Podcast Transcript: Why Shenzhen makes business sense

Canada has just doubled its commercial footprint in China.

The Canadian Trade Commissioner Service has opened six new offices in Shenyang, Qingdao, Wuhan, Nanjing, Chengdu and Shenzhen. Starting now, Canadian companies can benefit from expanded trade, investment and innovation partnerships with in-market and local expertise.

The offices are staffed with business development experts with strong connections within each of the new cities, so Canadian companies might want to put their China strategy on the front burner if it isn’t already.

I’m Michael Mancini, Editor-in-Chief of CanadExport, the official e-magazine of the Canadian Trade Commissioner Service.

Today we’re looking at Shenzhen, a city in southeastern China with over 8 million people. It’s also strategically located just north of Hong Kong.

But why should your company look to Shenzhen? On the phone with me to answer that is David Bostwick, Senior Trade Commissioner at the Canadian Consulate General in Guangzhou.

Michael Mancini: Thanks for being here David.

David Bostwick: Hi Michael, it’s great to be here.

Michael Mancini: So what are the top 3 reasons Canadian companies should do business in Shenzhen?

David Bostwick: Right off the top, Shenzhen was the birth place of China's economic reforms just over 30 years ago. And at that time, the city of Shenzhen was then a sleepy fishing village bordering on Hong Kong as you mentioned, with a population of a just a few thousand. However over the last three decades, it has now transformed itself into a thriving and entrepreneurial city of 8 million+ citizens, with per capita income of over $14,000 CAD.

That makes it China's first so-called "developed" city by OECD standards and the richest of any major mainland municipality. Given a significant disposable income amongst citizens of Shenzhen, a number of different opportunities abound for Canadian companies in the priority sectors of agri-food and seafood products, beverages, and education to name just a few.

Michael Mancini: You say that Shenzhen quickly became one of the wealthiest cities in China. Why exactly did that happen?

David Bostwick: Well, that’s due mostly to foreign direct investment. And that is my second point in term to really why we should do business in Shenzhen.

Shenzhen really did benefit in its early days from a lot of investment from Hong Kong and Taiwan. And over the last 20 years, it has become a mecca of foreign investment from all over the world. As such it has become a centre for global value chains. It also has the reputation now of being one of most transparent and easiest locations in mainland China to do business. Numerous Canadian companies have taken advantage of liberal investment policies there and continue to use the city as a base of production base for both export and increasingly for the booming Chinese domestic market.

Michael Mancini: Hong Kong is usually the launching pad to China for many foreign companies. Is Shenzhen typically the first place and the best stop for that mainland China launch?

David Bostwick: Very much so. The connections with Hong Kong are tremendous and the two cities, Hong Kong and Shenzhen, are becoming increasingly integrated. Numerous companies not just Canadian but global companies use Shenzhen as a base for their operations in China. And that continues today.

Michael Mancini: What is an example of liberal investment policies that in Shenzhen may differe from another pier in China?

David Bostwick: Well, if you wanted to register a representative office in Shenzhen for your company, it would take you about five days. In a bureaucracy like China’s, this five-days is really a significant leap forward.

Michael Mancini: OK, to recap quickly. Your first reason was the incredible wealth generated in Shenzhen. The second was that it’s a city built on foreign direct investment with liberal investment policies. What’s your third reason?

David Bostwick: Well, a third reason really has to do with Shenzhen being a home base for a number of leading China's high tech companies, including global telecom giant Huawei Technologies, a telelcom giant that has recently invested in Canada, and BYD, a leader in production of cars, including clean electric autos and batteries—they’re about to launch some models in North America (market). And a company like Tencent, China's largest internet portal with a global reach. While these companies may not yet be household names among Canadian consumers. Industry players in Canada and around the world do recognize these companies as tomorrow's industry leaders. Innovative Shenzhen-based companies like these are open to partnerships with Canadian technology firms and our new Trade Office in Shenzhen can help make the right introductions into these large companies.

Michael Mancini: Tell me why was it important for the TCS to open an office in Shenzhen to begin with, as opposed to having our closest office in Guanzhou cover that territory?

David Bostwick: Guangzhou is only an hour’s high speed train ride from Shenzhen. Again, we have been covering it (Shenzhen) for a number of years from Guangzhou (the home of Canada's Consulate General in South China) and we’ve already seen the potential for trade, investment and innovative partnerships for Canadian business in Shenzhen but could not fully realized by weekly visits by (Guangzhou-based) Trade Commissioners. I myself have been going back and forth to Shenzhen once a week for the past two and half years. And we very much realized that we needed a presence in the city, having boots on the ground. Having a presence in Shenzhen, having a Trade Office in Shenzhen allowa the Trade Commissioner Service and our Trade Program in South China to have a more sustained and strategic approach to the booming local market. Follow-up is key when developing trade leads for Canadian business and having our staff there allows the TCS to provide a better level of service to our Canadian clients, all while seeking new opportunities and partnerships with local business.

Michael Mancini: What would you say is a big challenge Canadian companies should be prepared for when it comes to doing business in Shenzhen?

David Bostwick: Like any city in China, finding the right partner is a significant challenge. You need to find partners that can be trusted, that understand your business plan, and understand how to develop your business locally. This can be a frustrating endeavour in a place like China where there’s a different language, different way of doing business. There is a much larger participation of the government in doing business so that can be very difficult. China is becoming a very sophisticated and large market. And it’s getting very crowded (market) so finding that right partner is a key.

I have a recent case of a Canadian ICT company that knew the opportunities available to them in South China but had considerable difficulty in developing the right local contacts with potential partners that could be trusted to work with the firm to advance their technology and business interests locally in Shenzhen.

This firm decided to approach the Trade Commissioner Service in Guangzhou to seek our advice in engaging local partners and we subsequently worked with our new Trade Commissioner in Shenzhen to engage her network and to ensure that they had an opportunity to meet with potential partners, people who have been moving business forward in the city of Shenzhen. Through our trade commissioner contact, she (our trade commissioner in Shenzhen) was able to introduce the company to a number of (local) partners. This company is now about to sign a significant deal that will see their company's products being used by a number of key players in the South China market.

Michael Mancini: So David, I am sure we’ve piqued the interest of hundreds if not thousands of Canadian companies. What should they do now? Who do they call?

David Bostwick: They should be calling Leslie Lee, our Trade Commissioner in Shenzhen, and she has a number of years of experience in business development in Shenzhen. You can find her contact information at www.tradecommissioner.gc.ca.

Michael Mancini: Just a reminder to our listeners that I will have this information in a little resource centre box on the CanadExport homepage. David, thank you for your time.

David Bostwick: Thank you Michael.

Well, that’s all for this podcast edition of CanadExport.

Stay tuned for our next podcast which looks at another city in the expansion of the Canadian Trade Commissioner Service in China.

As David said, don’t forget to contact Leslie Lee at our office in Shenzhen, to find out how she can help your company. Go to the China page on www.tradecommissioner.gc.ca to do that.

While you’re there you can learn more about the other cities in the TCS expansion in China. You might also want to contact one of our 18 regional offices across Canada for help in assessing your export readiness.

I’m Michael Mancini, signing off for now.

To download our other episodes, just go to www.canadexport.gc.ca or go to iTunes and use the searchword “CanadExport.”