David T. Fung's tips for aspiring Canadian entrepreneurs in China
Ready or not, China will be Canada's next major trading partner and the primary destination for many brave new entrepreneurs.
The Canada-China Foreign Investment Promotion and Protection Act (FIPPA), Canada's biggest foreign trade treaty since NAFTA, will get domestic approval status in Canada at the end of October. It's a mutually-binding agreement that Canada and China protect and respect the rights of investors from the partnering country. It's a treaty China-Canada watchers say has immediate symbolic, if not economic, significance.
The Vancouver Observer spoke with David T. Fung, vice-chair of the Canada-China Business Council and CEO who has business partnerships in North America, Europe and Asia about what his top five pieces of advice would be for Canadian entrepreneurs aspiring to start a business or invest in China.
1. Send yourself or your executives to study in China
There are 70,000 Chinese students studying in Canada according to a 2012 Education Policy Briefing, but fewer than 1,000 Canadian students studying in China. This unbalanced flow of students is Canada's biggest weakness vis à vis China, Fung said.
Amit Chakma, president of the University of Western Ontario and part of a delegation travelling with Prime Minister Stephen Harper on an official visit to China in February, was quoted as saying: “Our Chinese friends told us that there is a trade deficit, meaning they are sending more students, we are sending few."
"Without having studied in China or another Asian country, future Canadian executives lack the competence to manage enterprises in these countries," Fund said.
"Future Chinese executives who have studied in Canada would be a lot more able to adapt to the Canadian system and legal environment. This is a huge advantage compared to Canadian executives who would be very fearful to work on cultural adaptation."
2. Football is not the same as soccer; expect to play by very different rules in China
Fung used football versus soccer as an analogy for explaining the differences between doing business in North America versus doing business in China.
"We're used to playing American football, we carry the ball with their hands. But the Chinese pay soccer, and no one touches the ball with their hands except for the goalie. It's not that one system is better than the other, it's just different," he explained.
"If we're going to operate in a country with a different system without understanding the nature, characteristics and idiosyncrasies of that system, our chances of success would be significantly diminished."
Fung pointed out the risks for Canadian small and medium business owners who go to China without knowing the cultural, political and social context of their local surroundings, particularly if its a small city or town where a mayor can wield much more power than one in Canada.
3. Understand global value chains
Fung emphasized that no matter what a country's natural or clear competitive advantage, no country can afford to keep all its goods and services at home.
"After the Second World War, Britain was one of the largest ship building countries in the world. Then Britain decided to turn to protectionism, stay home. The end result today is that there's no ship building industry left in Britain. Anytime there is protectionism, it breeds inefficiency and uncompetitive and the end result is a slow death," Fung said.
"On the other hand, Germany and Norway and others decided to compete. Despite their so-called high cost and high tech environment, today both Germany and Norway still have a ship building industry."
4. Understand the role being played by logistics
"A young executive needs to understand the role being played by logistics," Fung said. "And of course, technology. Those are fundamental elements for anybody who wants to operate successfully in the future.
5. Surround yourself with productive and creative team
"Last but not least, knowing how to hire people and having a productive and creative team. It's fundamental to the success for any business enterprise."