Foreign investors take on China
Control Engineering China has monitored the rise of the Chinese manufacturing market since the magazine began in 2003. It has also seen parallel growth in the automation industry. According to Ma Xiu Hong, vice minister of the Ministry of Commerce of the People’s Republic of China, more than 570,000 companies from 200 countries have invested in China, and total capital has reached US$665 ...
Control Engineering China has monitored the rise of the Chinese manufacturing market since the magazine began in 2003. It has also seen parallel growth in the automation industry. According to Ma Xiu Hong, vice minister of the Ministry of Commerce of the People’s Republic of China, more than 570,000 companies from 200 countries have invested in China, and total capital has reached US$665 billion. In a recent speech, she noted, "Only less than 20 companies of the top 500 in the world haven't invested in China right now."
So what are you waiting for? Right now, foreign equity joint ventures, China-foreign contractual joint ventures, and wholly foreign-owned enterprises are the three main forms of foreign direct investment in China for absorbing foreign capital. Large companies may join in local government projects directly, but for those not familiar with the rules of the Chinese government, finding a good domestic partner is important.
U.S.-based automation companies have chosen to enter the country in a variety of ways. Opto 22 went to China in 2002 by choosing local enterprise APT as its only agent. APT had already shown good performance. Many foreign companies have succeeded in China using this win-win strategy, which provides ready distribution channels. Early in 2006, National Instruments announced that “NI China will distribute directly, as well as keeping the former relationships of local agents.”
If your company is familiar with the Chinese market, or has done research on China, you might consider setting set up a factory directly as the German-based Phoenix Group did with Phoenix Contact Asia-Pacific (Nanjing) Co. Ltd with the Nanrui Group at the end of 1993. After 13 years of effort by a local team, Nanjing Phoenix is at the center of Chinese market.
Purchasing a state-owned enterprise may be a good choice for those who want a quick entry into the Chinese market, but there are limitations. In August 2006, China announced the "Provisions for foreign investors to merge domestic enterprises.” Before a merger, you must know if the company you plan to purchase is included among national protective industries such as machine manufacturing. Schaeffler Group’s acquisition of Luoyang Bearing Group failed for that reason last year. For more detailed information about these rules, visit the Website of the Invest in China channel supported by Ministry of Commerce of People’s Republic of China at www.fdi.gov.cn/pub/FDI_EN/default.htm .
Aileen Jin is editor of Control Engineering China , published six times per year.
Planning helps Watlow succeed in China
Last fall, Watlow, a designer and manufacturer of electric heaters, controllers, and temperature sensors, opened a new 80,000-sq-ft manufacturing plant in Shanghai, China. As Watlow’s international presence has grown, so has the company’s insight about doing business overseas, especially in China.
“Probably the smartest thing we have done is create a management team that is made up of both Americans and local Chinese experts,” explains Roly Juliano, product manager. “You really need experts in language and culture on the ground, throughout the process.”
Never underestimate the language barrier, cautions Juliano. At times, management teams had to use white boards to draw pictures to improve communication, he continues. In addition, all documentation was done in English and Mandarin so the team could train and work side by side. Extensive documentation and planning help ensure consistency and quality throughout the manufacturing process, no matter where products are produced.
According to John Gross, the Shanghai facility’s director of operations, the new plant incorporates “the same manufacturing processes as facilities in the United States, but it is supported by Watlow’s Asia Application and Design Center, located in Singapore.”
Gross recommends having a detailed plan for acquiring supplies and spare parts, as they are not as readily available in China. “At this point, there is still an orientation toward parts being available in separate businesses, versus the American style of large distribution. That infrastructure is still being built. The key is good planning,” he says.