Building water-related business in China can be a daunting task for companies, especially small and medium-sized enterprises. Aqua Strategy asked the European Union’s support service in China, the EU SME Centre, to outline the advice it has for European companies on how to approach working in China and the opportunities there relating to water.
‘There’s no secret to successful market access in China – it takes time and a lot of preparation,’ according to the EU SME Centre, which advises and provides support to European companies looking to do business in the country. ‘SMEs in particular need to spend time developing their market entry strategy, since they often cannot rely on the same level of resources that larger multinationals may have.’
Given these constraints, the support the centre can provide includes, for example, a series of tools to help small businesses better gauge their readiness to enter the market, including an online quiz and a starter kit giving very practical support for market access.
As part of its support, the centre prepares reports as a resource for companies. These include one, ‘The Water Sector in China’, published in 2013. While the sector is a fast-changing one, with new legislation appearing all the time, the report covers other issues that remain relevant, such as the likely need to work with one or more local partners. ‘Any EU SME would need experienced local partners to help them understand all of different organisations and to identify those that can be most helpful in leading to actual contracts,’ says the centre, which also offers affordable paid-for support to help EU SMEs find local partners.
On bidding for contracts, the centre offers this advice: ‘For major municipal or industrial water projects, EU SMEs would only be able to enter the process as part of a consortium or supplier to a major Chinese or local company. For smaller projects, equipment tenders or shopping contracts however, they may be able to bid and sell directly. Bids are evaluated on the basis of quality and price, with price taking 40% to 60% of the marks.’
Other areas to consider include the protection of intellectual property rights. ‘A must before you come to China – identify and register your IP,’ cautions the centre. It advises also that there are shifts in the market. ‘European companies remain confident about long term growth prospects in China. However, they are beginning to see their profit margins getting slimmer,’ says the centre. This is due, for example to increasing human resources costs and increasing competition from both foreign and domestic companies.
Trade fairs in China
Trade fairs have a very valuable part to play in developing a strategy for China. ‘The centre recommends that newcomers participate in a trade fair in China as an effective way to explore the local market. This can help companies better understand the market and its competitive landscape, enhance brand visibility, and help them to find new clients or potential partners,’ says the centre. To get the most out of this, the centre recommends some careful preparation in advance and developing a detailed plan. ‘We suggest SMEs first research the leading trade fairs in their industry sector to select the most suitable one. The centre can help in this respect through its online directory of exhibitions, saving SMEs a lot of time to search the right one.’
‘Visit the fair and get an overview of your competitors,’ it continues. ‘Exhibitions are the perfect place to gain a picture of the competitive landscape from your industry. Review the exhibition catalogue and prepare in advance to stroll the fair.’ It suggests also preparing marketing materials in Chinese and using qualified staff to present products.
The centre adds some additional advice on what to do after a show. ‘After the event, follow up on questions and potential leads. Send your potential clients a letter or a thank-you card, possibly with a product sample or a small gift. Make sure you answer all the questions you have received. But act quickly – leads will lose interest if not contacted a timely manner, and this can be very detrimental for your investment.’
Opportunities for EU SMEs in the Chinese water sector
Armed with this advice, SMEs can begin to think about the actual business opportunities in the water sector. In addition to the water sector report published in 2013, the centre also recently published a very relevant new report on smart cities in China.
‘We see that there are good opportunities in China’s industrial water treatment sector and in the development of China’s ‘sponge cities’,’ says the centre. Areas such as pollution treatment, water quality testing and monitoring, and waste recycling are all areas where EU know-how and high-tech products are in demand in China, especially applying smart technologies, it adds.
Referring to research by Zhiyan Consulting Group, the centre says intelligent water is still an emerging market in China, with a small number of companies being capable of providing total solutions. ‘Chinese companies that have not previously used advanced smart technologies in the sector are however developing and exploring ways to advance their businesses to incorporate intelligent and smart technology. No one specific company has a dominant market position with the ability to provide full-packaged solutions. Opportunities in the market are therefore present as China lacks the availability of professional consultation on top-level industry design, in addition to operation, utilisation and protection,’ says the centre.
Application areas include solutions to better utilise water. Water pollution is also a major challenge for the development of cities in China. ‘Many commercial companies involved in smart water focus on providing pollution control services, such as testing and monitoring water quality, data transfer, and treatment,’ says the centre. Less intelligent approaches are being taken in water supply. ‘At present, no single company is capable of providing total smart water solutions in China,’ adds the centre. ‘Water plant and related equipment/infrastructure providers are currently looking for solutions to be more effective. Smart meters are therefore seen as a potential area of growth.’
These market developments present opportunities for European SMEs. ‘China is on a drive to acquire technology and innovative products and services which can present many opportunities for European producers in particular, which are known for their strong know-how and good reputation,’ says the centre.
It also offers some further advice on how best to approach these opportunities. ‘European SMEs should first check if their products and services can be exported to China. The centre has experts in standards and conformity that can provide specific information on norms, labelling requirements, customs duties, the China Compulsory Certification, etc.’
It also advises that companies should not expect quick answers to questions such as ‘Is there demand for my membrane filtration technology in China?’ ‘While in mature markets, companies in the water field have a precise list of their needs, and know what’s available in the market, the fast growth experienced by China makes it sometimes less obvious what the real necessities are. Frequently it's only when they are told what a product, service, or technology solves, that they realize it fills a need they have.’
Resources for working in the water sector in China
Ready for China?
Self-assessment for readiness to access China: www.eusmecentre.org.cn/diagnostic
Support in finding local partners is one of the paid-for business solutions offered by the centre: www.eusmecentre.org.cn/solutions
See also Section 1.2.2., ‘Water Pricing, Tariff Reform and Public-Private Partnership Funding of Water Infrastructure’, and Section 2.2.1, ‘Role of foreign companies’, in the EU SME Centre report ‘The Water Sector in China’, 2013.
Bidding for contracts
See Section 2.2.2., ‘Role of Design Institutes and Local Government’, in the EU SME Centre report ‘The Water Sector in China’, 2013.
A list of upcoming trade fairs in China is provided by the Exhibitions Database on the centre’s website.
The centre has just launched a new report on exhibitions in China, available on the centre’s website.
Further support on selecting and preparing for a trade fair in China can be obtained through the centre’s Advice Centre: www.eusmecentre.org.cn/expert
For more information, visit: www.eusmecentre.org.cn
The responses on behalf of the EU SME Centre were provided by:
Rafael Jimenez, Business Development Advisor, whose roles includes business development and market access advice and trade fair support
Anne-Laure Maddy, Marketing & Communications Manager
Domenico Di Liello, Knowledge Centre Coordinator, whose role includes trade fair support
Related article: Regulation drives action on water in China
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