BUSINESSES from Liverpool and the North-West have a major opportunity to benefit from the burgeoning Chinese economy, thanks to the city’s involvement in the World Expo in Shanghai next year.

But to bring home gold from the “Olympic Games of business”, companies will have to demonstrate enterprise, initiative, and some very careful planning.

China’s determined conversion into a commercially open, western-facing economy has been so remarkable that the nation is well on course to become the economic superpower of the 21st century.

Liverpool’s presence at Expo 2010 marks the high point of the city’s growing links with its twin city of Shanghai. Our Expo presence will open doors for us, but it will take a bold and imaginative business strategy to extract the maximum benefit.

One of the first things any business eyeing the potential of China must realise is that the path to the Far East is already well-worn by enterprising international businesses.

More than half the world’s Fortune 500 Companies already have offices in Shanghai, and UK businesses are already well- established in other large, established cities such as Beijing, Suzhou, Shenzhen and Guangzhou.

However, as a research project by the China-Britain Business Council (CBBC) for UK Trade and Investment pointed out last year, China has 274 municipalities with a population in excess of 1m. The report identified 35 of these cities as being “regional” on the basis of their economic size, economic growth rate and population.

Many of these growing cities offer much better investment opportunities for UK firms than the more mature markets, because of the “early mover” advantages that can be gained, and because of the Chinese state and provincial government help that can be tapped into.

Seven sectors offer the biggest opportunities for British companies: financial and professional services, environment and climate change, energy, infrastructure, life sciences, information communication technology, and advanced engineering.

There is massive market potential for businesses in these areas, but there are also some massive pitfalls for the unwary.

Ian Crawford, executive director of the British Chamber of Commerce in Shanghai, has seen many UK businesses try to tackle the Chinese market over the years, with varying degrees of success. The CBBC is the body that helps and advises new UK businesses on their path into China, but the Chamber is also happy to meet new business people and help them find their feet.

“We also have a very open British ex-pat community, always willing to find half an hour of their time to give advice someone who is new in China,” he said.

“There are lots of opportunities here if you avoid the pitfalls. You need to study the local market and adapt your product or service to it.

“Too many companies have come in saying ‘We are a great company. We do this in the UK and we are going to do the same in China.’ That rarely works.”

He warned that many business people fly into Shanghai’s Pudong airport and are swallowed up by what ex-pats refer to as “China fog”.

“It is difficult to get around because of the language, and people forget their normal approach to business,” he added.

“Instead of doing their proper market research, they forget and go with the first person they meet who speaks decent English to them and seems friendly.”

In order to do business in China, you need to be granted a business licence, which defines fairly precisely the kind of area in which you can do business. Given that acquiring this licence can take 3-6 months, some careful thought about what areas you might want to explore with your business at the outset can avoid a great deal of frustration later on.

“It almost always takes longer in China to set up,” said Mr Crawford. “People need to think hard about what they want to do in the first 3-5 years and then apply for a business licence.”

Allied to this issue is the problem of managing expectations back home. Mr Crawford has encountered a number of harassed executives in China who have difficulties explaining an apparent lack of progress to impatient boards in the UK.

He said: “The MD at home says China’s economy is growing at 7% a year – why haven’t you set up in three months and why aren’t you growing at 20% a year? Head offices tend to be impatient and think things can be done quicker than is the reality on the ground.”

Recruitment of Chinese staff who can be adaptable enough to cope with the demands of a western company can be a challenge, too, Mr Crawford says, suggesting that this is largely down to the Chinese “learning by rote” education system.

“The Chinese are very good at their own subject but ask them to go outside that box and they find it very difficult,” he added.

“No Chinese national working on the Chinese mainland has ever won a Nobel prize. Plenty of Chinese people have won it working in America. From that, I conclude that the system doesn’t lead to them inventing things.”

Issues like team working, innovation and creative planning are priorities for the Chinese in terms of developing their skills, which is why foreign education institutions like the University of Liverpool’s new joint venture in Suzhou are finding favour.

Another major problem faced by international businesses setting up in China is the lax attitude towards the protection of intellectual property. This has been recognised and is being acted upon by the authorities, but Mr Crawford says there is still work to be done.

The Chinese are also making inroads in terms of trying to simplify the procedures for setting up a new business. “Aside from the intellectual property issue, China has got a relatively good legal system and is quite a good country to do business in,” adds Mr Crawford.

Many of these problems cut both ways, of course, and the Chinese suffer in terms of their attempts to invest abroad because of a relative lack of international management experience.

“They are fine in China but when they go out in the world they have the equal and opposite problem that foreign firms have that come to China,” he said.

“The Chinese feel fairly comfortable going to the UK, though, because they are English speakers.”

For Liverpool firms interested in exploiting the Expo opportunity to develop in China, a first step would be to consider taking a presence on the city’s stand, with sponsorship packages being made available from £7,500 up to £100,000.

But, even then, it is not just a case of sitting back and waiting for the business to flood in. Liverpool companies will need to network effectively, contact the right businesses and officials in China, and invite them to receptions and social events.

Times might be gloomy economically at home, but those who wait for recovery at home before making the move to China may well miss the boat.

For companies with the vision and courage to take a chance, the potential offered by China is massive.

But the time to start laying your plans is now.

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