Making the difference

Western firms get helping hand from EU SME Centre in China

For small- and medium-sized enterprises (SMEs), establishing a presence in China is like a journey with several hidden obstacles.

As the Chinese economy continues to blossom, the number of SMEs seeking access to the world's next biggest consumer market is also increasing exponentially. But many are hesitant to take the first steps into a complicated market thousands of miles away due to the risks involved.

"What started out as a sort of curiosity about the Chinese market for many has now turned into a desire for action and we've seen a big increase in the number of businesses looking to move to China, as the situation back home is not that encouraging," says Chris Cheung, director of the European Union SME Centre and market advisor in business development.

By 2011, 12 percent of all EU businesses working on an international scale had operations in China, a significant jump from five years ago and a sign of a growing change, according to a report published by the European Commission late last year.

With more than 99 percent of European businesses considered SMEs, which usually means companies having fewer than 250 employees, a staggering 92 percent fall under the micro category - often employing much smaller teams to turn creative dreams into reality.

With SMEs generating more than 50 percent of the $211 billion (161 billion euros) worth of EU exports to China in 2011, there is no question of the importance of supporting such businesses.

Seeing the pivotal role these businesses play, the EU has adapted the strategy of "think small first" in order to help make the move.

Aided by the EU's Small Business Act, an effort by European member states to ease the regulatory burden facing small businesses enacted in 2008, Cheung and his team of industry experts opened the EU SME Centre in Beijing early last year to ease the transition for these businesses, which often lack the resources to gather quality information on China's complex business environment and different culture.

"The first step for any business considering a move to China is to get informed and know how the market works," he says.

"China is a very unique market so it is important for businesses to understand the market they're trying to penetrate."

It is not just the lack of cultural knowledge or language expertise that is preventing global SMEs from entering the Chinese market.

In the Opportunities for the Internationalization of European SMEs report published by the EU Chamber of Commerce in 2011, lack of market information and much needed statistics are listed as top barriers for Western companies.

Compared to other BRIC nations - a term used to refer to the emerging economies which encompasses Brazil, Russia, India and China - China is listed below the average in terms of the language barrier.

Following market information, understanding China's different business practices and the difficulty in understanding the required paperwork and bureaucratic procedures were listed as the other major hurdles.

China, with exports of more than $1.5 trillion in 2010, has been gradually changing its trade mix by importing foreign goods and services recently.

Most of these imports are focused on high-technology industries, with green technology being the biggest growth driver for Western companies, Cheung says.

"Green technology is a big industry for China right now," he says.

By arranging regular trade missions and exchange visits to China, offering access to legal experts well-versed in Chinese law, and giving in-depth reports on issues facing small businesses moving to the mainland, he says they are helping to level the playing field for foreign companies.

"Our mission statement, our goal, is to make it easier for businesses to operate here and be successful," he says.

So far the plan to help businesses move East and tap into a rich resource of wealth has been producing significant results.

In just one year of operation, the EU SME Centre has published more than half a dozen reports addressing issues from IPR protection to an in-depth look into the textile industry.

In addition to reports, the center also provides prior case studies of successful SME business ventures, highlighting the right approaches and pointing out what needs to be done for improvement.

Though the center has several challenges to overcome, it believes that collective efforts can help bring about better business ties. Though its services are free of charge, not many businesses are aware of it.

Of the thousands of SMEs looking to tap the Chinese market, only 27 percent are aware that support services like the EU SME Centre exist, while only 7 percent have actually used these services.

But with the China focus continuing to grow, Cheung says he expects an increasing number of businesses to take advantage of the center's services and information.

"We do not charge for our services. We are basically a non-profit organization whose sole purpose is to help educate those businesses that show interest. But if they don't know we exist, we can't help them," he says.

As the old saying goes: knowledge is power. For companies looking to boost their balance sheets in the East, the information is freely available to make that move.

Contact the writer at toddbalazovic@chinadaily.com.cn