George Osborne’s Chinese vision

The Government wants to encourage UK technology companies to do business with China. That’s a laudable objective, but are businesses ready to make the move, asks Peter Crosby?

Chancellor George Osborne’s ongoing ongoing attempts to forge business links with China will be widely welcomed by UK plc – especially for the big brands whose names he conveniently dropped into conversation on his most recent trip there. But while his sentiments are understandable and his drive to make London a centre for trading in the renminbi is sensible, does he really understand the intricacies of doing in business in China?

Much of the official emphasis seems to be on major corporations, but according to the ONS, small and medium sized enterprises (SMEs) account for 99.9 per cent of the UK’s 4.8 million private businesses. And one of the fastest growing-sectors in the UK is technology; green tech and mobile are the fastest within that. The UK’s IT and telecoms industry currently produces an annual gross value added (GVA) contribution of £71 billion, or 8.4 per cent of the total UK economy. Importantly it is set to grow; the tech sector has already been identified, by leading Chinese business experts, as key to any burgeoning relationship between the two nations.

In December, Viadeo hosted an event in London with Lord Wei, to look at how UK technology companies can trade with Chinese businesses. Representatives from the China-Britain Business Council (CBBC), UKTI, IntraLink, Chinese Business Solutions and the LSE Confucius Institute were there.

The overriding issue to come out of that meeting was culture.

It may sound a little obvious, but for anyone wanting to do business with China it is essential to understand that doing so demands a serious investment, particularly of time. In China, friends do business with friends. The personal element cannot be underestimated.

In our business, we have seen this already, when we entered China by acquiring professional social network Tianji.com. You cannot cold-call people and expect to do business. Chinese professionals network differently. They interlink work and play and this is what helps to build the trust needed to establish solid business relations.

It is interesting to see how social networks are playing an increasingly important role in the on-going communication between these business “friends”. Tianji is expected to hit 18 million members this year, the fastest growth of any international region.

But before anyone can reach this point, it is important to network in the real world. One of the recommendations from the experts at our event in December was to find mentors and alliances. It is far easier to do business in China quickly with those that already know what they are doing and have a foothold in the country.

How do you find these people? UKTI and CBBC run events to help bring people together while organisations such as IntraLink actively connect like-minded businesses and entrepreneurs in the UK, China and Japan through their business services. It’s also worth considering trade missions run by UKTI or tech mission experts Chinwag.

Are there any shortcuts? Experts might sneer at the mere suggestion, but our event revealed potential for quick wins particularly in terms of licensing deals. Avoiding large investments in buildings, production and local sales and marketing makes a lot of sense. Joint ventures are a logical next step, should things work out, although they do bring in a whole collection of governance issues. Anyone going this far would have to have done their research, conducted a scoping mission and be sure their product or service would fly. It’s a big step.

So is Osborne right to big-up China?

China is still the most dynamic economy in the world. To make just one comparison, of the 300,000 graduates emerging each year from higher education in the UK, only 24,000 do so with an engineering-related degree. China has 600,000 such graduates each year.

UK technology innovation is still strong, and the government wants to look east and develop links and business opportunities. There is little doubting that the UK’s tech sector has the ability to help.

But it’s not just about finding the business partners to service the right markets with the right products. It is also about understanding the legal and financial frameworks within which any outside business has to operate. Can social networking help? To a certain extent it can, but mainly as an extension of existing offline networks, or where contacts are already made.

Interestingly China shares a few traits with other emerging countries in that its social networking users are very active, in groups, forums and in sharing information. Westerners are passive in comparison, a point recently noted by analysts at Forrester. Passive in any business culture does not work, and the UK tech scene will have to take note and get on its bike if it is to stand any chance in China.