"For now China is a small market for us," Bombardier Aerospace vice-president Michael McAdoo told a business forum recently. "But we are convinced that it's going to increase in the next few years."
He was speaking to the converted - about 100 businesspeople with more than a casual interest in "courting the dragon" attended the recent Canadian Chamber of Commerce event held in Calgary.
China has now passed Britain to become the world's fourth-largest economy with almost 10-per-cent annual GDP growth, and it's moving up on the U.S., Japan and Germany. In fact, China's economy is predicted to overtake Germany's in 2008.
McAdoo told a story of the on-again, off-again deal to manufacturer his company's C-series aircraft in China, as a joint venture with the Shenyang Aircraft Co. "Each of my last four trips to China was supposed to be the last before signing the deal," he laughed. "I would come back to Canada, and our people would ask me if it was thumbs up or thumbs down, and I had to say I really didn't know."
He explained that while the contract didn't need Chinese government approval, it did require "acknowledgement, recognition and registration" from the government. "Can they withhold those?" he asked his Shenyang counterparts. They weren't really sure, but said, "we'll know the go-ahead when we see it."
"At one point," McAdoo recalled, they added two new conditions to their list of requirements, "and we said, 'We're really sorry, but we're withdrawing.' " But before the Bombardier folks could re-arrange their flights to return to Canada, they got a call from Shenyang's honcho saying they were good to go. "They realized this was the deal they were going to get from us," McAdoo said, "and they took it."
The Bombardier executive dispensed a list of hard-earned lessons for those who want to do business in China, starting with taking a long-term approach - "China will do nothing for you this quarter or next quarter.”
He also encouraged Canadian companies to use local staff, for reasons of language and protocol.
"We'd get to an impasse, and the Chinese wouldn't tell us what was wrong in the formal meetings," he recalled. "Then, they'd go out to dinner with our Chinese staff and tell them what the real problem was."
Other tips include arranging meetings between people of comparable levels, and avoiding idioms and slang words. "If you tell them we're going to try a Hail Mary pass and bet the farm, they're just going to stare at you."
Wenran Jiang, acting director of the University of Alberta's China Institute, noted that China has a ravenous appetite for all types of energy.
"If every Chinese were to consume on a per capita basis what we do," he said, "that would be 80 million barrels a day of oil, which is the entire daily supply of the world today."
Jiang also tackled the thorny question of Chinese ownership of energy companies, noting that they are being rebuffed in many parts of the world, including Latin America, "which the U.S. considers to be its backyard."
"If they invest in countries like Sudan, they're accused of being in bed with the rogue states. So their question to us is, 'Just where in the world do we need to go to get energy?' " Jiang argues that Canada needs to get its act together in dealing with China and better focus its fragmented provincial and federal trade development efforts with Beijing.
Doug Horswill, senior vice-president of mining company Teck Cominco, told the forum he sees huge opportunities for his company. "China has become the largest consuming country in the world in aluminum," he said. "It's in the same position in zinc, in copper, in lead and in nickel. Europe is slightly larger, but that's 25 countries together."
He added China's urban population is poised to grow by "ten New York Cities, almost ten Mexico Cities" in the next decade. "That's people moving into middle-class consumption. That means washing machines, stoves, fridges and air conditioners, so very metal-intensive growth in the future."
However, Horswill also sees serious barriers, such as the fact that "the chain of property rights doesn't hold between exploration and mining.”
Western companies won't invest in mining exploration in China, he added, because their best finds might be yanked away from them.
He also noted he would be wary of transferring technology to China, because "Chinese buyers who are new to international trade figure a contract lasts as long as they are interested in it, and then they'll go on to something else. We've experienced that in real terms in the last 12 months, and in fact have backed away from sales to China simply because the smaller, less sophisticated companies don't understand and don't respect that contractual law rule."
But Ching-Wo Ng, a partner of Beijing-based law firm King & Wood, told the forum that there is an increasing awareness (in China) about the value of intellectual property (IP) rights. More than 20,000 new cases in this area were filed in 2005, he added, and Chinese companies are realizing that they need to protect their own IP. "Intense competition forces Chinese enterprises to become creative and to innovate," Ng said. "Once they start innovation, they know how valuable it is. They spend three years, five years to develop a new product and then in two weeks, the entire market is flooded with fakes. And they will at that time use every power they have to stop those fakes."
In five or 10 years, Chinese intellectual property protection will be as strong as anywhere in the world, Ng predicted.
So China emerges as a place for the businessperson to simultaneously fear and love. It's strange and different and cutthroat, but it's on its way to being the world's top economic powerhouse.
Canadian businesses that want to harness this dragon will need skill, patience and lots of practice with chopsticks for those "informal/formal" dinner meetings.
(Tom Keenan is a professor at the University of Calgary and an expert on technology and its social implications. He can be reached at keenan@businessedge.ca)
