China: where should you locate your business?

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When in China, many government-sponsored science parks vie for your attention and investment.

In my first China trip of 2014 I visited the new science and innovation park in Benxi, just South of Shenyang in the North East of China and only around 100 miles north of Dandong/Sinuiju on the North Korean border, where we sought to engage with the local cluster. Luckily we brought along two products that gained immediate buy-in from the local technologists and we also had significant support from the dynamic Mayor Mr. Hongbin GAO. As a result, we had an extremely successful trip and expect to raise significant funding for development of our European products in Benxi. Is this where I should base all my China business?

Well having come back this week-end from my second China trip of the year – a gruelling twelve-and-a half thousand mile round trip to four locations in 5 days – I would also add Wuhan and Qingdao to the ‘most valuable partner’ list of target locations for UK firms.

locations

From the top:
Benxi, Qingdao and Wuhan

So how do you decide where to locate your business, and how do you go about developing the necessary relationships to make it work – in a country where relationships matter more than pretty-much anything else? The two are closely linked.

The first step is easy to define, but harder to execute: first, be successful in China! Turning up in China and pitching for multi-million pound funding without first showing commitment to the commercialisation of IP in China is unlikely to produce a positive result, or an engaged relationship. Too many Western firms have taken Chinese money and benefits in the past only to depart soon afterwards (without generating anything of lasting value in the local economy) for Chinese investors to put big money up before you demonstrate commitment. So … start small. Demonstrate commitment. Create some short term successes – confirmed partnerships supported by revenue, confirmed collaborations with the local industry, hospitals or public health, or evident progress towards manufacturing of your product – and you will be amazed by how fast the rapport is developed, and how much support you receive.

Many UK firms will be disappointed by this need for upfront commitment (what do you expect when seeking multi-million pound non-dilutive funding from China?) and will be even more disappointed by the next essential: make sure you have China-ready as well as China-relevant products.

  • ‘China-relevant’ is easy: this includes any product that addresses issues specific to the Chinese market, ideally referenced by inclusion in the current 5 Year Plan.  As China experiences increased incidence of all the typical ‘Western’ diseases like cancer or diabetes, there is seldom any difficulty in confirming European products as China-relevant.
  • ‘China-ready’ is harder but basically means ‘later-stage products’ – focus first on therapies already in the clinic (or devices at least at confirmed prototype stage) if you want Chinese commitment in the form of funding. Once success is established with later-stage products you MIGHT be able to partner earlier-stage technologies. But don’t rely on it. I have seen too many brilliant pre-clinical projects rejected by Chinese investors in favour of super-generics or similar to think that discovery-stage assets fit well with Chinese investors.

I have seen too many brilliant pre-clinical projects rejected by Chinese investors … to think that discovery-stage assets fit well with Chinese investors.


Go it alone or spend valuable time finding a partner?

Developing effective Chinese relationships requires the help of a trusted local partner. It has taken nearly three years for us to find such a partner and establish the necessary bonds of trust, but we are now able to connect through our partner with the top Chinese political influencers, mayors, government officials and business leaders on a regular basis. Trusted partners have given us access to Regional Directors and it is through these relationships that the long term regional partnerships have been cemented. You could presumably do this without a local partner but it would take far more time and you would certainly need well connected, dedicated, Mandarin-speaking staff members on your team. For the vast majority of UK entities, working through a trusted partner is the way to go.

As it stands I think we can now confirm Qingdao, Wuhan and Benxi as our top Chinese locations and our connections and partnerships are well established in each of them. At last I can begin to concentrate my China trips on these three. Other centres will continue to compete of course – we will always have interests in Beijing, China Medical City will continue to court us (and has real value despite its location), different conference locations will continue to make themselves known and we will continue to develop our engagement with Shanghai and in particular with the Shanghai Pilot Free Trade Zone (http://en.shftz.gov.cn/).

Regional demand is not uniform however: Like investors anywhere, each Chinese science park has its own priority list of target investments. Not all China-ready projects are attractive to all Chinese science parks. Your local partner – or Dynasty contact if you have one – will tell you who wants what. Then all you have to do is develop a Chinese-centric pitch (with slides in Mandarin PLEASE) and you are good to go.

So what else happened this trip?

I don’t have space to go in to details but many China-classic events featured in my schedule this time:

  • The formulaic and formal audience with a local Director (see pic below)
  • The signing ceremony, with attendant press (see pic and link)
  • The TV interview with a wholly Chinese-speaking camera crew (see pic and video)
  • Being ‘announced’ at the start of a conference meeting
  • Helter-skelter, breath taking taxi rides (not for the faint hearted – have crashed once so far)
  • Bewildering searches for specific office or restaurant locations
  • Endemic, rapid staff turnover
  • Silent, un-responsive and apparently neutral audiences (which can actually belie a keen interest in what you are saying!)
  • Absolute frustrations with slow, intermittent Gmail. And no Twitter or Facebook – Ok the latter is an advantage, as far as I am concerned

New experiences: What is it like to be a patient in China?

Hospital registration and my digital records reference card

Hospital registration and my digital records reference card

I also gained the opportunity to experience Chinese healthcare first hand. Luckily my only ailment was a broken tooth – sustained during a delicious lunch in one of the many restaurants found in the shadow of the Tsingtao beer factory. I was then reminded that all healthcare services in China are delivered through the hospital network, even basic dentistry.

So my long-suffering local interpreter and I headed off to the vast Qingdao Chengyang People’s Hospital (every major City has a People’s Hospital), checked with the hospital doctors in Outpatients that they were prepared to treat a foreigner, registered me with the healthcare system in the Foyer in exchange for some cash, and then headed up to the dental unit on the third floor.

‘Can’t be done’ was the young dentist’s first reaction on being presented with a dislodged ‘implant’ but, after some discussion, he was persuaded to do his best. Thirty minutes later, with my front tooth safely re-fixed but with the dentist’s warning that it was ‘Only temporary because the technology is different’ ringing in my ears, I was back to normal.

All I had to do then was to part with more cash at the front desk and return the completed paperwork to the dentist.

All in all the visit took about 90 minutes, including Registration. But how much did it cost me for this highly efficient service, you ask? Well the Registration was a massive 4.5 Yuan and the dental work cost 20 Yuan. In total that is about £2:50 in English money. Now that is an excellent service!

So I think we know Where. Final thoughts on How?

Well if you insist on turning up in China to pitch a discovery-stage asset, seeking Chinese investment that needs to be paid in to a UK bank account, perhaps even in the form of a long-term equity investment, reliant on a presentation written wholly in English and with no previous commitment to commercialising IP in China then PLEASE … stay at home and save your money.

If, on the other hand, you want to make either a long term commitment to China yourself or to partner with us to ‘borrow’ our own commitment and relationships, then please give me a call. An offer: Honestly, I am delighted to help you either way. Pro bono. Though I sometimes feel like I am playing the role of concerned potential father-in-law checking that a suitor’s intentions are honourable, I really want your marriage to work too – because it is essential to my business that we develop this channel to its fullest potential.

In my experience in China, many locations vie for your attention but each offers different opportunities. If your business deserves that attention, if you find a partner you trust and a location that suits your technology …  then the commercial opportunities are limitless.

Dynasty symbol on clearClick here for About Us or here to contact Simon

Footnote: 1> I hope to confirm completion of successful fundraising for Dynasty projects from all three locations within the next 6 weeks. Exciting progress. Fingers crossed. 2> See this link for access to China’s 12th 5 Year Plan (Healthcare development)

 

Here are some links to our top three sites, and my own comments on each:

Wuhan Biolake: http://en.biolake.org/ The Wuhan story is another of those remarkable tales of Chinese growth. Less than 10years ago the science park area was farmland and lakes. Now the first 15 square kilometre development area bristles with young, innovative companies plus a few large players (like Pfizer and Wuxi Apptec, Bayer and Thermo Fisher). This has created a powerful cluster, enhanced each year by the extraordinary 3551 Grant event. Now in its 7th year Wuhan has invested millions of dollars each year in companies prepared to bring IP and/or senior staff to Wuhan. (See http://www.dynastybio.com/china-beckons/ for details).

Qingdao: http://english.shandongbusiness.gov.cn/public/area/qingdao/ My engagement with Qingdao has been galvanised by connection with Mr Chen, the driving force behind its development. Mr Chen’s vision is to combine science with creativity in the region – a thesis that I have advocated elsewhere for some time. Others will think of Qingdao as the location of the sailing contests in the Olympics, or the home town of Tsingtao beer (no one seems quite clear as to why the beer and the City don’t quite have the same spelling but it is apparently something to do with translation in to German). But for me this is the location where innovation and artistry meet. And med devices find a welcome home here. http://lanmu.qtv.com.cn/system/2014/03/29/011271502.shtml

Benxi: Benxi is probably the young upstart of the three (though Qingdao is new on the scene too). Up until recently the technology development in the former heavy industry region of Liaoning Province was concentrated around Shenyang. However, following a change of leadership, the technology spotlight has now settled on nearby Benxi. Some still remember the region, sometimes without much fondness, as the home of state-owned, lumbering iron and steel companies. This past probably helps explain why Benxi seeks the manufacturing end of the life sciences sector as its new tenants but there is some appetite for a broad mix of commercialise-able healthcare businesses here.

 
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Signing ceremony: Qingdao National High-tech Industrial Development Zone

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The Qingdao hospital: faultless service

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Formal meeting with the Qingdao director.

Benxi Mayor in NSB office

Benxi Mayor Mr GAO with the Vice-Mayor and Jun REN CEO of NSB, inspects the new NSB office – nearing completion.
Future Dynasty Centre?

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Meeting the Wuhan leadership: Executive Vice Director Mr YAN

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Meeting the Qingdao Hospital director Prof. Sean Qu and team

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