Presence in China a business no-brainer

The Government is now taking China, and Asia, more seriously as a place to do business, writes Clifford Coonanin Shanghai

THE DEPARTURES area at Shanghai's Hongqiao airport is full of Irish businesspeople, many of them ducking into shops to do business away from the loud flight announcements booming through the hall.

You can't get a flight from Shanghai to Beijing, they're all full, so some of the large trade delegation who stayed on a bit longer in Shanghai - to finish up contract negotiations or drum up some business - fly on a bit later than their compatriots. All told, this is not a picture of a country in recession.

Taoiseach Brian Cowen arrived late to the trade delegation organised by Enterprise Ireland, but the fact he arrived at all given the political crisis at home is a clear indication that the Government is taking China, and Asia, more seriously as a place to do business.

"The global reach of Ireland can be seen here in the emerging power of China. This is the second largest ever trade delegation out of Ireland, and the largest was also to China, in 2005. It's an indication of the interest in Ireland in doing business out here," said the Taoiseach in an address to the Irish community.

"The power that is China will have a major role to play in meeting the systemic risk in the global financial crisis. Change is on the way, and how we manage change is the challenge," Mr Cowen said.

The global economic slowdown is hitting China too - economic growth slowed to nine per cent in the last quarter after five years of double-digit growth. There are reports of the closing of hundreds of factories which had manufacturing the toys and knick-knacks that were the lifeblood of China's economic rise in the booming southern province of Guangdong.

Vivek Tulpule, economist with the global miner Rio Tinto, cut his outlook for economic growth next year in China, which is the main driver of soaring demand for commodities.

"We're saying that we think China will grow between eight and nine per cent. That's a reduction in our view. Our view about commodities demand was that it would slow as the Chinese economy slowed, but it slowed faster," Tulpule said.

What wouldn't Ireland give to be able to talk of eight or nine per cent growth this year? This is a robust figure, and very much in line with what the Government has been trying to do for the past few years - ie, cool the overheating economy to calm rampant inflationary pressures.

Tulpule expects commodity prices to bounce back some time next year, as Beijing's recent moves to ease credit constraints kick in over the next six months.

The broad picture in China may be of one of a slowdown, but there is no sense of inertia creeping into the economy, and much of this is because of the huge domestic market. Irish companies on the trade delegation to China are cautious, but the overall tone remains bullish.

Next year Ireland celebrates 30 years of diplomatic relations with China, and Enterprise Ireland's current Asia-Pacific director, Alan Dixon, the first trade representative to set up in 1979, has seen the huge changes at first hand that have transformed China.

"It's hugely important for Irish companies to be in here, as it's a major player. Here they are talking of a smaller downturn, but in Ireland we're talking of a bigger downturn. The future development of Irish companies is in this part of the world," says Dixon.

The focus is particularly on service exports, in areas such as education and aviation services, which more than doubled last year. China is Ireland's second biggest trading partner in the region, after Australia and ahead of Japan.

Dr Michael Murphy, president of University College Cork, has been fine-tuning his organisation's approach to China to make it more productive.

"We abandoned participation in education fairs, as we found random fishing wasn't efficient. Here it's about identifying good universities who want to develop programmatic relations to come to Ireland for, say, a joint degree programme," Murphy says.

Showing that the relationship is mutual is also important. There are 200 students from Cork at UCC this year and there will be 300 next year. Students from Cork are also taking part in Chinese programmes and most of them will spend time in China at some point.

"All the experience of downturns and recessions tells you that recessions are great for education. What we need to see is that there are three million students crossing borders every year for education, and if we fail to see that we losing out on one of the biggest opportunities available. Being here is a no-brainer for us," Murphy says.

So far this trip has yielded €25 million in trade deals, no small figure at a time when belts are theoretically being tightened all over. These are real deals.

Finian Connolly, chief executive of Edgewater College in Drogheda, has just signed a deal with Air China to train 400 pilots in technical English in five centres around the country.

New aviation rules mean all pilots and air traffic controllers must speak the English required in aviation by this year, and China has been given an extension until 2011 to meet the requirements. "I've been here since 2000 and we've had a presence since 2002 with a representative office, which you need to get the business," Connolly says.

Healthcare is a big growth area in China, and from a very low base in some cases. Audit Diagnostics from Cork has signed a deal worth up to €10 million, and possibly more, providing facilities to carry out testing outside the hospital laboratory, which will have a major application in developing parts of China. "All the equipment is made in Cork. We've been working in China for nine years and it accounts for 40 per cent of our business this year and next year it will be 50 per cent," chief executive Michael O'Donovan says.

"We're expecting to grow and keep on growing because the healthcare side is really growing," he adds. Also expanding in the healthcare business in Greater China is Oneview, which supplies patient entertainment and education systems to hospitals, which allow patients to receive TV, video, internet, e-mail and telephone services at their bedside.

Oneview has just installed its system at GE's flagship hospital in Hong Kong, the HK Sanitorium, in what sales director Neill Ryan says was a "seven figure deal".

"The main purpose is to educate and entertain patients using network devices, including video-on-demand and Internet Protocol TV (IPTV). It's a multi-tasking thing and all the software is 100-per cent developed in Ireland," he says.

The economic slowdown has not hit the private hospital market, and Ryan says there was huge appetite for Oneview's products in Asia, and the company was close to signing a second deal.

John Breen of Instant Upright, which signed a deal to provide scaffolding systems to power stations owned by CEC, has been coming to the country for 20 years.

"China is all about relationships and in terms of our business, Asia is growing rather than contracting. People are nervous in Europe, but you see a strength here. The strength of the Chinese currency is also an equilibrium factor," Breen says.

Galway network services provider Lightstorm signed up with the leading Chinese telecom provider ZTE Corporation to use one of its solutions in a Video on Demand (VoD) application.

"Lightstorm's Brooklyn-10 carrier ethernet switch was chosen because its technology is unique to prevent pixelisation and/or poor video quality," says Dr Malachy Rice, sales director for Europe Asia with Lightstorm Networks.

"China is rolling out state-of-the-art IPTV services to millions of subscribers. To be a key-enabling technology in the infrastructure of this deployment is an amazing achievement for a young Irish semiconductor company.

"This deal shows that with the right engineering talent, the right venture capital and Government support, and the right market foresight, Irish high-technology companies can compete for leading edge technology deals across the globe," he adds.

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