The EU-China Buiness Association, the European Union Chamber of Commerce in China and BusinessEurope presented the launch of the ‘European Business in China – Position Paper 2020/2021’ online on 6 October 2020.

Ms. Gwenn Sonck, Executive Director, Flanders-China Chamber of Commerce, explained that the Position Paper includes the views from more than 30 working groups representing European businesses in China. The Paper describes the structural challenges in the China market and provides constructive recommendations to both Chinese and European authorities.

Mr. Joerg Wuttke, Chairman of the European Union Chamber of Commerce in China joined the webinar from Beijing. He is Vice President and Chief Representative of BASF China in Beijing since 1997. He lived in China for more than 20 years and since 2019 is Vice Chairman of the International Committee at the China Chemical Association. From 2011 to 2019, he served as Chairman of the Business and Industry Advisory Committee to the OECD’s China Task Force. The Position Paper was launched about a month ago, just before the EU-China Summit. It counts 400 pages and is freely downloadable from the Chamber’s website. In some areas 5% to 10% of the recommendations get done, about 90% is carried forward and new things are coming up. The essence of the Paper is combined in the Executive Summary with the focus this year on the growing sense of urgency for China to reform. There are the old headwinds in the economy, such as the debt burden, which is growing due to the stimulus that Beijing has instigated; the demographics, as China is one of the fastest ageing societies in the world; and of course the new challenges the economy is facing, such as Covid-19 and decoupling. The Chamber will cover decoupling in a survey to be launched on January 14. As headwinds are rising, China has to get moving. China is falling behind Taiwan, South Korea, and Japan. China could have done better.

The World Bank examined three scenarios. In the baseline scenario of “muddling through”, China will catch up with Japan in about 15 to 20 years, but will be behind Taiwan and Korea on GDP per capita. In a second scenario, if China focusses on the domestic side, it will not catch up with any of these economies until about 30 years from now. If China implements comprehensive reforms, it would overtake Japan in the next five years already and overtake Korea and Taiwan in 30 years. China is performing below its potential right now, which is related to the state-owned enterprises. The Chinese Communist Party wants to have control mechanisms in order to stay on top of the economy, energy, banking, insurance and so on. They pay for it with a lagging success story. At the same time they have a brilliant and innovative foreign enterprise landscape, which – unleashed more with reforms – would make China bounce much faster. The Communist system is based on control, and control has to be paid for. The revenues of SOEs were stable over the last six months compared to last year, but profits were down 9% or 10%. But private enterprises listed in Shanghai and Shenzhen increased their profits by 22% and revenues by 9%. This shows that even in a crisis the Chinese economy has players that are extremely well positioned and resilient.

In the Position Paper, China’s productivity issue is also emphasized. Productivity has been going down, as 12 years ago one renminbi of credit generated one renminbi of GDP growth, but now it is 0.28 renminbi. China needs much more money to generate what it did more efficiently 12 years ago. Institution building is another important point to be able to get out of the middle-income trap. The Position Paper could easily run to a thousand pages, but nobody would read it, so we have to delete about half of what we collect. Another point is how important are foreign companies to the Chinese economy? There are 87,000 foreign-invested companies registered in Shanghai, including 17,00 American, 10,400 European companies and others. The largest direct foreign investor is the British Virgin Islands. The 87,000 foreign companies generate 25% of Shanghai’s GDP, 33% of local taxation, and 11% of employment. Import-export is 66% and industrial output 30%. There is a huge impact from few players, which should be a reminder of how beneficial foreign investment is to the Chinese economy.

The Paper concluded with one economy, two systems, being state-owned enterprises versus private Chinese enterprises, but also including foreign enterprises. There is no doubt that China is the growth story for the next years to come. China is to account for 30% of global growth until 2030. We are constantly told that China is opening up, but very little happens. The issue of business versus politics is really very worrisome because the politicization of business is increasing, such as in the Taiwan, Hong Kong and Xinjiang issues, where we are between a rock and a hard place. If foreign companies are trying to accommodate the Chinese version, they have problems back home. It is a time of soul searching, standing up for European values such as human rights and open dialogue and at the same time operating in an autocratic system. How to bridge this is a real challenge more than ever.

China used to be the charming point in the economy but recently China has been dropping a lot of soft power. In Europe we need goodwill for Chinese investors in order to get the investment agreement done and passed in parliament. In countries like Poland, the Czech Republic, Slovakia, and Sweden there is much resentment. China realizes that it needs a genuine friend and the Chinese leadership is taking time to care about foreign businesses. The Chamber hopes that China will change tack in language and opening up, to have a better atmosphere between Europe and China.

Mr. Jochum Haakma, Chairman of the EU-China Business Association, remarked that not much is heard anymore about the Made in China 2025 program. How much does China really need foreign investors to outcompete Korea and Japan? Mr. Wuttke: To many Chinese reformers, Made in China 2025 stood for overcapacity, and that is the reason it has disappeared, not necessarily because of foreign concerns. The Chinese realized they were going down the same road as solar panels and wind turbines, where they created huge overcapacity. Made in China 2025 was indicating that China had to catch up, as it was not proficient in engineering, nor in sales and marketing, but in the low-profit area of production. China is importing about USD300 billion worth of semiconductors a year, which they need in their digital wonderland, but the motor is still coming from the U.S., Taiwan, Japan or Holland. They are now throwing money again at everything that moves. It remains to be seen whether they can close the gap. Decoupling comes with price increases and we see a splintering of the world. There is anxiety in China in getting ahead in some technologies, but this has been build up over decades in Europe and it turns out it is more difficult than the Chinese thought. If the U.S. tighten sanctions, and the Europeans and others join the club to whatever extent, China might find it very difficult to follow the path into the promised land.

Ms. Luisa Santos, Deputy Director General of BusinessEurope, moderated the Q&A. The big question is what will happen with China in the coming months and years. Mr. Wuttke: Many in the Chinese leadership are worried how the technology war is shaping the world. Some however realize that China started decoupling and was very aggressive with countries that were not complying and the companies associated with these countries. After all these years, companies are not speaking up for China anymore, and the ending of naivety that Europe had towards China is good, but Europe has to be careful not to cross red lines and become protectionist. It is going to be a real challenge to have the investment agreement passed before the end of the year. Mr. Wuttke is more worried than he was six months ago because the Chinese leadership seems to be more driven by catering to a domestic audience.

How has the business environment for European companies in China changed? Mr. Wuttke: The business climate is good as the Chamber’s members have more business opportunities, but most of the members are already successful in China. Production has seen incredible increases to the point were consumption is lacking in China. The export data are incredible, but this also means that people in China don’t buy the stuff. China has been roaring back particularly in areas of interest for European business, such as the car industry, chemicals and luxury items. But there is no level playing field: it is Chinese private and foreign companies against SOEs. Private enterprises in China have a really tough time and it’s not getting better due to the introduction of party cells. There is still the issue of market access for technology transfer, but they realize that there is a problem with attracting new technologies if they are being seen as ripping it off. Dual circulation and a strong domestic focus is going to be theme of the 14th Five Year Plan. It is not clear yet how this will translate into opportunities for foreign companies. The social credit system is still in the making but again it is a tool in the toolbox of the Communist Party.

Is a dispute settlement clause really needed in the investment agreement? Mr. Wuttke: Nobody has any illusions that you can take the Chinese government to court and the Chamber has not taken any position on it although there is a big discussion on it in Brussels. Not only European companies have requirements concerning the investment treaty, the Chinese also have, such as participation in the setting up of power and water treatment plants. Concerning the Green Deal, China pledged to have the peak of emissions in 2030 and being neutral in 2060. It is a commitment from the President which we welcome, but we will hold China accountable to it. To say goodbye to coal is going to be less likely than it was two or three years ago. China is still building coal-fired power stations and is one of the big financing parties in power stations based on coal outside China. But let’s not forget that things also get done between China and Europe, we now have a geographic indications by which European and Chinese products are safeguarded in each others markets.

Ms Santos: In the first six months of this year, China has become the main trading partner of the EU, passing the U.S. It is a very important relationship and we want to keep it that way. Business Europe will be focussing on the Green Deal and the digitalization, because there are potential conflicts.

The Flanders-China Chamber of Commerce organized a webinar focused on Financial Incentives for Doing Business with China online on 1 October 2020.

Ms. Gwenn Sonck, Executive Director, Flanders-China Chamber of Commerce, introduced the webinar and the speakers. Mr. Rik Daems, Senior Advisor International Investment Funds FPIM – SFPI, Vice Chairman and President of the Investment Supervisory Board CBDEIF, President Parliamentary Assembly of the Council of Europe PACE-COE, gave a speech on the topic of “Different Investment Vehicles for Belgian Companies Investing in China and Chinese Companies Investing in Belgium or in Europe”. “Capricorn Partners: Equity & Support for China roll-out” was introduced by Mr. Steven Levecke, Senior Investment Manager, Capricorn Partners, followed by “Financial Instruments of PMV” by Mr. Tim Lievens, Senior Investment Manager PMV. Mr. Wim Bosman, Business Development Specialist, Marketing and Communication, Credendo, Export Credit Agency, gave the last presentation of the webinar on “Exporting to China? Investing in China? Support by Credendo”.

A question and answer session concluded the webinar.

The EU-China Business Association and the Flanders-China Chamber of Commerce organized a webinar focused on “Experiences of investing in Weihai, Shandong province” on September 17, 2020.

Ms. Gwenn Sonck, Executive Director of the Flanders-China Chamber of Commerce and the EU-China Business Association and Honorary Citizen of Weihai City and Shandong Province, explained that in her job she met many delegations, but clearly remembered her first contact with Weihai 15 years ago. A delegation from Weihai visited Bekaert in Belgium, and during a luncheon introduced the city. Their openness and the advantages of their city made her want to learn more, and she was invited to visit the city. She was impressed by the natural beauty of the city, the friendliness of the people and the efficiency of the government. Delegations were exchanged and many friendships developed. A long-term cooperation was established between the Flanders-China Chamber of Commerce, the Weihai Foreign Commerce Bureau, other government departments and development zones. The city of Ghent also established a partnership with the city of Weihai. Many cities that are promoting themselves to attract foreign investment all say they are unique. The difference is that Weihai is really unique. Weihai only has 1,000 square kilometers of seaside and the city won many awards for its clean air, clean city, best habitat for living, business-friendly environment etc.

Mr. Chen Hui, Chief Representative of Weihai in Europe, introduced Weihai’s investment climate and the different strong sectors of Weihai. The city is located at the eastern-most tip of the Shandong peninsula and is the nearest city to South Korea in China. It takes 45 minutes to fly to Seoul and one hour to Beijing and Shanghai. The city has a land area of 5,800 sq km with a population of 2.84 million. The coastline is 986 km long. The city has a complete logistics infrastructure and convenient traffic conditions. The network of airlines, railways, sea routes and freeways connect Weihai with the whole of China and the world. There are four class-1 ports in Weihai with 27 sea routes to Japan, South Korea and domestic cities, including nine sea routes to South Korea. The passenger throughput of Weihai airport reached 3.09 million passengers in 2019 with direct flights to 24 cities. Weihai is a city of universities. Famous Chinese universities like the Harbin Institute of Technology and Shandong University set up campuses in Weihai. There are 11 institutes of higher learning where 20,000 students graduate every year.

Weihai has a sound industrial base and developed marine industry. There are 15 national and provincial-level industrial parks. There are 20,000 industrial enterprises, including 18 listed enterprises. Weihai is a famous and important production base for medical devices, fishing gear, tires, carpets, new materials and printers. Weihai has a developed marine industry and rich marine resources. There are more than 300 species of sea products. The output of aquatic products reached 2.7 million tons and the processing output reached 3.54 million tons. Weihai was one of the first open coastal cities in China and has 19 friendly sister-city relationships. The city has set up economic and trade cooperation with more than 200 countries and regions. In 2019 the import and export volume reached CNY140.2 billion, while the actual use of foreign capital amounted to USD1.22 billion. A total of 1,441 foreign-funded enterprises settled down in Weihai, including Hewlett-Packard from the U.S., Hyundai and Samsung from South Korea, Hitachi and Mitsubishi from Japan, Bekaert and Beaulieu from Belgium, Air Liquide from France and other Fortune 500 companies. Weihai is one of the first pilot cities for the innovative development of the service trade. Recognized technologically-advanced services companies will pay corporate income tax at a reduced rate of 15%. Weihai has become a hub city linking the east and the west for international logistics. Freight trains link Weihai to Hamburg and Duisburg in Germany.

There are seven industrial clusters with an output of more than CNY100 billion and the city is striving to cultivate one to three CNY10-billion-level enterprises in each industrial cluster within three years. One cluster is new generation information technology. Key enterprises have investments from all over the world. The electronic information and intelligent manufacturing industrial park has been built up. There are three development directions: printing devices and components, IC design, assembly and test, and mobile smart terminals, VR and AI.

A second cluster is new medicine and medical devices, including Wego Group and Disha Pharmaceutical Group. The Medical Devices and Biomedical Industrial Park has a planned area of 18 sq. km. and a construction area of 5 million sq. m. There are five development directions in this cluster: 1. core technology, industrialization and application of high-performance medical devices; 2. high-resolution acousto-optic electromagnetic medical imaging equipment; 3. rehabilitation equipment; 4. new targeted and multiple targeted drugs and anti-tumor drugs; and 5. therapeutic vaccine and gene therapy drug development. The revenue of this cluster could reach CNY130 billion by 2022.

The third cluster is advanced equipment and intelligent manufacturing. The development directions of this cluster are: 1. robots and key components; 2. intelligent manufacturing systems; 3. CNC machine tools and systems; 4. marine engineering equipment; and 5. vehicles and key parts. The goal is to achieve a revenue of CNY220 billion by 2022.

The fourth cluster is carbon fiber and other composites. The Carbon Fiber Industrial Park has a planned area of 2.5 sq. km. to introduce carbon fiber production and R&D institutions. The Graphene Industrial Park aims to create a graphene industrial cluster based on ultra-high purity graphite materials. The development directions are: 1. high-performance carbon fiber production, R&D and industrialization; 2. R&D of graphene material application technology; 3. R&D and production of metal-, ceramic-, and non-metal-based ceramic materials; and 4. production of high-performance polyurethane, engineering plastics, degradable polymers, silicon polymers, etc. The revenue to be achieved by 2020 is CNY110 billion.

The fifth cluster is marine biology and health food. The Marine High-tech Industrial Park has been set up with a planning area of 37 sq. km. It is the only marine biotechnology park in Shandong province. The development directions are 1. marine biology and genetic drugs, etc.; 2. deep processing of marine products; and 3. deep processing of agricultural products such as ginseng and peanuts. The revenue of this cluster is expected to reach CNY220 billion by 2020.

The sixth cluster is leisure and sports products. The development directions are: 1. R&D and design of high-end textiles, clothing, carpets and sports products; 2. design and production of high-end fashion brands; and 3. introducing world-renowned fashion events. The target revenue is CNY110 billion by 2022.

The seventh and last cluster is health and wellness tourism. Weihai is one of the most attractive tourist destinations in China and a famous hot spring town with nine high-quality hot springs. The development directions are: 1. medical colleges, research institutions and hospitals; 2. rehabilitation physiotherapy and elderly care; 3. high-end hotels and theme parks; and 4. sports, film and TV bases. The revenue target is CNY130 billion by 2022.

The European office of Weihai is located in Munich, tel. +49-17632860311, email: chenhuich2003@aliyun.com

Mr. Jun Liao, Divisional CEO Specialty Business, member of the Bekaert Group Executive, Bekaert, gave a short description of the activities of Bekaert in China and why it went to Weihai. Bekaert entered the China market in 1992. The first venture was established in Jiangyin, close to Shanghai, to make tire cord and stay close to international customers who had moved their business into China. Later the company saw the great potential of the China market and expanded its business to other cities. The company set up a business in Weihai in 2003. Invested capital has grown from USD30 million to over USD100 million. Total investment has grown from USD30 million to USD310 million. Bekaert’s growth in Weihai is linked to the open investment environment. During the Covid-19 outbreak the company received tax and financial benefits. During the Covid-19 epidemic we very quickly resumed our production with the support of the city government. The government was very supportive. Weihai also has advantages in human resources with its top class universities and technology schools. When you face difficulties, you can go to the city government, which is very open and supportive. A tip to do business in China is to conduct due diligence before you make a big investment decision.

Mr. Berthold Arends, General Manager, Marquardt Switches Weihai, gave a description of the activities of Marquardt in Weihai and why it choose the city to invest. The German family-owned company is headquartered in Baden-Würtemberg and started its China business in 1996 in Shanghai’s Pudong. At that time it was in the middle of nowhere, but Pudong developed very fast. The core business was switches for power tools, drilling machines, etc. Several years later the company expanded its business in automotive switches, anything you can press in the car and also hidden systems, including steering locks. Since 2014 there has been a further development in battery management systems. Due to the huge development, especially in automotive, the company was looking to expand in Asia. The location in Shanghai was fully occupied and new projects required manufacturing space. The company was looking not only to China but finally the decision was made to stay in China because the core business would be in electrical vehicles. China is very much supporting development in EVs, and the core know-how is located in China. Weihai had certain advantages. Logistics-wise it is close to customers in Changchun, Beijing and Qingdao, but also in Korea and Japan. Transportation by sea, rail, road and air is very well developed, which is a big advantage. There is a very strong willingness to develop Weihai into a high-tech area. There are famous and well-equipped universities willing to cooperate with companies. People are very open to new challenges and very stable. Compared to other regions in China, people in Weihai are much more committed to a choice they made. Weihai does not have much automotive industry, so Marquardt is pioneering. It started an apprenticeship program for students from vocational colleges to start a training program. In two years time they will become new employees. Support from the local government is very important. As a certified high-tech company it can receive tax benefits. When you are a new investor in China you would need a consultant or partner to understand how to start. There are a lot of local regulations which are challenging to get to know all by yourself. You also need to have the right contacts and support from the local authorities.

How did Weihai cope with Covid-19? Mr. Arends went to Germany for a winter vacation on January 19 and hadn’t heard anything about the disease, but after landing in Germany, everybody was talking about corona. It was a big challenge to go back to China as flights were canceled, but he succeeded in the beginning of March. The company recovered four days after Chinese Spring Festival, losing only a few days of work, and restarted 100% with measures such as wearing masks and performing disinfections. The company never faced any issues. Weihai had only around 40 cases. The key success factor for keeping the number of Covid-19 cases so low is that the Chinese authorities don’t allow anybody to come into the country without 14 days of quarantine in a specified hotel. It is impressive how strict and fast the measures were implemented. Also impressive was how people followed the measures.

Mr. Luis S. Galán, CEO and Founder of 2Open China Ecommerce, discussed the importance of e-commerce and also shared his experiences in Weihai. His company also started in Pudong. Mr. Galan came to China with a scholarship to study for his MBA in the China-Europe Business School in Shanghai. He now has a team of 30 people in Weihai. It has a competitive advantage in human resources. His company – 2Open – is a service provider for e-commerce solutions. Weihai is a great place to live and develop a business. Weihai is like the Mediterranean with seaside, palm trees and blue skies. People in Weihai have a great attitude and willingness to help. Mr. Galan first tip to do successful business in China is to have an appreciation for China and the right mindset. Don’t go to China with a negative mindset. Doing business is serving and helping each other. By doing business we are helping our clients, consumers and employees. Secondly, try to have a stable and motivated team. Treat them as family. Thirdly, be realistic as everybody wants to go to China. Thinking that you are going to make easy money is totally wrong. To compete in China you need strong resources and a strong mindset.

Companies interested to know more about Weihai’s investment environment, can send an e-mail to: gwenn.sonck@flanders-china.be

The Flanders-China Chamber of Commerce and Flanders Investment & Trade organized a webinar on “Financial support measures for doing business with China” on September 18, 2020.

Ms. Gwenn Sonck, Executive Director of the Flanders-China Chamber of Commerce and the EU-China Business Association and Mr. Yves Roekens, Head Subsidies and Financing, Flanders Investment & Trade, introduced the subject of the webinar. Mrs. Lise Betjes, Expert Subsidies, Flanders Investment & Trade, talked about the conditions to apply for the starter’s package internationalization. They are similar to those of special export support. In 2020, FIT will distribute a maximum of 150 starter’s packages internationalization of €7,000 each and probably also the same number in 2021. The goal is to internationalize as many Flemish companies as possible. The target group is SMEs who have not yet received any subsidies from Flanders Investment & Trade. The call is being launched from October 5 till 28 to submit the applications.

There are several conditions, the most important one is that the SME has never before received any support from FIT, have a Belgian enterprise number, and being located in the Flemish region. The target group are young innovative enterprises entering the international market for the first time. Some sectors are excluded, specifically those who have already received financial support, such as agriculture, and enterprises who fall outside the scope of this subsidy offer, such as the hospitality and tourism sector, which through their activities are already active internationally. Companies in receivership cannot apply for subsidies. The subsidy is €7,000 to be used for costs related to international activities, except for salaries and internal company costs. To be reimbursed an invoice has to be received from a third party. This subsidy cannot be combined with support measures included in the ruling of 2016, nor with special export support measures.

Besides the financial support, the starter’s pack also includes coaching. The advisor international entrepreneurship will contact the SME three times: at the start of the project, during the execution period and afterwards. The detailed procedure for submitting an application is available on the FIT website. Applications need to be submitted online on the FIT website during the period from October 5 till 28. This period is limited because there are only 150 support packages available. When FIT receives 180 applications, the application period will be closed. Therefore it is advisable to submit an application as soon as possible and check beforehand if you can log-in with your ID card. Not all employees’ ID cards are linked to the company. If a problem occurs at log-in, it would still be possible to fix it before October 5.

The subsidy can be used to reimburse costs related to international business for nine months starting on the application date. This could for example include the costs to invite French clients, to adapt the company website, or adapt the packaging for the Chinese market. Upon application, the company will receive a file number, and when the application is completed, also a follow-up number. Companies will still have 10 days to complete their application if needed.

A completed application includes a completed electronic application form, a short presentation of the company and its activities, a description of the project, an implementation plan of up to nine months, and a budget for the minimum amount of the subsidy. At the end of the period it has to be shown that the project has been completed or sanctions may apply.

The applications will be evaluated by a selection committee on the basis of selection criteria. In case of a positive decision the subsidy will be paid within 60 days. Subsidies for the 150 packagess of 2020 will be paid out before the end of the year. After finishing the project, the company needs to submit a commercial report. FIT will check if there is proof of costs made and may request submission of invoices and other documents. In case the project was not completed, there is insufficient proof of costs having been made, or insufficient cooperation with FIT, FIT may decide not to provide further support the following year.

Mr. Yves Roekens provided further information about special export subsidies related to Covid-19 for Flemish SMEs who before the outbreak already had achieved satisfactory exports. The application period is the same as the one for the starter package. There are 500 special export support packages available of €5,000 and a rush is expected when the application period starts. Conditions to apply include having a least five full-time equivalent employees registered in the last annual account, having no negative capital, and having realized a minimum 20% share of exports during the last financial year. Subsidies will be disbursed according to the first-come-first-served principle.

The target group is substantial, as another 500 packages may be offered next year, subject to approval during the budget negotiations of the Flemish government at the end of the month. As FIT is expecting a rush it is vital to submit applications as soon as possible. Those who fail may still apply for support under the 2016 ruling. The application procedure is similar to the one of the starter’s packages already explained previously. Subsidies will be approved and paid out before the end of the year. The period however is six months instead of nine months.

The Export Expo which was planned this year had to be postponed due to Covid-19 and will be organized from February 9 till 11, 2021 at Palace 1 of Brussels Expo, either in a physical or virtual format, including the FIT representatives around the world.

Further questions can be submitted by email at subsidies@fitagency.be

Q&A: Is the starter’s package also available for start-ups and may consultancy expenses to explore the market also be reimbursed? Lise Betjes: Starts-up are part of the target group, but they should not have previously received any subsidies from FIT. If the company has invoices, costs can be reimbursed, only salaries and internal working expenses are excluded. Costs related to a student sent abroad to do market studies can be reimbursed.

Mr. Luc Royackers, Region Coach Contact Center, Agency for Innovation and Entrepreneurship (VLAIO), introduced growth subsidies for SMEs’ internationalization projects. The Agency Innovation & Entrepreneurship is a sister organization of FIT focused on organizing a good climate for Flemish entrepreneurs, by providing information, coaching and networking through partner organizations. VLAIO is using a business case approach, looking at the company’s project and not only at the subsidy measures. It refers companies to partners in the VLAIO network and determines whether subsidies might be disbursed. VLAIO’s support measures include an “SME growth subsidy”, which might be applicable to internationalization projects if extra knowledge in the strategic field is required. Many SMEs need a bigger budget, so VLAIO is offering a growth subsidy to SMEs who have a clear growth vision, related to a transformation, innovation or internationalization project. In that case they are faced with something new and would need more strategic knowledge. Subsidies are intended to buy external advice or employment of a strategic collaborator. VLAIO focuses on companies doing something new and encourage them to grow. The subsidy is €25,000 to employ a new collaborator and/or an external consultant, which together amounts to €50,000. The companies need to have a vision and a plan to implement it, not just a vague idea. They need to analyze which company processes will change as a result of the growth strategy, such as human resources, IT and marketing. To manage the changes the company will need knowledge. The evaluation criteria include the vision on economic growth, a tipping moment of doing something new, a plan to achieve the objectives, and the necessity of strategic knowledge. The application needs to be submitted during the month prior to employing the new strategic collaborator. There will also be a meeting with a case file handler and the decision may take a few months. An e-window for entrepreneurs is also available at www.e-loketondernemers.be

VLAIO has a subsidy databank including information about subsidies and financing and a series of subsidy guides.

More information is available at: www.kmogroeisubsidie.be and application procedure.

luc.royackers@vlaio.be

The Flanders-China Chamber of Commerce organized a webinar on the very important subject of “Entering the Chinese Market through Cross-Border E-commerce” on August 28, 2020.

Ms Gwenn Sonck, Executive Director of the Flanders-China Chamber of Commerce and the EU-China Business Association introduced the topic and the speaker. China is the largest e-commerce market in the world and will continue to grow. The speaker is Ms Jiao Li, Co-founder and Marketing Director at Crayfish.io. She leads the marketing and sales activities for the company and key clients. Having studied for a finance degree at Nankai University, she completed her MEF at the London School of Economics before joining Unilever, where she worked for six years as e-commerce and digital manager, leading cross-functional teams in the UK and China. She is a highly-experienced e-commerce and digital marketing specialist, helping brands reach out and interact with Chinese audiences in a smarter and more engaging way.

As Covid-19 dealt a heavy blow to traditional trade, cross-border e-commerce has become a major driving force for stabilizing foreign trade. In the first half of the year, cross-border e-commerce increased by 26%. An expansion in the sector also came because Chinese authorities unveiled supportive measures, including optimizing the business climate, quickening customs clearances, and accelerating payment of export rebates. In April the Chinese government decided to set up 46 new comprehensive cross-border e-commerce pilot zones, bringing the total number to 105. Firms in these zones will enjoy support policies, such as exemption of value-added and consumption taxes on retail exports and less levies on corporate income tax. China’s foreign trade in July rose by 6% year-on-year and exports and imports went up by 10% and 1.6% respectively. China is the EU’s biggest source of imports and its second-biggest export market. China and Europe trade on average over one billion euro a day.

Jiao Li introduced herself by saying that she spent the major part of her career in digital work, especially focussing on e-commerce. China is the biggest e-commerce market and will continue to be so. In 2017 Chinese e-commerce was around USD839 billion, rising to USD1,500 billion in 2019, so it almost doubled in size. The growth rate in 2019 was 16.5%. As a result of Covid-19 there was a drop during Chinese New Year and in March and then the growth rate recovered to about zero. Although China has been hit by the pandemic, e-commerce has still been growing rapidly.

What is driving e-commerce growth? Jiao Li showed two pictures of purchases by her brother and sister on the major e-commerce event Double 11, like Black Friday online. Her sister bought cosmetics from big brands or luxury brands worth about GBP1,000. Her brother bought something tailor-made in the UK worth about GBP600. Jiao Li is from a lower-tier small city in China with only 300,000 people. The average monthly income is around GBP200 to GBP300, but they are spending such a huge amount in e-commerce, buying things they don’t have access to in the off-line retail market. The new growth driver for e-commerce is lower-tier cities, where people are earning much less than in tier-1 cities but spending almost the same amount online at the same spending frequency per week. The new growth driver is small-town youngsters. City elites between 25 and 44 years old in tier-1 cities number 30 million, but small-town youngsters between 18 and 30 years old living in tier-3 to 5 cities number 212 million.

How are they driving e-commerce? Before getting married, they are still living with their parents who pay all living expenses, so they can still spend their own money. They have a much easier life compared to the city elites. They have no housing loan, low living expenses, low working pressure, and more leisure time to consume and travel.

The major e-commerce categories which are growing are health, food, and social, such as cosmetics. The e-commerce landscape in China is highly dynamic and constantly evolving. In the West, you have Amazon and E-bay, but many people are still buying directly from consumer websites. The Chinese market is dominated by e-commerce platforms such a Tmall.

Cross-border e-commerce (CBEC) offers an opportunity to enter China faster with relatively low cost and complexity. There are differences between Chinese domestic trade and China Tmall global. In China’s domestic e-commerce you are sometimes required to register your products, which can take up to two years, but there is no such requirement on Tmall Global, nor is there a requirement for specific testing, such as animal testing for cosmetic products. In China domestic trade you need to set up your own business, which can cost a lot of money. On Tmall global you have a 4% commission, an opening fee, and you only need to pay import tax. This can save you a lot of money. Domestically, you need to set up your own supply chain, but through Tmall you can use a central warehouse in Hong Kong or in a free trade zone and ship directly to the consumer. The channel of cross-border e-commerce is still quite small compared to total e-commerce, but it is one of the fastest growing channels in China. China’s cross-border online shopping population is estimated to grow from 15% in 2018 to 25% in 2022, which still means hundreds of millions of people. So how does it works? In cross-border e-commerce customs clearance and payment of taxes only happens after you sell.

How to win in cross-border e-commerce? There are five points:

1. Choosing the right channel is very important. Tmall Import is leading the market, together with Koala.com, which is also owned by Tmall. There are also social media platforms such as Little Red Book, which have e-commerce functions. Tmall Global is expanding rapidly in tier-3 and 4 cities. It is hosting brands from 120 countries in more than 8,000 categories.

2. Collaborate with your local partner or TP (Tmall partner), which provides Tmall Global merchants with high quality, transparent and one-stop cross-border e-commerce operation services. They give you the space and infrastructure, and operate your store on a daily basis. You need to choose your partner well. If it is a big partner and you are a small brand, they might not pay much attention to you. You also need to check their reputation, expertise, region and industry focus. The cost of a TP can also vary very much.

3. Eco system: taking Alibaba as an example, it is not just an e-commerce company, but a platform for every Chinese internet user for every activity, so you need to consider your marketing strategy. Live streaming has become very popular during the pandemic.

4. IP protection: your trademarks do not have to be registered in China, only in your own country, but it is recommended to register in China both in English and Chinese.

5. Raise brand awareness before you go into China to sell. Brands will struggle when entering China too fast without pre-awareness.
Crayfish.io is facilitating cross-border trade and investment, powered by technology. It offers expertise in the form of a full range of China-related business services, connections and capital. The Crayfish accelerator is a China-ready program for tech start-ups. Crayfish can also help you set up your e-commerce store in China.

Q&A: Is there a list of TP available? Yes, there is a list you can check, certified by Tmall.

What is the number one challenge? Awareness building is the most important, as well as the marketing strategy to build that awareness. Competition is quite high, as you are also competing with new Chinese brands, which were not there 10 years ago. You are fighting for attention that is already very fragmented.

Is e-commerce in China for B2B as popular as for B2C? It is not as popular but there are still a lot of B2B businesses leveraging e-commerce.

How about transferring your brand to a new partner or distributor? It is better not to give full exclusivity for the whole of China to one partner. Don’t give your partner 5 or 10 years, because you don’t know how the market is going to evolve. Also keep full control of your brand.

Do you provide trademark registration? Yes, we have such a service. The process will take half a year to one year.