Webinar: Cleantech Opportunities for SMEs in China – 23 June 2020
June 30, 2020 Category Past events, Weekly
The Flanders-China Chamber of Commerce and the Province of East-Flanders organized a webinar focused on the Cleantech Opportunities for SME’s in China on 23 June 2020.
Ms Gwenn Sonck, Executive Director of the Flanders-China Chamber of Commerce introduced the webinar and the speakers. The Province of East-Flanders, co-organizer of the webinar, has almost 30 years of cooperation with the province of Hebei and is a long-standing structural partner of the FCCC. In the field of cleantech, they worked together with several other Flemish provinces, Flanders Investment and Trade, and Cleantech Flanders on a very interesting cleantech China project. During the recent National People’s Congress session, the Chinese government mentioned environmental protection as one of the priorities. There are new investments in renewable energies, recycling and ecological restoration.
The first speaker is Mr Johnny Browaeys, National Vice-Chair of the Environmental Working Group of the European Union Chamber of Commerce in China and Director Greenment Environment. Mr. Browaeys is an old China hand, living in China for more than 15 years and specialized in the cleantech sector. He will talk about the cleantech opportunities for Flemish SMEs in China.
Mr Johnny Browaeys explained that China’s development is driven centrally by the Chinese government by means of five-year plans. In 2007, social stability was the main topic and the environment was part of that for the first time because the authorities realized that a clean environment was part of what a happy society expects. China started systematically collecting information throughout the country on the environmental status of surface water, air, soil and so on. As the environment was in dire condition the focus of the next five year plan in 2012 was on environmental impacts. China started systematically mapping the impact of industries and cities on the environment to understand what had led to the poor environmental conditions. In 2017, as it became clear that environmental issues had become critical, Xi Jinping included environmental enforcement as one of the three critical battles on financial risks, poverty and pollution. In 2018, China even changed the country’s constitution to become an equal civilization. Europe with its Green Deal and China with its equal civilization share exactly the same long-term 2050 goals of green, digital and competitive. The central government started campaigns all over the country punishing not only factories but also local governments if they had environmental issues. Instead of issuing small fines, local authorities were now authorized to reduce or stop production of polluting companies. A lot still needs to be done. One-third of the water and two-thirds of the air still do not meet quality targets.
China’s approach to environmental governance is a very practical one. They focus on solving the biggest acute problems first to drive industrial transformation. The National Development and Reform Commission is developing a green economy framework which should be ready by 2022. You probably noticed how during Covid-19 China used its data collecting capability to control virus spreading among the people. The same ability is used to collect factory environmental data. Covid has even accelerated this process. In the next two to three years you are going to get an AI upgrade all over the country. There is a real-time portal showing the situation of the factories with the color changing according to the challenges they face. Last year the system changed from inspections to force factories to comply with regulations to a system incentivizing factories for improving their environmental performance. Factories now all have an environmental credit score, which – by the end of this year – will be linked to the national social credit system. Soon, the best green manufacturing companies in China will start taking over the market.
What support can cleantech companies coming to China enjoy? Factories that want to become certified will need cleantech upgrades. In 2019 the NDRC listed 6 key industries for Green Economy transformation: energy conservation, clean production, clean energy, eco-industry, green infrastructure and green services. However there are similar programs for agriculture, food, and the health industry as well. Government support includes tax benefits, fiscal subsidies and financial support. Tax benefits are negotiable at the local level as local governments compete with each other. Green bonds are also an important development. The “Encouraged import catalogue” and “Catalogue of Encouraged industries for Foreign Investment” are a guide guide to see where companies are welcome. China is no longer the same as a few years ago. A lot of the state-of-the-art is already in China, and sometimes even more developed than in Europe or the U.S. The first task is to determine how valuable your product or service really is or already exists in the market in China. China has an enormous data collection system and those data are mostly accessible by a few specialized companies.
Ms Sonck: Mr Jet Chang, Vice President Circular Economy of Tomra Group, has 15 years of experience and has extensive knowledge of the energy and cleantech sectors in China. He is called a veteran in the environmental industry. He will discuss the best practices of Tomra in China.
Tomra was established in 2010 and has about 300 employees. About doing business in China, the country is now in a “new norm”: GDP will continue to grow but not in double digits anymore. Last year it was 6.5% but because of Covid-19 the government didn’t set a target this year. The “good times” are over in China, you will face competition from both international and domestic companies. Labor costs are rising and the economy is slowing down. If you want to be an international company, China has to be on your radar. To do business in China, you have to be there and have along-term commitment. You need to find your market in China: which sector and region you want to be in. Tomra is active in 5 sectors but up to now only in three in China. You have to find out if there is a real demand. China is so big it is difficult for SMEs to cover the whole country. So you have to find a geographical region where you want to be.
You need to be flexible and adapt to the local needs, for example the user interface needs to be localized. Also be aware of the local conditions, as labor costs are still rising, but are still lower than the European standard. Services to lower electricity or water costs for customers are not so attractive in China because the savings are less than in Europe. Personal and working relationships are very important in China. But as a foreign company you don’t want to be too close to the central or provincial governments. It will benefit you in the short term, but as personnel changes, it may come to hit you in the long term. It is also important to use Chinese social media. Finally, to do business in China you really have to be patient and make a long-term plan, such as a ten-year plan.
There are also a list of don’ts. Don’t look at China as just one market, some areas are developed, some others less so. Don’t just think that China equals big numbers. It’s a big market, but there are also a lot of competitors. The pie might be big, but the slice for your business might not be so big. Don’t bet only on personal relationships or “guanxi”. Some people approached us to become an exclusive agent and said they would make us rich in one year, but we didn’t believe it. In many cases you shouldn’t trust such a person. Local governments will also offer you investment opportunities and promise you all the business in their city, but also be wary of that. You still need to earn the business. Don’t be afraid of your products being copied, it means your products are in demand. In most cases, those who copy your products are competing with local companies, not with you if you focus on the middle- to high market. Also don’t just take existing products to China, but adapt and localize them. Don’t only look at the growth rate of your business of maybe 10% or 15%, but also at the market share which might be shrinking. Finally, don’t be too western, you need to respect cultural differences.
Ms Sonck: Mr Frans Snijkers, Director Cleantech Flanders, will introduce the activities of Cleantech Flanders.
Mr. Snijkers explained the role of Cleantech Flanders, which was founded in 2010 by VITO, an organization with more than 800 people focussed on cleantech and sustainable development and a strategic partner of Flanders Investment & Trade. Cleantech Flanders supports Flemish cleantech companies with internationalizing their business. “We know, we connect, we spread”. “Knows” cleantech means we have developed our own proprietary taxonomy, because cleantech is a big field. Domains can be water, air and soil, but also energy efficiency, mobility, circular economy, and cleantech enabling technologies. We also know the Flemish ecosystem and are preparing an overview of the possibilities for support for innovative companies with international ambitions. Financial support can be obtained from provinces, the Flemish government and even from Europe. You can have a look at our cleantech report. We also “connect” and have launched a new website – www.cleantechflanders.com – and also promote cleantech through social media. You can become a member of Cleantech Flanders free of charge. We “spread” by taking part in global events, such as forums and summits, but many have now been postponed. We are ready to help understand the vast opportunities and challenges in China, and Cleantech Flanders can build on its valuable China experience. VITO has set up a subsidiary LiboVITO in Beijing for air and water quality modeling. Cleantech Flanders also has a collaboration with BZHB (Beijing) on medical implant material and is a longstanding partner of many Chinese and Flemish enterprises.
Next, Mr. Pierre Faché, Cleantech Manager Smart Hub Flemish Brabant, explained what to expect from the interprovincial cleantech project on China. In November 2019, I²PCC joined the Belgian economic mission to China and in Beijing organized a successful cleantech seminar with 260 participants. Later on we took 17 companies and a university on a regional tour to Guangdong, Shaanxi, Chongqing and Chengdu. I²PCC ordered a strategic study, made by Prospex, to compare the business needs to the actual support. We look forward to a bright future for the I²PCC consortium. We will organize an event in Antwerp on September 30, to explain our new support actions and give you some inspirational talk. We will also present our Best Practices brochure and a new website. If you are interested in making your company visible to our Chinese contacts and through international fairs in China, but do not yet have a company file in the I²PCC-catalogue of Flemish cleantech companies? Contact sara.landuydt@pomantwerpen.be by July 10 to make a company profile and we will include your activities in our publicity.
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