In Europe, they stand united

Updated: 2012-06-29 12:49

By Cecily Liu and Zhang Haizhou (China Daily)

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In Europe, they stand united

Aigo's Feng Jun has won support and praise for his ideas. Provided to China Daily

Chinese private businesses have banded together to give each other a helping hand as they expand

An alliance of Chinese private-sector companies is setting up representative offices in Europe, championing a new model of group expansion aimed at easing the burden on those wanting to operate in a new environment.

Members of Aigo Entrepreneurs Alliance will move to London and Brussels over the coming months, potentially giving a shot in the arm to ailing European economies.

In London they will set up in an office building on Greenwich Peninsula in southeast London. In Brussels, they will be based between two business hubs, Tour & Taxis and European Market City.

"The Chinese government gives help to State-owned enterprises when they expand overseas, but little help is given to private-sector companies, so we have to help each other," says Feng Jun, president of Aigo Digital Technology Co Ltd, who founded the alliance a year ago.

The alliance's move comes as Chinese companies increasingly invest overseas. More than 13,000 Chinese enterprises had invested in 178 countries and regions by the end of 2010, the Ministry of Commerce says.

Annual growth of outbound direct investment for 2011-15 is expected to be in the double digits, expanding to $560 billion (448 billion euros), the ministry said early this year.

The government would guide and encourage local companies to enhance cooperation and invest abroad in manufacturing, energy, culture and engineering, it said.

But Feng, in contrast to some Chinese companies that expand overseas to sell price-competitive products, or become original equipment suppliers to foreign manufacturers, would like the alliance's members to build global brands.

"Creating brands is different from doing business because it requires absolute honesty," Feng says. "Our alliance will make sure our members are honest and provide quality products to European consumers."

He also feels that overseas subsidiaries of Chinese businesses must create value for their local communities, so he encourages alliance members, of whom there are about 100, to expand through joint ventures with foreign companies, rather than acquisitions.

Feng's vision and ideas have won plaudits for the alliance from his hosts in Europe.

Trevor Dorling, head of economic development at Greenwich Council, says that working with Feng has allowed his team to come into contact with many Chinese companies otherwise difficult to find, and he expects the new investments will generate growth in the borough.

"Our ambition is that we become a home for successful Chinese businesses, and over time they will create jobs for local residents, and give business opportunities to local companies."

As the office and residential development covering about 80 hectares of Greenwich Peninsula is only 10 percent built, he says he believes companies wishing to move into bigger office space later will have many choices.

For now the alliance will be based at 6 Mitre Passage, a commercial property in which Greenwich Council is subletting two floors to host individual businesses.

Dorling agrees with Feng that extra help to give Chinese businesses a "protective and sheltered environment" is needed, as overseas expansion is still a new concept for many of them.

The council is allowing alliance members to occupy space rent-free for a year and receive a 50 percent rent reduction for the following year provided they commit for a third year after that. The standard rent is 550 pounds ($860, 690 euros) per office desk per month.

"We expect that a number of them will stay, prosper, grow and introduce new Chinese businesses to Greenwich," Dorling says.

Although businesses are under no obligation to commit to Greenwich for a definite period, Dorling's team hopes that helping them find local housing and local schools for employees' children will encourage them to stay.

In Brussels, several alliance members are beginning to move into Tour & Taxis, a business complex with shop space in central Brussels.

Others will soon move into European Market City, a business hub along the highway between the capital and Antwerp.

Many of the companies choosing European Market City are manufacturers who will display their products in showrooms for European retailers to see and order in bulk, receiving shipments directly from the companies' factories in China.

Guido Bernaerts, CEO of Group Bernaerts, which developed European Market City, says the project connects manufacturers from China and retailers from Europe, so both parties can share profits that would otherwise be made by wholesalers.

Group Bernaerts also gave the alliance's members one year of free space. The standard annual rent is 150 euros a square meter.

As well, Group Bernaerts has joined 10 professional services firms, including the Industrial and Commercial Bank of China Ltd, to provide the businesses with services such as market research, company registration, human resources and accounting services.

However, Bernaerts says that one "should not emphasize" the impact of the alliance, as it is "small against the whole capacity of the EMC project", which could host 2,000 companies once it is completed in two years.

A trade delegation from the All-China Federation of Industry and Commerce is expected to visit European Market City in July, he says, and he hopes the visit will result in more companies taking up space during their expansion.

Because of China's large volume of foreign exchange reserves, growing corporate demand for expansion abroad and the debt crisis in Europe, the country's ODI has been growing.

In 2010 China overtook Japan and Britain to become the fifth-largest global investor. China was the largest investor among developing economies in each of the last two years.

The energy and mining sectors will be the major focus of Chinese companies investing abroad through mergers and acquisitions, as the nation's ODI continues to grow.

Last year China's ODI rose 1.8 percent to $60 billion year-on-year. Mergers and aquisitions in the mining, manufacturing, transport and retail sectors accounted for 37 percent of that amount.

But Feng represents a new generation of Chinese entrepreneurs who champion high-tech innovation and brand-value creation.

As a testament to the effort his company invests in protecting innovation, Aigo Digital won a landmark intellectual property rights case against Toshiba in a Chinese court in October.

Other examples of Chinese companies that have come to realize the value of branding include the fashion brand Bosideng and Gree Electric Appliances Inc.

When both companies first expanded overseas, they exported products mainly through original equipment manufacturing arrangements.

But now Gree has its own brand store to sell air conditioning in the United States, and Bosideng will open a flagship store in Britain in July.

Eager to share their success stories with other Chinese companies, Aigo, Gree and Bosideng, among other founding members, worked hard to build the alliance, the stated aim being to help 100 Chinese companies "join the ranks of the Fortune 500".

The alliance is quickly being joined by more companies, including those already present overseas but that want to work closely with the alliance's new members.

Jack Yu, managing director of the British subsidiary of Yingke, a Chinese law firm, says his firm joined the alliance this year because Yingke shares the same go-global vision with the alliance and believes it can provide legal advice to help other alliance members.

"Our lawyers' familiarity with both Chinese and British laws and our relationships with Western law firms put us in a good position to help Chinese clients," he says. "And because we established our own UK subsidiary eight months ago, we understand the challenges and how to solve some potential problems other alliance members could encounter in the UK."

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(China Daily 06/29/2012 page21)