than can be done at the moment, which is a normal ordinary level by world standards. They know they are lagging behind and can’t import all the technology they need so they have to be self-reliant, which is not easy for China because they need to import talent as growing their own talent takes time. They also need raw materials. A few months ago imports of silicon increased multiple times month-on-month. Silicon is used in the production of chips and needs a lot of imports. Selling technology is also difficult as foreign companies that have a footprint in the U.S. cannot sell technology to Chinese companies on the U.S. list for export control. China is facing difficulties to sell its technology to the world.
Green: The target to reach the carbon peak by 2030 and become carbon neutral by 2060 means China needs a lot of green products and technology. China is not very late in developing green equipment. It has quite advanced water and solid waste management systems, for example to recycle masks and PPE uniforms. “Green” can hopefully become a window between China and Europe and the U.S. Also in the green sector China needs technology which also depends on globalization and cooperation with the rest of the world. There are a lot of opportunities as many sectors are included in “green”. Europe can help China become greener.
The widening wealth gap is also addressed in the 14th Five-Year Plan. The wealthy class has benefited from Covid. They have resources and cash to increase their investments and therefore the wealth gap has increased. One way to reduce it is to enhance the healthcare system. Migrants are going to be able to enjoy health care services in cities, which in the past they could not due to the household registration system. There will be opportunities for European companies in the upgrading of public hospitals and there will be a breakthrough in education.
The government announced economic targets in the work report at the two sessions. The GDP growth target is set above 6% but the range is now between 8% and 10% because of the low base effect from 2020. China is really energetic in terms of growth. The country is scaling back fiscal stimulants because it has generally recovered from Covid-19. Compared to 2020, China does not need a very big fiscal stimulus in 2021. The 14th FYP shows a slowing down from the 13th one. The Chinese government is not looking for very fast growth, nor a lot of stimulus and relaxation for the coming five years. The focus is more on tackling challenges. The surveyed urban jobless rate will be 5.5% with 11 million jobs added. Keep in mind that every year 7 million students graduate, so the remaining 4 million is not much. Migrant workers’ wages are still growing but they experience it as a wage cut as it is lower than the 8% to 12% it used to be. An expected increase of 5% is not particularly attractive for migrant workers. We don’t need to worry about inflation in China. There will be tax reductions and an increase in R&D expenses by the government of 10.6%. There are many anti-monopoly regulations on fintech. The government doesn’t want to kill them but wants to show the world that it is on the same level with global regulations.
The relationship between China and the U.S. has worsened. It is wrong to assume that this has nothing to do with Europe. Following the Alaska meeting between China and the U.S., the EU imposed sanctions on China and China reacted with its own sanctions on the EU, which means the China-U.S. meeting had a political impact beyond the two economies. The EU is standing by the U.S. to fight on some China issues. Doing business with China, you need to be careful not to step on China or the U.S.
The China-EU Comprehensive Agreement on Investment (CAI) is not yet in effect. Many people celebrated when Merkel and Xi signed off on the agreement, but it has to be passed by every EU country and by the European Parliament. This will not happen this year, maybe next year, but it remains uncertain. China overtook the U.S. in 2020 as the EU’s biggest trading partner. The U.S. international trade dropped 10% in 2020, but trade with China increased 4.5%, while China’s exports to the EU increased 5.6% and China’s imports from the EU 2.2%. Both sides did more trade with each other even during Covid, because of medical equipment and supplies.
China is a big market but there are risks too. If you are doing business with China you need to be very careful, for example in speaking out about Xinjiang cotton. Think twice. Mrs Pang said that even being close to China, she didn’t know if there are labor camps in Xinjiang as she hasn’t visited for several years. But without information it is impossible to comment on it and it is best not to jump to conclusions. On the technology war it is difficult for Europe not to stand by the U.S. because many governments are worried about the growth of China’s economic and military power. Make sure you know the politics well before making a decision. In the coming five years you will face many difficult questions. You need to have somebody studying international politics consistently. Covid will continue to make international travel very difficult. Some European brands have started to sell their products on China’s online shopping platforms.
Volatility is the key theme for the yuan in 2021. The high-low range of the USD versus the yuan increased from 7% in 2019 to 9% in 2020 and there will be even more volatility this year with three terms of appreciation and depreciation expected. Be very careful if you open yuan positions and think about hedging because you may need it.
Which sectors are preferred in the China market? Promising sectors are 5G, infrastructure projects and big data centers. Domestic demand is a stable sector. Issues Mrs Pang warned about are anti-monopoly, the technology war and local government debt. Property developers are deleveraging but the Chinese government is not going to squeeze them to death. However, property developers have weak cash flows and need to divest a lot. The major assumption is that there will be no major comeback of Covid in China. The forecast for China’s real year-on-year GDP growth in 2021 is 8.6%. No changes in monetary policy are expected.
During the Q&A session, Jochum Haakma, Chairman of the EUCBA, asked how non-ratification of the CAI by all member countries would impact investment opportunities? Mrs Pang: You can’t rely on the international platform to grow your business. You have to rely on your own company.
Are rising housing prices part of inflation? Mrs Pang: No, asset inflation is always there in a growing economy. It is built in in emerging markets. Inflation does not come from investments, but from the real economic side, such as wage increases to retain your staff. The risks for China are the technology war and export demand. Wage growth and inflation will be limited this year.
Is there a plan about strategic research domains? Mrs Pang: The roadmap on technology innovation 2030 is available on this website: https://www.sciping.com/
If the CAI is ratified, will it be followed by a free trade agreement? Mrs Pang: This will probably take a long time. The FTA is even more difficult than the CAI. How can you talk about a trade agreement with a technology war going on, with export controls and sanctions?
Will non-Chinese companies be eligible for tax reductions for research-driven companies? Mrs Pang: Yes, if you have R&D projects in China, you can apply for tax reduction.
Could the technology war result in different standards? Mrs Pang: This idea comes from companies like Apple, Google and Huawei, and China having different operating systems. Almost all Chinese tech companies are private and they know the importance of the network effect. If more people use system A then it will be the system for the general public. Many companies want their system to be system A, but it won’t happen if they are not the biggest player. Ultimately there will be one or two operating systems that survive. China will not use this to limit imports, it actually wants to import more. They don’t mind if there system is system A, they want to buy and sell technology.
When is the RMB likely to become fully convertible? Mrs Pang: The RMB joining the IMF’s special drawing rights was the start of convertibility. It is now going through a very slow stage, but things are changing. China and Russia and other countries have more transactions in RMB. But if I am a European company, I would want China to use the euro so that they take the risk.
Does the 14th Five-Year Plan points to a more centralized approach or is there still a strong impact from the provinces? Mrs Pang: There are still locally-based policies, but the concept is driven by the central government. The green policy is dictated by the central government but each province will have its own set of policies approved by the central government. You will face a lot of different policies if you have factories in different locations.
Webinar: “How to Protect Your Trade Secrets in China” – 13 April 2021
Apr-20-2021 By : fcccadmin
The Flanders-China Chamber of Commerce, the EU-China Business Association, the China IPR SME Helpdesk and the China Chamber of Commerce / EU organized a webinar focused on “How to Protect Your Trade Secrets in China” on 13 April 2021.
Mr Peter Sczigel of the China IPR SME Helpdesk introduced the Helpdesk and the webinar’s speakers to the participants. He also introduced a few factsheets and business guides about mainland China which can be downloaded from the Helpdesk’s website.
Ms Gwenn Sonck, Executive Director of the FCCC and EUCBA, gave a brief presentation of both organizations. She also said that the Chamber attaches much importance to IPR in China. Companies doing business with China should also have an IPR strategy in their China business plan. China has already become a leader in innovation in several areas, such as the internet industry and artificial intelligence. Speaking about innovation and speed, in Beijing, shops, restaurants and communities have signs showing the inoculation rate of the inhabitants or employees. Already 50% of the city’s population has been vaccinated and the aim is to go to 70% – which is the threshold for herd immunity – by the end of May. This is something we can only dream of. According to the IMF, GDP growth in China will be 8.4% this year, which would be the highest in 10 years. Foreign investments in China have also increased by 6.2%. China overtook the U.S. and became the world’s top destination for FDI and will be one of the main drivers of growth this year. More business opportunities will also arise as the EU-China investment agreement will be signed, the most ambitious agreement that China has ever concluded with a third country. It will broaden market access and provide a better business environment for investors in Europe and China.
Mr Valentin de le Court, IPR Expert at the China IPR SME Helpdesk and leader of the China desk at Daldewolf, a Belgian business law firm, talked about the importance of keeping your secrets secret. It is a hot topic in China for several reasons. Trade secrets are used to protect highly valuable information. The world’s most valuable resource is no longer oil, it is data. How do you protect data? Through trade secrets confidentiality. Hardly a week goes by without reports about alleged trade secret theft by Chines individuals, state-sponsored hackers and employees. The topic of trade secrets has been included in the EU-China trade agreement, so there is also a political dimension. In the past year we have witnessed a very intense legislative dynamism when it comes to trade secrets protection in the U.S., the EU and China.
We live in a knowledge-based, information-based, ever more digitized economy. Looking at the S&P500 of the best performing companies in the world, in 1975, intangible assets represented 17% of corporate value, rising to 90% in 2020. Intangible assets are playing a key role in today’s economy. The value of a company is determined by its capacity to innovate and to appropriate, control, exploit and monetize the results of its innovation. The law provides two important tools to manage the results of your innovation. First, intellectual property rights, including trademarks, patents, copyrights, and design rights. An IP right is an exclusive right, a monopoly that is granted. The second tool is trade secrets. They are not IP rights, so no exclusive right is granted, but they protect you against unlawful acts.
A patent is an exclusive right granted for an invention. It enables the patent holder to exclude others from making, using, offering for sale or selling the invention without the patentee’s authorization. The invention must be new, inventive and applicable industrially. A patent is public information, available in patent registries. In return you get an exclusive right for a limited time. The main characteristic of a trade secret is that it is confidential. The protection of a trade secret is mainly factual. That will depend on the nature of the information and the way it is handled. Once it is known, it is not protected anymore and you lose the competitive advantage that you had. Trade secrets can cover a wide variety of information, not only technical, but also commercial and financial information. IP rights grant you an exclusive right, trade secrets provide protection against unlawful acts. Trade secrets and IP are complementary. Innovative EU firms use both patents and trade secrets, but they use more trade secrets than patents for protecting innovations.
Risks related to trade secrets have increased over the years. Trade secret thefts are on the rise because there is an increased flow of information. This is due to several factors: internet and digitization, open innovation, globalization of supply chains, the mobility of workers, and hacking. The biggest risk to trade secrets is not hackers, but people close to the business, such as employees, ex-employees and business partners. The majority of trade secret cases are among people that know each other.
How to protect your trade secrets? It requires an appropriate legal framework and an internal strategy for the management and protection of trade secrets. Over the past years there was a global awareness of the need to reinforce the protection of trade secrets, including in the U.S., the EU and China. The legal framework has improved, but most EU businesses still lack a clear internal management and protection strategy for trade secrets, which is the only way for effective protection. You need to have a trade secret action plan including five actions: audit, inventory, improvement, education, and monitoring and reacting.
In China, the centerpiece of trade secrets protection is the Anti-Unfair Competition Law (AUCL), revised in 2017 and 2019. There is also a set of other laws and regulations that can have an impact. Several rules were adopted last year by the Supreme People’s Court (SPC). In China there is a clear political will to strengthen trade secrets protection and enforcement. Looking at article 9 of the AUCL, we see that the definition of “trade secret” has been broadened to include all commercial information, not limited to technical and business information. The scope of trade secrets misappropriation has been expanded to include hacking and indirect infringement. Who is liable for misappropriation has also been clarified. There is no limitation to “business operators” and now includes individuals, legal persons and non-legal organizations. A Supreme People’s Court interpretation was issued in September 2020, providing guidance to courts on how to treat trade secrets cases and to companies on how to protect their trade secrets.
Trade secrets protection requires trade secrets identification. Under Chinese law a trade secret is commercial information such as technical information, business information and etc. that are not known to the public, have commercial value and for which reasonable efforts to maintain secrecy have been made by the rights holder. EU law roughly presents the same approach. It is a broad and open notion. The SPC clearly identifies typical information that may qualify as trade secrets, including technical and business operation information. Almost any kind of information can qualify as a trade secret. The second requirement is secrecy and confidentiality. The information is not widely known and not easily accessible. The ease of access to the information is the key criteria to assess whether information is confidential or not. The third requirement is to assess the commercial value of the information. It is information that has practical or potential market value because it is not known to the public and it must provide a competitive advantage because of its secrecy. The last requirement is vey important: to adopt reasonable steps to keep the information secret. Protection of trade secrets is not automatic, you need to take proactive measures. If you don’t adopt protection measures, information will not qualify as a trade secret, and you won’t be protected. You will need to convince a judge that you adopted measures to prevent what happened. Concerning the required measures there is no size fits all. The judge will not expect the same measures from a start-up as from a multinational.
Reasonable steps to implement include contracts, training and regulations, physical barriers, access management, IT measures, HR management and other reasonable measures of confidentiality. A non-disclosure agreement (NDA) is a good start, but is not enough. Trade secrets infringement includes obtaining trade secrets through theft, fraud, coercion, electronic intrusion or other improper means and disclosing, using, and allowing others to use illicitly acquired trade secrets. It also includes the second degree infringer. Remedies include civil enforcement and administrative / criminal enforcement. The maximum statutory damages have increased to CNY5 million or €650,000. There are specialized IP courts and an IP division at the Supreme People’s Court. The main difficulty of enforcement is evidence. The win rate in China is relatively low but difficult to asses. In an SPC judgement of February 26, 2021, the highest ever damages for a trade secrets case of CNY159 million were awarded.
Take aways:
- • Trade secrets are widely used
- • Trade secrets enforcement is challenging in China
- • Pay special attention to employees and business partners
- • Prevention is key and pro-active management is the only way to protect your trade secrets.
- • There are positive legislative changes
- • Implement a trade secret action plan
A Q&A session concluded the webinar.
Webinar: “Innovation in China’s agricultural sector, current situation and opportunities” – 19 March 2021
Mar-23-2021 By : fcccadmin
On March 19, the Flanders-China Chamber of Commerce and the Province of East Flanders organized a webinar focused on: “Innovation in China’s agricultural sector – current situation and opportunities”.
Ms. Gwenn Sonck, Executive Director of the Flanders-China Chamber of Commerce, welcomed the speakers and participants to the webinar. The Province of East Flanders is a long term structural partner of the Chamber. Since 30 years they have an economic and scientific cooperation with Hebei, their twin province in China. The province has a lot of opportunities in the agricultural sector. There is also a long-term structural partnership between the Chamber and Flanders Investment & Trade (FIT). Experts will speak about innovations in China’s agricultural sector and the opportunities for our companies.
Mr. Johnny Browaeys, Chairman of Seeder Clean Energy, is an old China hand and has been working in China for almost 20 years. He also works with the European Chamber in China and provides executive coaching with hands-on support to business leaders doing business with China. He will provide an insight into the developments currently taking place in the Chinese agricultural sector. He will offer his analysis on how agritech, big data, digitization, e-commerce and fintech are revolutionizing the Chinese agricultural eco-system. The second speaker, Mr. Kris Fivez, Sales Manager Asia, Middle-East and Oceania of Biobest Belgium, will share the experiences of Biobest in China. China is a market which cannot be ignored. One of the latest developments which will offer new opportunities is the agreement in principle on the Comprehensive Agreement on Investment (CAI) reached between the EU and China. The agreement grants European investors a greater level of access to China’s market and will level the playing field for European businesses in China.
Mr. Johnny Browaeys, Chairman of Seeder Clean Energy, came to China 18 years ago after a 10-year career in Belgium. After having a motorcycle accident he stayed in his room for 8 months and had time to read some books. He got fascinated by how different China seemed to be, so he sold his house and took off on an adventure starting a new life in China. He is married to a Chinese woman, is practicing standing meditation, and loves to experiment with qigong, iceskating and pioneering new businesses. He runs a new energy and carbon advisory, Seeder Clean Energy; is the owner of Zesen, providing executive coaching and strategic consultancy on Chinese businesses; is setting up an investment fund for tech companies moving into China and he is the National Vice Chair of a working group of th European Chamber.
Mr. Browaeys provided high-level insights on the crop growing industry in China. The agricultural industry represents a USD1 trillion business with crops, mainly grains, taking up the biggest share. Grains are mainly corn, rice and wheat, predominant in specific areas in China. Twenty percent of vegetables are grown in controlled environments like greenhouses, where industrialization is starting. Orchards are mainly growing fruits such as oranges and apples. About 27% of the labor force is employed in agriculture and has a relatively low educational level. There is a shortage of grain in China and the problem is getting worse because the population is eating more meat. If they would eat as much meat as we do, there would be a big problem. China has a relatively low amount of arable land. It is one of the countries with the least arable land compared to its population and it has decreased in the past years due to development, contamination and conversion to ecological use like eco-parks. The younger generation is less interested in the old farming practices because it is a very tough life to work in the farming industry. There are still a lot of small farm holdings with tough labor conditions. The habits of fertilizer use are hard to change and there is still much overuse of fertilizers and pesticides, degrading the land’s quality. China has a relatively low amount of water. This is making irrigation practices increasingly important, which is one of the key challenges China is facing. The government is moving to turn the smallholder farms into larger scale farming, but the largest part of the land is still in the hands of smallholders.
China has a centrally planned economy, which is different from Europe. Every five years they make an update on the progress of the past five years, setting new priorities based on the country’s needs. The most recent development is the digitization of agriculture and rural areas in the plan for 2021 to 2025. The aim is to build on technology, machinery, the Internet of Things (IoT), and artificial intelligence (AI). The government started incentivizing larger and modern farms, e-commerce and innovation in general. It also developed specific objectives for different parts of the country, not only the amount of crops, but research and innovation via modern agricultural parks (MAPs). MAPs are key to understand how China’s planned economy works and how to enter the Chinese market as a foreign company through this eco-system. Local governments are executing what the central government is asking them to do. A second pillar are the universities where research and development is happening, and finally the industry, which also knows what the central government is asking them to do. The key stakeholders in China’s agricultural eco-system are the governments, farmers and digital solution providers, and the government is connecting all these players by digitizing the whole value chain. State-owned enterprises, private companies, R&D centers, universities, the service industry and entrepreneurs are all incentivized to facilitate the growth of the eco-system. China has access to a lot of data on an enormous number of things you even can’t imagine. The data are being centralized and made available to all players, while artificial intelligence is also used to figure out how to optimize processes, solutions, operational models etc. The digitization of the industrial value chain is happening in all industries.
There are MAPs in 31 provinces. GDP growth is still a target but is set relatively low, to avoid putting on too much pressure. Talents, and the ability to generate patents, are a second point. Solutions that can facilitate the interactions between stakeholders to accelerate the growth of the eco-system are the most attractive to them. Digital farming solutions can create operational efficiency, reduce labor requirements, improve environmental performance, reduce costs, ensure food security, and make agriculture attractive to young people and entrepreneurs. The financial sector is also very active in the agricultural industry with finance, insurance and e-commerce. China has already rolled out the network that enables digital solutions to be used. Farmers living in the middle of nowhere still have access to modern technology to sell their produce. They can also take pictures of their crops to figure out when to apply fertilizer or at what price they could sell the crops. The central plan shows where it is all going and what is important.
There are now entrepreneurs beginning to use non-tradable funding (NTF) and blockchain solutions to conceptually combine a number of stakeholders in this eco-system by means of smart contracting where each of the players in a region gets a certain value, e.g. a farmer has a certain value because he is able to produce, an e-commerce company has a certain value because it can sell the produce, a start-up company with a new solution has a certain value. In the blockchain context, all these players are put in a basket and investors are now able to invest in the basket using fintech. They don’t need to invest in a specific start-up or SOE, but they can invest in the solution as a whole, which reduces the risk. Successful solutions can roll out very quickly through the MAPs, creating a new low-risk market.
Mr. Kris Fivez, Sales Manager Asia, Middle-East and Oceania of Biobest Belgium. explained that his company is active in biological pollination and crop protection. In the territory for which he is responsible, there are three subsidiaries in Turkey, Israel and China, where the company has been active for about six years. Biobest has 22 subsidiary companies, of which 10 are production units and the others mainly trading companies. Biobest employs 1,600 people and exports to about 70 countries. It has two main activities. The first one is bumblebee pollination. Bumblebees are used to pollinate different kinds of crops. The company can provide bumblebees at any time of the year. It produces about 10,000 to 15,000 bumblebee colonies on a weekly basis. About 100 bumblebees are packed in a box. A grower can place these boxes in his greenhouse containing different kinds of crops such as tomatoes, eggplants and strawberries. Bumblebees pollinate the crops and enable the grower to increase his yield. A second activity is biological crop protection. The company produces about 40 other insects used for pest control in greenhouses. The insects look for the pests, keeping them under control and reducing the amount of chemicals the grower needs to use.
The Chinese government is putting a lot of attention on human health, reduction of chemicals and food safety. An incredible amount of chemicals is used on traditional crops, but growers are now forced to consider other alternatives, one of them being bumblebees. Biobest can offer a biological solution reducing chemical usage. In China, the more conventional use of growing in small family-owned greenhouses is being reduced, and younger people are moving to the cities, abandoning the agricultural areas, where there is now a shortage of labor. The food demand in bigger cities continues to grow, and the income of the people is also growing, while they are paying more attention to what they eat. The government is starting programs to invest a lot in building big high-tech greenhouses nearby big cities. Not all agriculture is interesting for Biobest, only the greenhouses covering now 650,000 hectares. One of the main vegetable-producing countries in Europe – Spain – has about 25,000 to 30,000 ha of greenhouses compared to China’s 650,000. Biobest considers China to be its future base for exports to countries including Japan, Korea and Vietnam.
Biobest is producing bumblebees in climate rooms in China, enabling it to provide bumblebees year-round. There is a local team of about 15 people in China working in departments of production, sales, and finance. The China branch is located in Shandong province, where the majority of cropping in greenhouses is happening. In the regions around Beijing and Shanghai many greenhouses are being built. In the area between Shenyang and Dailian there are open field crops where bumblebees are also being used. In Yunnan there are many foreign and local companies producing huge quantities of blueberries, which are also interesting for Biobest. The customers are those having traditional solar greenhouses of about one mu (670 sq m), which are not too big, but which are interesting if you look at the quantity. On the other hand there are the high-tech greenhouses of about 15 ha.
At a certain moment it was clear that China was an interesting market, so we started to investigate. Importing living insects in China is very complicated and the company can import in China only once every two months. To have a stable business, imports should be possible every week or two. The company therefore chose local semi-production in China. The bumblebee queen is imported in China from which the colonies are built. To do this a bilateral agreement between the veterinary services of Belgium and China was required, which took about two years. But an approval on the national level doesn’t necessarily mean an approval on the local level. It took another two months for Qingdao ariport to agree to accept the goods. In the summer of 2019 imports were suddenly stopped as the national authorities wanted 100% local production. Concerning know-how, this is more sensitive, but China is such an important market for the future that the company decided to go for it. Local production is now quite successful. The company initially started with a distance management system as it was not possible to dedicated people 100% to China. The production manager could only spend 10% of his time on China. Biobest had a majority share in a joint venture. Language is an issue, as misunderstandings easily arise and meetings and protocols take a lot of time. It also took some time to convince the staff to report if something went wrong. The location in the countryside is not ideal as there are frequent power cuts. In the beginning the company sourced a lot of components from Belgium, gradually sourcing more in China, and relied on the JV partner for sales, but it was a new kind of product for the Chinese market, creating some complications. The company made too many assumptions and was surprised by the use of chemicals. In China there are subsidies to promote the use of this kind of product, but some companies use the subsidies to start bumblebee factories, increasing competition in the local market. Sales exclusivity of the JV partner has been discontinued, the company is now focussing more on certain crops, regions and clients and has taken control of logistics.
Finally, Mr.Fivez outlined the company’s successes. Production yields are coming close to the group level. There is a stable team in which Biobest has full confidence. Since two years sales targets have been realized and online sales have started. About 15% of sales is going through online channels, the only country where this is happening. Biobest is the only foreign company still present out of four originally and is becoming a reference brand in China.The next step is starting a new factory for biological crop protection and considering first steps on the export market.
What would the company do differently?
- Concerning the JV partner, do more homework and be more critical in advance
- Better investigate the location, as it is not easy to find the right people.
- Invest for the future, assume there will be problems.
- Invest in people.
- Make time for China, and realize what you can and cannot do yourself.
Q&A: What are the main tips for entering the Chinese agricultural market? Mr. Browaeys: Having local competitors is not necessarily a bad thing, it means your market is maturing and as a foreign company you will always be different. You can also get subsidies to upgrade by e.g. going into e-commerce. It is important to localize sales to clients because your competitors will soon have products tailored to the local market. Don’t look for one JV partner but for industrial value chain partners, which means different partners in different parts of the value chain. Built trust and long term relationships with the eco-system and always change to facilitate the Chinese eco-system. What is your main challenge today? Mr. Fivez: Focus, there are so many opportunities in different provinces. You cannot start everywhere at the same time. Mr. Browaeys; You need to be present, you can’t do this from a distance.
Webinar: “Breaking into the Chinese green construction sector” – 25 February 2021
Mar-02-2021 By : fcccadmin
The Flanders-China Chamber of Commerce, the EU SME Centre and EUROCHAMBRES organized a webinar on the topic of “Breaking into the Chinese green construction sector” on 25 February 2021.
Ms Gwenn Sonck, Executive Director of the Flanders-China Chamber of Commerce and the EU-China Business Association, welcomed the participants and introduced the topic. The Chinese construction sector is one of the largest in the world and is expected to continue growing at an annual average of 5% until 2023. The Chinese government is making green building a top priority by promoting more energy efficient buildings. Therefore there is great potential for European SMEs. By 2030, two-thirds of the Chinese population is going to live in urban areas and Chinese authorities are already planning to build 60,000 new multi-floor residential buildings and 117 new mass transit rail and underground projects. The Comprehensive Agreement on Investment (CAI) agreed in principle by the EU and China grants European investors a greater level of access to the Chinese market and will level the playing field for European businesses in China, a market which cannot be ignored.
Mr Gianluca Ghiara, Managing Director, Geapower Consulting Co, is normally living in Beijing but is now staying in Rome due to Covid-19. He is an independent consultant active in the Chinese green-tech sector for more than 15 years and holds an MBA from Peking University. The Chinese green construction sector is extremely important. About 15 years ago the building sector was not modern, and China started to renew the sector, which will continue to grow for at least 10 to 15 years. All municipalities in China are pushing the construction sector in different ways. In a centralized country like China, the central government plays an important role and provides the direction for municipalities and local governments. Related to the construction sector, the three most important ministries are the National Development and Reform Commission (NDRC), the Ministry of Housing and Urban-Rural Development (MoHURD) and the Ministry of Ecology and Environment (MEE). The role of municipalities is still very important in developing green construction projects, including areas such as the water supply, solid waste management and energy generation. In the last 10 years the government has been transforming the construction sector into a green construction sector, as it wanted to control pollution and support the renewal of local industries. Chinese people are now more conscious about living in beautiful, green and sustainable cities.
There are new laws and regulations in all areas of the green building sector, such as in design, construction and operations. MoHURD introduced the “New Assessment Standard for Green Building”. In the past, cities were not well-planned, causing many problems in terms of energy efficiency, traffic control, water and waste management etc. Another important regulation is the “Green Building Evaluation Standard”, approved in January 2015, and subsequently amended. China wanted to upgrade to the level of Europe and the U.S. China’s ”three star system” is very similar to the LEED system in the U.S. The evaluation system has two different standards: one for residential buildings and one for public buildings, covering six categories. Three stars means green buildings. The system is a way for the central government to push municipalities and developers to focus on good quality buildings. The legislation created a “green wave” in the construction sector and a bottom-up approach. Now the whole country is involved in the modernization.
Over the past 20 years, China has promoted the development of eco-cities, which are in fact districts in some cities. The government wanted to control CO2 emissions in cities and create some areas where the best technologies could be developed and only certain companies and buildings are allowed. New eco-city projects that have gained international attention include the Sino-UK Dongtan Eco-City in Shanghai, Caofeidian International Eco-City in Tangshan, Sino-Swedish Wuxi Low Carbon Eco-City, Sino-Finland Mentougou Eco-Valley in Beijing, and the Sino-Singapore Tianjin Eco-City. These offer opportunities for European companies to partner with Chinese companies in their development. They present positive competition between different cities and have been developed through bilateral cooperation projects. Being involved in these eco-cities can offer a good entry to the Chinese market.
Another important element is the Chinese green municipal finance. The level of local finance is very different from national finance. Most taxes are not kept locally, but are controlled centrally. Municipalities don’t have much financial power and the level of municipal debt is high. The central government obliges the municipalities to develop projects that are sustainable, also from a financial point of view. Municipalities were selling land and asking banks for loans. This can’t be done anymore. The prices of apartments in China are skyrocketing and the central government want to limit the rise. Municipalities are no longer allowed to ask for finance which is not sustainable. In the past, municipalities only had to look at the financing side: think about the project and look for money. Now they also have to focus on the funding. The project has to be sustainable in terms of “green” and “finance”. Screening of green projects is very strict. Municipalities have to be able to finance them, because there is no longer any financial support from the central government. Developers are looking for foreign companies to partner with Chinese companies that don’t have enough experience. In the field of laws and regulations, much still needs to be done. Some are too strict, making them difficult to follow, and some too vague, giving too much room to local developers.
China set out clear goals to develop green building:
- The energy efficiency of newly constructed buildings in urban areas must be improved by 20% compared to the year 2015
- Th share of newly constructed green buildings in urban areas shall be increased to 50%
- The newly constructed green building space nationwide is expected to reach 2 billion sq m
- The retrofitting of existing public buildings for energy efficiency covering 100 million sq m and existing residential buildings covering over 500 million sq m to be completed
It is evident that China represents a good opportunity for European SMEs. At least 10% to 15% of the overall investment in the Chinese green construction sector is expected to go to foreign companies. There is a need for stable technology and Chinese companies are looking to upgrade their systems and follow the green wave started by the Chinese government. The Chinese market is profitable but very diversified, so you need to do your homework. Chinese companies have learned to appreciate the role of European SMEs, presenting a good opportunity. But a good business strategy is essential and you need to determine according to your technology which cities you want to enter. Your technology needs to be localized, you can’t simply replicate what you do in Europe.
Ms Ma Jingjing, Senior Low Carbon Urban Planner, NORDIQ Group China, has over 17 years of professional experience in climate change and related topics and holds an MBA from Peking University and a Master’s degree from the Technical University of Denmark. China’s climate targets for 2030/2060 have been announced in September 2020: before 2030, achieve peaking of carbon dioxide emissions and before 2060, achieve carbon neutrality. More specifically, by 2030:
- Lower carbon dioxide emissions per unit of GDP by over 65% from the 2005 level
- Increase the share of non-fossil fuels in the primary energy consumption to around 25%
- Increase the forest stock volume by 6 billion cubic meters from the 2005 level
- Increase the total installed capacity of wind and solar power to over 1.2 billion kilowatts
The 14th Five Year Plan (2021-25) and 2035 targets have been announced as well as the climate strategy until 2030 and 2060. The Ministry of Ecology and Environment (MEE) has taken over the climate strategy from the National Development and Reform Commission (NDRC). The National Energy Administration (NEA) has called for public comments on the renewable energy plan and laid out the seven priority areas. The part of non-fossil fuels in China’s energy structure has been increasing in the past 10 years. Achieving the 1.5°C target will require an additional investment of about CNY138 trillion, or about 2.5% of GDP per year. To achieve the “Europe Green Deal” targets with reduced emissions by 50% to 55% by 2030 will need an annual investment of €260 billion or about 1.5% of GDP in 2018. In the Chinese building and construction sector, the use of electricity and natural gas has been increasing. By 2020, the national target for the total building area with ultra-low energy consumption has exceeded 11 million sq m.
Concluding her presentation, Ms Ma Jingjing described three case studies: the Hubei 50MW biomass CHP project, the Datong zero carbon project and the green industrial park in Changsha, Hunan province.
Q&A: How sensitive is the Chinese population regarding green cities? Do they take it into account when moving to a city? Ms Ma: First university graduates will consider if they could get a good job with a high salary, but the green factor, mobility and housing are also taken into account. Mr Ghiara: Sometimes it’s a matter of choosing where to live in a city. People are frustrated by traffic and heavy pollution and will try to find new, good quality districts. Does the government also give incentives for factory construction like for residential buildings? Mr Ghiara: Yes, seveal industries receive incentives to upgrade their systems and machinery in terms of the use of electricity and water, but it depends on the kinds of industry.
The above is a summary of the webinar, which lasted around one hour and forty minutes. The webinar can be viewed on the Youtube channel of the EU SME Centre: Part 1 and Part 2.
Webinar: “Innovation in China’s agricultural sector – current situation and opportunities” – 19 March 2021, 10 am CET
Feb-24-2021 By : fcccadmin
On March 19th, the Flanders-China Chamber of Commerce and the Province of East Flanders are organizing a webinar focused on: “Innovation in China’s agricultural sector – current situation and opportunities”.
Our speaker, Mr. Johnny Browaeys, Director of Greenment, will provide an insight into the developments currently taking place in the Chinese agricultural sector. He will offer an outlook about how AgriTech, big data, digitization, e-commerce, and fintech are revolutionizing the Chinese agricultural ecosystem. He will be followed by a company testimonial.
If you work in the agriculture sector and you want to get close to China, don’t miss our webinar to dig up more information about the agri-trade sector.
More information can be obtained at info@flanders-china.be
Practical Information:
Date and time: March 19, 2021, 10 AM, CET
Location: Online
Price for members: Free
Price for non-members: Free
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