Irish companies are quick to learn how to gain a foothold in China, writes Jamie Smyth in Beijing
Michael O'Donovan began looking for opportunities in China almost five years ago for his Cork-based medical device firm, Audit Diagnostics. But progress was slow initially, as he travelled back and forth to China at least four times a year seeking the right partner to crack one of the world's biggest markets.
This week, on the Taoiseach's trade mission to China, he finally succeeded in landing several distribution deals with Chinese firms that could earn his firm up to €20 million in revenue over the next few years.
"Patience is key," says Mr O'Donovan, whose firm develops specialised technology to diagnose a range of health complaints. "Business is a long-term process in China. You really have to be prepared to come over often and spend time building long-term relationships with clients." He also emphasises the role played by Irish politicians, who offer their time on trade missions to meet key clients and business partners. A photo opportunity with the President on the last Irish trade mission to China in 2003 was enough to convince Audit Diagnostics' new partner, Beijing Hamoi Biological Engineering, to cancel a contract with a Japanese rival and provide a foothold in China.
Similar experiences are recounted by most of the businesses that signed €38.5 million worth of contracts on the first leg of the Irish trade mission to Beijing yesterday. Companies spanning a range of sectors from telecoms to water treatment all tell tales of lengthy negotiations and enthusiastic socialising before they finally managed to get their first big break in the fast-growing Chinese marketplace.
It took Ted O'Morchoe almost a decade before his firm, Bannon - which exports specialised machinery to help recycle water in buildings - struck gold in mainland China. Teaming up with the Longford-based manufacturer of water treatment systems, Butler Manufacturing Services, Bannon yesterday signed a lucrative deal with a Beijing property management firm, Yinda Property. Yinda will install water recycling systems in 20 of its Beijing properties, which can now be used as a showcase to attract further business.
"It often takes longer to build relationships in China and there is a big indigenous industry to compete against," says Mr O'Morchoe, who notes that many Irish firms gain a toehold in China by signing deals with foreign investors in the country before signing up indigenous Chinese clients.
But doing business in China is not without its risks, according to Cathal Friel, chairman of the Irish Software Industry, who is participating in the mission. "The issue of intellectual property protection is still huge here and companies can find their software pirated by rivals. To combat this, many firms are signing reseller agreements with larger partners such as Lucent to give them extra protection," says Mr Friel, who cites the example of Mobileaware which has signed a reseller deal with the Chinese unit of BEA Systems.
Announcing the goals of the trade mission to the Chinese media yesterday, the Taoiseach, Mr Ahern, set a target of doubling bilateral trade with China, which currently is worth about €4 billion, within five years. But to achieve this ambitious goal, realistically many more Irish companies will have to invest resources in the country, set up a permanent presence and forge partnerships with local firms.
Just 70 Irish firms have so far established a presence in China and exports from indigenous companies were worth just €48 million in 2003. Irish firms will also have to beat off fierce competition from other foreign firms flocking to the Chinese market.
"Irish firms also face significant problems addressing the Chinese market due to the sheer distance and physical time it takes to travel there," says Alan Hobbs, Enterprise Ireland's director for China. "And you need a lot of 'face-time' with partners to succeed."
But as Audit Diagnostics has found this week, the opportunities presented from doing business in China outweigh the challenges.