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Private companies fly the flag on distant shores

Updated: 2012-11-03 14:21
By Cecily Liu ( China Daily)
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Indeed, many businesses face these challenges, including Ghrepower, a Chinese manufacturer of small and medium-sized wind turbines. It invested heavily to set up a joint venture in Wales two years ago, but the subsidiary has yet to reach break-even point.

"Wind power is a sector with heavy sunk costs, so obviously we have a disadvantage compared to state-owned enterprises that have large-scale funding to support their international expansion," says Joseph Deng, director of Ghrepower UK Ltd.

Generally wind turbines have a lifespan of 20 years, meaning customers will often place more trust in rival companies that have been in Britain longer.

"To overcome this challenge, we came up with a policy to become a joint investor in our customers' wind farms, which reduces their risk," Deng says, explaining that flexibility is an advantage that keeps Ghrepower competitive.

Such flexibility helps privately owned Chinese businesses stand apart from their state-owned peers, says Guy Dru Drury of the Confederation of British Industry, a trade association with 240,000 members, some of which are British subsidiaries of foreign companies.

"As the decision-making process is far simpler for a private business compared to a state-owned enterprise, they are able to act quickly and therefore are more flexible," Drury says.

They also possess a singular "determination to succeed", he says.

"Private businesses have little if any access to cheap finance and therefore have to both make and take risks. The capital is likely to have been raised among family and friends or business partners so there is also a cultural pressure to be successful in the eyes of their peers."

The expansion of Chinese businesses to Britain also benefits local consumers by giving them greater choices and lower prices, he says.

Indeed, Chinese products sold in Britain are often more competitively priced, an advantage increasingly being supplemented by competitive technology.

For example, Hytera's reputation in the industry was given a considerable fillip this year after it helped the British retailer River Island overcome a challenging technical problem with its radio communications system.

Since moving into a new distribution center in 2010, River Island had suffered severe interference with its audio signals because two groups were using the same frequency, a problem Hytera's equipment helped River Island overcome.

For Yuan, such cases prove that to compete, Chinese technology businesses needed to rely on more than price.

"As China's manufacturing costs rise, cheap manufacturing can go to Vietnam, Malaysia, or Nepal. Therefore we must compete on our technology."

Looking back to 2005 when Hytera first entered Britain, Yuan says his team has come a long way through trial and error. When the subsidiary was first set up it had a small office in Burton-on-Trent, a small town in the English Midlands.

To cope with a growing need for office and storage space, Yuan moved Hytera to larger office space in Milton Keynes, a high-tech town northwest of London, in 2006. Rapid growth demanded another move this April, to Slough, a borough west of London close to Heathrow Airport.

"Being close to Heathrow Airport makes logistics arrangements a lot easier for us," Yuan says. "At the same time, being close to London helps us greatly in recruiting highly skilled workers."

To commemorate this milestone achievement, Prince Andrew, the Duke of York, attended the opening of Hytera's new office as guest of honor.

"To be able to invite Prince Andrew to our new office launch shows the recognition the UK government has for Hytera," Yuan says, adding that he feels thankful for the help that the British government's inward investment agency has given Hytera over the years.

Despite the success, Yuan says the road to internationalization by China's privately-run high-tech businesses is only beginning and that many challenges lie ahead.

"One of the challenges they should think about is how to make the best use of the R&D specialty and employees' skills of the local market they are in. Another is to accurately report the needs of the local market back to the R&D team in China."

An even more pressing challenge is how to overcome misconceptions about the quality of Chinese products, and get them more accepted into mainstream markets.

"The only way for Chinese businesses to become truly global is to enter the mainstream markets of developed economies. As the British government is already using our products, we can now go to any market and say that our products are of good quality.

"It is only this level of recognition that can help us to easily replicate the same business model in other markets in the world and be successful."


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