China: Business Presence Establishment in Beijing using British Business Council Launchpad

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A decision made 22 February 2013:

Decision Reference: MD-E-2013-0014
Decision Summary Title :	Business Development presence in China		Date of Decision Summary:	February 2013
Decision Summary Author:	Wayne Gallichan		Decision Summary: Public or Exempt? (If exempt State clauses from Code of Practice booklet)	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	N/A
Written Report Title :	Business Development presence in China		Date of Written Report:	January 2013
Written Report Author:	Wayne Gallichan		Written Report : Public or Exempt? (State clauses from Code of Practice booklet)	Public
Subject: To consider having a business development presence in China (Beijing) using China British Business Council Launchpad.
Decision(s): The Minister agreed to establish a business development presence in Beijing using China British Business Council Launchpad
Reason(s) for Decision: To promote Jersey as a place to do business, both inbound and outbound. To build on previous relationships with representative bodies and businesses and government. To promote Jersey as a Tourist destination for Chinese visitors.
Resource Implications: The cost is estimated to be c£60,000 which will come from within current Departmental budget. No Departmental manpower implications.
Action required: Director, Inward Investment and International Trade, to take the necessary steps with China British Business Council to establish the Launchpad Office.
Signature: Senator AJH Maclean		Position: Economic Development Minister
Date Signed:		Date of Decision (If different from Date Signed):

China: Business Presence Establishment in Beijing using British Business Council Launchpad

Economic Development Department

Proposal to establish a business development presence in China

EDD Visits to date

In October 2012, a Jersey delegation led by Deputy James Baker, Assistant Minister for Economic Development, accompanied by Mike King, CEO for Economic Development, David de Carteret, Director of Jersey Tourism and Wayne Gallichan, Director of International Trade & Inward Investment at Locate Jersey visited Hong Kong, Hangzhou and Beijing between 8th and 16th October. Michael McNally, Jersey Post International Business Development Director, Grant Twine, Director of Basel Global and Alan Cox, Principal at Indigo Lighthouse, were also part of the Jersey delegation.

Following an initial visit to Hangzhou in May 2012 by Senator Maclean, Minister for Economic Development, a personal invitation to attend the 4th International Sister City Mayors’ Conference with the theme “City and Leisure” held in Hangzhou from October 11th to October 14th was extended by Mr Shao Zhanwei, Mayor of Hangzhou.

Wayne Gallichan was a member of a China British Business Council delegation which attended the CIFIT Conference in Xiamen in September 2012.

Why have a presence?

Positive meetings have been held with strategic and business development representatives looking to relocate to Europe. It is clear from the above visits that opportunities exist in both financial and non-financial sectors in Hong Kong and China. Traders looking to get into the UK and Continental European market had encountered logistical problems for which Jersey can provide solutions.

The last visit built on the relationships forged during the initial May trip and has proved the value of investing the time in getting to know people and businesses. It is evident that before business can be done in Asia, a relationship based on trust has to be formed and this can only be built over a period of time. Those visited for a second time had themselves carried out more research on what Jersey can offer and those met for the first time had been well briefed by the China British Business Council and the Beijing E-commerce Association.

Jersey Post and the other delegates are now in direct discussions with the 3 largest online retailers in China. This was directly as a result of the initial meeting with Ms Lin Ya of Beijing E-commerce Association. It was a coincidence that whilst in Beijing, one of these online retailers actually launched their English language site as their first step to actively targeting Europe.

The amount of effort required in terms of follow up and exchanging information must not be underestimated and communication follow ups have already taken place. We must also be prepared to undertake further visits, each time meeting more senior people as well as working out the detail with operational representatives (one of the online retailers we met with would like us to present to their CFO and CEO and have also been in contact regarding importation of dairy products from Jersey. A representative from Jersey dairy visited China in November).

The Beijing E-commerce Association has invited Jersey to attend the CIFTIS (www.ciftis.org/en_10/) E-commerce Forum in May 2013 to both have a stand at the exhibition and provide a keynote presentation to members. CCOIC has also issued an invitation to attend an event next year in May. These invitations should not be taken lightly.

The logistics message delivered to the Chinese businesses is a powerful one and together with the advantageous tax position Jersey can offer makes Jersey an attractive proposition when compared to other locations around Europe. Jersey can certainly provide solutions to Chinese/Hong Kong businesses seeking to expand their operations to Europe by providing services from Jersey. It is also possible that high value goods could be exported into China from Jersey.

It is agreed by those involved to date that consideration should be given to having a person on the ground to carry out first level follow-up which is not practical to do from Jersey.

Objectives of a physical presence

To convey the Jersey proposition and create potential business opportunities for Jersey businesses

To promote Jersey as a place to do business – both inward and outbound.

To build on previous relationships and establish new links with representative bodies and businesses and government.

for the e-commerce and online retail sectors with particular emphasis on Chinese and Hong Kong-based online retail businesses looking to expand into the European market, building upon Jersey’s e-commerce expertise and logistics capability that supports online retail operations to the UK and Continental Europe.

To promote Jersey as a destination for Chinese visitors.

Possible Locations

Hong Kong

MK and WG met with Andrew Davis, Associate Director-General Invest HK, the inward investment agency of the Government of the Hong Kong Special Administrative Region (i.e Hong Kong’s Locate Jersey equivalent). A number of Jersey based legal firms had set up an office in HK and it was clear that Jersey could be used for HK businesses as opposed to the current business model using BVI or Cayman. Andrew Davis is happy to continue business dialogue including facilitating a visit by the Chief Minister in Spring 2013. Invest HK offered the possibility of using Invest HK office facilities if a permanent Jersey/Locate Jersey presence was required in Hong Kong. Whilst this represents a viable option, should permanent presence be justified, co-location within the existing Jersey Finance Limited office could offer greater synergies.

Hangzhou

The relationship with Hangzhou Government is getting stronger each visit and should be maintained. We are likely to be invited back again to the 2013 International Sister City Mayor’s Conference and there is also a strong possibility that the Mayor of Hangzhou may visit the UK and Jersey in 2013. Having now visited Hangzhou twice, Jersey is currently regarded as a “Friendly City” and should aspire to becoming a Sister City in due course. At Government level, a tree was planted in honour of Jersey and the Mayor and Vice Mayor of Hangzhou joined Assistant Minister Baker in the planting of the tree. This was clearly a high profile ceremony which received huge media coverage.

Several meetings have taken place in Hangzhou with leading Chinese B2B and B2C and C2C online trading and retail platforms.

An initial visit was made to the Hangzhou Hi-Tech Industry development organisation, a government sponsored operation which looks to help Hangzhou regional businesses expand within and outside of China. It’s an innovation intensive area with technology-focused universities (37) and institutions. This is of interest to Digital Jersey and possibly JT.

Hangzhou is a hugely successful tourist destination and Jersey Tourism has met with the Vice Chief Marketing Department of the Hangzhou Tourism Commission.

Beijing

Meetings and presentations have been made to various legal and accountancy firms on the jersey proposition with emphasis on those which have clients who may be looking to expand their business into Europe and will also promote Jersey as a jurisdiction for Chinese companies wishing to list on LSE and AIM. Significant progress has been made with representative bodies such as Beijing E-commerce Association, Beijing Municipal Commission of Commerce and China Chamber of International Commerce which is of particular relevance to the online retail industry. Invitations have been received to exhibit and present at events in May 2013.

Jersey Tourism has met with the Deputy Director of Beijing Tourism Commission who gave an overview of the WTCF, and provided WTCF’s introduction materials, including information on WTCF’s purpose and their members. Jersey has been welcomed to join WTCF, if Jersey considers themselves a good platform to connect with the industry insiders in China. Jersey Tourism has also met with the China Travel Holidays.

Recommendation

Following discussions with Jersey Post, Basel Global and Indigo lighthouse, all of whom have confirmed a strong interest in continuing to develop a relationship with China, the preferred locations at this stage is Beijing. Apart from being where the Chinese Government is situate, this is where we have gained traction in the e-commerce sector. Shanghai is an option for the finance industry but is covered at present by JFL Hong Kong office.

JFL Hong Kong office does not have the resource to take on Locate Jersey business and preference is currently leaning towards having a mainland China presence.

Hangzhou should remain high on the agenda, especially at Government level and tourism. It is a little isolated from a general business perspective.

The services of China British Business Council (“CBBC”) has been utilised on all 3 visits to China. The levels of service provided and the quality of meetings arranged has been exemplary. It cannot be underestimated that to succeed in a foreign jurisdiction such as China, it is imperative to have local knowledge, guidance, experience and a wide network of contacts. CBBC has eleven offices in China and 13 offices in the UK.

CBBC can provide a “Launchpad” which provides a simple, cost effective, low risk and legal means of having a presence in China, before having to set up an office. Key performance indicators will be put in place for the representative office. A guide to Launchpad is attached.

Resource Implications

The costs are approximately RMB 550,795 (£55K) plus VAT which include an annual management fee to CBBC (RMB 168,000 plus 20% VAT), salary, housing fund and other costs (see Appendix B of the guide). These costs are within the current department budget. There are no manpower implications for Economic Development.

Here are some similar scenarios:

• Scottish Development International (www.sdi.co.uk), were accommodated by Launchpad in Beijing between 1994 and 2006, before finally setting up their own office in Beijing and subsequent offices in Shanghai and Shenzhen

• The City of London were accommodated by Launchpad in Shanghai from 2005 to 2008, Beijing from 2006 to 2007 and Shenzhen from 2006 to 2008. They now have their own offices in Beijing and Shanghai http://www.cityoflondon.gov.uk/business/support-promotion-and-advice/promoting-the-city-internationally/china/Pages/Contacts.aspx

• Guernsey Finance, was hosted by Launchapd in Shanghai 2007-2009. The project manager was Wendy Weng http://www.guernseyfinance.com/key-personnel/wendy-weng/. Wendy is now Chief Representative of Guernsey Finance’s own office.

• Under Launchpad, CBBC hosted the British Council presence in Chengdu from 1997 to 2000

• CBBC also hosted the Welsh Development Agency office in Beijing from 2002 to 2007.

Other Launchpads have included:

• Advantage West Midlands, Shanghai, 2009-2010

• British Tourist Authority/Visit Britain, Beijing, 1997-1999

• Guernsey Finance, Shanghai 2007-2009

• Invest Northern Ireland, Beijing, 2003-2005

• Manchester City Council, Wuhan 1995-2003

• One NorthEast, Shanghai, 2002-2003

It is recommended that instructions be issued to CBBC to commence with a Launchpad option in Beijing.

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