New Opportunities for a Foreign Company with a Chinese Partner

12 Aprile 2022

An important forum is scheduled for April / May (date to be confirmed) which includes B2B activities: we are talking about CREATIVE WORLD LEADS THE FUTURE: China-Europe SME Innovation Cooperation and Development Forum. Organized by the China-Italy Chamber for Commerce, with the support of the Consulate General of Italy in Shanghai and together with the Shanghai Municipality Small Medium Enterprise Department, it represents a unique milestone.

Previously this activity was carried out by individual legal entities and required time and money for an uncertain result. Today we are looking forward to a more coordinated and accurate procedure that should bring better results. B2B matchmaking managed by Shanghai SME Department is a golden opportunity to find that missing piece of the puzzle and expand the business horizons of your company and operations. To make it come true we need to be prepared.

On April 7th, our Mechanical Engineering Working Group (MEWG), together with four eminent consultants and more than 60 attendees, discussed many issues and questions that need answering when approaching new potential cooperation or a new partner, including the necessary background checks, different (legal) forms of cooperation, financial transaction, merger, acquisition and taxation - financial due diligence and company evaluation on target partner.

The intent of the organizers is for this activity to become long-term cooperation and a future way of approaching the Chinese market.

Among the guests was Ms Alessandra Palumbo, Commercial Consul of the Consulate General of Italy in Shanghai, who gave a warm welcome to all the attendees and underlined the importance of the close cooperation between the different components of the “Sistema Italia in Shanghai” to overcome together the difficulties related to the current lockdown.

Why choose a partner in China? Is it essential? Once the decision is taken which is the right way to assess the reliability? – With this question, Mr Paolo Bazzoni, CICC Chairman, opened the dialogue with the experts highlighting the importance for a company to be in China to work with China. Finding the best formula for success is a matter of business strategy, always taking into consideration the fact that the level of quality and competition of Made in China is much higher than in the past.

Is it better to be alone or have a partner in China? What type of relationship is the most successful one? This is the first question that the webinar moderator Mr Carlo Nizia, Vice Coordinator of the CICC Mechanical Engineering Working Group asked the panelists.

Thanks to our experts we learned that partnership is important but is not the only model, and if a company is experiencing an unsuccessful case, the answer could come after an assessment of the design or redesign of a business model. If it is true that China is the first market in the world on many indexes, being successful is very difficult, but it is possible, with the right turbo and the right approach.

Flexibility, patience, and negotiating power thanks to the knowledge of Chinese business culture are the three keywords for creating or breaking a deal.

Choosing a partner should be one of the key elements to deploying a thorough and well-conceived strategy and coherent business model. The selected partner should be functional and coherent with the objectives to be pursued and not vice versa, in case the partner is being an active part of the company’s business model. Hence, a business partnership has to be designed “on paper” first based on the strategy to be deployed, profiling the “ideal partner”, segmenting and identifying key indicators (qualitative and quantitative), clearly checking areas of risk with different intensities. A lack of comprehensive “preparation” in identifying and selecting a business partner would bring, at best, to loose growth opportunities and to incorporate tensions and inefficiencies in the company’s operation.

— Guido D. Giacconi

Co-founder and Chairman, In3act Srl

Whether for market entry or the next phase of an established business in China, companies should tailor their corporate structure to their main strategic objectives, while remaining flexible in what constitutes success. When forming partnerships with Chinese enterprises, such flexibility will be useful in two dimensions. First, it will provide the necessary room for finding common goals, which are essential. Second, it will help the partnership to remain functional when being exposed to major shifts in the market environment.

— Simon Laube

Senior Associate, International Business Advisory at Dezan Shira & Associates

To carry out business in China, now the first market in the world on many indexes, working with a partner can increase the speed and the performance of an international project in reaching specific objectives, such as revenue growth, gaining a relevant domestic, diversifying products, regional and global market share, increase margins, improve asset utilization, reduce the number of competitors, acquire talents and expand the investment presence in the country and in the region.

— Lorenzo Riccardi

Managing Partner of RsA Asia

It’s unavoidable to deal with Chinese partners when doing business in China, therefore we should focus on how to cooperate with the Chinese partner in the most appropriate way. Preliminary checks on the identity and qualification of your potential Chinese partner is always a must before any decision making, apps such as Tianyancha and Qichacha would be of help. Besides, a mutual understanding of business culture and a timely response on communication will certainly help you in making the deal.

— Matteo Zhi

Senior Partner, D’Andrea & Partners Legal Counsel

The webinar was enriched by many questions from the audience that raised other interesting points. In the selection of partners and personnel for example it is fundamental to do a ground check before hiring employees and choose the ones with experiences and mindset aligned with the own company culture, overpassing the cultural discrepancy.

The panel ended with some final suggestions to better prepare manufacturing companies for matchmaking: steer the selection, be focused on your main goal, and don’t be too short time-oriented. Timing and speed are two key factors for any partnership project. Last but not least: do not underestimate the business culture, try to jump from your Italian way of thinking and identify yourself with the Chinese one, prefer face-to-face meetings, and immediately try to understand if emotionally that person can be the right partner for you.

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