The timing couldn't have been better for Jocelyn Chng (pictured). The managing director of Sin Hwa Dee Foodstuff Industries, a Singapore-based sauce manufacturer, is about to expand her business into China - just as the country has become the 143rd member of the World Trade Organisation.
The home-grown SME has, since 1997, been exporting its growing range of Chinese and Asian sauces and food mixes to countries in Southeast Asia and Europe, but not yet to China. With the world's biggest country now in the WTO and pledging to play by international rules, Sin Hwa Dee regards this as an opportune time to move in. It has engaged a consultancy firm to do a feasibility study on entering a market that pundits predict will be the world's next economic powerhouse in a matter of years. The company's options include moving in as a manufacturer producing and selling its products there, as a trader importing products for distribution, or as a retailer setting up retail and franchised outlets.
"A lot of rules and regulations will be eased. A lot of industries are moving in and it will be easier for us to work, to get services like packaging and machinery. Now because of outside influence, people are more aware of quality and value add. So it's a good time to move in," says Chng, 34, who has been introducing innovative food products including a Hainanese chicken rice mix since taking over the family firm in 1989.
"With WTO, we see a more urgent need to move in - as soon as we can", she says. "There will be a lot of opportunities as China opens up."
The last point at least is a view that none would dispute. Seksun Corp, a Singapore-listed precision metal components manufacturer, is setting much store by its China operations.
Company chairman Felix Ong expects turnover and profit contributions there to "grow significantly" after the country's accession to the WTO.
The market is so huge, "you have to be there," says Ong. Another reason for Seksun's presence in China is its strategy to be near its customers, a major one being Seagate, one of the world's leading disc-drive makers that has two plants in the country.
"China was very important because everyone knew it would join the WTO, but nobody knew when. So we moved in early," says Ong, who first began studying the potential, including joint-venture possibilities, in the country 11 years ago. In the end, because of complications over joint ventures, Seksun decided to go in alone. Its first plant in Suzhou, near Shanghai, commenced operations in August 1998 and has reached full capacity.
Its second plant, a larger one at 16,000 square metres and one kilometre away from the first, is scheduled to start operations this month or next. The total investment in this second facility including land, construction and machinery is expected to amount to S$10 million (US$5.44 million). Land cost for this plant, at about S$4 million, is inexpensive, but Ong predicts a jump in land value there over the next year.
So will there be a flood of foreign players rushing in to carve out concessions in a 21st century El Dorado? In a country that is powering ahead relentlessly without regard to the economic doldrums all around the region, what bonanza awaits Asia's entrepreneurs?
Senior Chinese officials, including Long Yongtu, the country's top WTO negotiator and now its Vice-Minister of Foreign Trade and Economic Co-operation, have said that there would be new economic opportunities, particularly for countries in the region, as China opens up its markets.
Dora Hoan, president of the Association of Small and Medium Enterprises in Singapore, agrees: "There will be huge opportunities for Singapore and the world. China will gradually liberalise certain industries like insurance, pharmaceuticals, finance and retailing. Policies and regulations will be more transparent and this will also create opportunities."
Obviously, MNCs would be keen to produce in a low-cost country such as China for supplies to their global market as well as the Chinese market. "Leading mobile phone manufacturers like Motorola and Ericsson are already setting up several plants in China while shutting down manufacturing operations in other parts of the world," says Amelyn Chong, a Singapore-based management consultant at A&L Business Consulting, which advises SMEs on expanding their businesses. "In this region, companies based in high-cost countries like Singapore, Japan, Taiwan and South Korea will enjoy more meaningful cost-savings - compared to those in the less developed Asean countries like Thailand and the Philippines - from China ventures."
The Chinese government is perceived to be more inclined to admit MNCs and big foreign companies. "They don't have so much time to waste on smaller firms," says Ma Seen Soon, a China business specialist and CEO of Enterprise Innovation Consultants, a Singapore-based SME consultancy that has already made inroads into China through its associates in Beijing. "They want the big boys in insurance, banking, automobile, telecoms."
But thousands of foreign entrepreneurs are in China now. "My company is a classic example," says Charlie In, president/strategist at APEC-CARE, a competence-enhancement systems firm that helps organisations enhance their employees' competence. "We are comfortable with our 15 years' presence in Singapore and [now] we have a full-fledged operation in China."
Roger Khoo, director of Acts Interiors, an interior design consultancy in Singapore, is this month leading a trade delegation under the auspices of the Young Entrepreneurs' Organisation (Singapore chapter) to Shanghai to investigate trade and business prospects there. "Increasing trade liberalisation and China's WTO status could potentially offer new opportunities in terms of market expansion or new business developments," he says, "though it is still too early to predict for now."
Not all the members in the delegation have an immediate intention to start up businesses in China; they just want to be there to study, observe and network for the purpose of "making a more informed decision later on", Khoo says. Some will be there purely to get a feel for the market and to be prepared should future opportunities arise.
China's WTO entry "provides a window of opportunity for us", says Kho Han Mien, CEO of 3ntity.com, a Malaysian e-commerce solutions provider. He sees the company's market potential in China as "immense". While it is still in the early stages of moving into China, 3ntity believes the country's 20 million internet users have an "insatiable need for internet applications". That, and the increasing foreign investments in China, have encouraged Kho to "explore market opportunities" there.
In December the Young Entrepreneurs Association of Malaysia, predicting "heaps of business prospects for Malaysian businessmen" in an emerging China, organised a business study trip to Yiwu and Guangzhou. Kenny Sim, honorary treasurer of the association, urged Malaysian entrepreneurs to venture overseas, partnering with their foreign counterparts "for a bigger share of the borderless market".
Among Thai business owners, most have had a potential China strategy from birth, thanks to Chinese ancestry, family connections and language skills. Companies such entertainment group GMM Grammy already have a nice foothold in Taiwan. Now Grammy plans active expansion into China selling Mandarin music recordings.
By far the most aggressive Thai player in China is Charoen Pokphand Group (CP), Thailand's biggest conglomerate and one of China's largest investors. Centred on agribusiness, CP was the first foreign multinational to invest when China opened in the late seventies. Now CP has operations in 29 provinces there - doing business in everything from feeds and seeds to livestock and biotechnology. CP joint ventures are involved in services such as banking and broadcasting as well as all kinds of products: auto parts, motorcycles, luggage, petrochemicals, leather, rainwear, pharmaceuticals, paints and beer.
CP is a major player in China's modern retail sector, with plans for rapid growth of its current operations, which include two Makro discount markets, four Lotus Supercenters, 7-Eleven convenience stores and Shanghai's huge new Super Brand Mall.
Closer to China, the Hong Kong Productivity Council (HKPC) organised a study tour to booming Shanghai in December. The visit helped Hong Kong businesses have a better understanding of the changes China's WTO membership would bring, says Vincent Li, general manager of the Enterprise Enhancement Services Division of the HKPC.
"They were able to meet with key people that as an SME you usually don't have access to." To compete effectively after China's WTO entry, "Hong Kong enterprises must establish their own niches and turn them into sustainable competitive advantages", Li says.
Seeking out niches and real opportunities albeit in a land of much promise will not be easy. And keeping a business going - once it is set up - in a fast-moving market will not be a breeze either.
Yong Kwek Ping, CEO of Inventis Shanghai, an IT solutions and software contract manufacturing company, says he was "totally surprised to see how fast the canteens of Shanghai Jiaotong University changed from shabby and dirty places to modern food courts, with external caterers supplying the food. The students no longer use their iron rice bowls locked in their small lockers near the canteens.
"If you know that there are thousands of universities in China, you will know the opportunities and all the universities are improving their facilities or plan to do so now." Inventis Shanghai has Japanese and Singaporean capital. Yong aims at taking the company public as China opens up "sooner or later".
He says the business opportunities are real and not exaggerated. "China in many ways (for example, in infrastructure and education) obviously is far behind Singapore, but these 'lags' are precisely the business opportunities for Singapore."
Khoo of Acts Interiors says there are three areas that entrepreneurs can tap into: research and development, outsourcing and the education market.
"China has many researchers to offer and they cost much less than [Singaporean] researchers. Even government-linked research agencies in Singapore are tapping into the pool of research talent. This will be a good alternative for SMEs to get into their own R&D activities without having to burn a hole in their budget," Khoo says.
There are opportunities in outsourcing, particularly for manufacturing/production "where there is clear cost advantage and assuming quality control meets standard requirements. However, IPR [intellectual property rights] issues will still constantly be of primary concern", he says.
The education market, says Khoo, will be sizeable, particularly for courses offering English language and computer studies. "When more MNCs and TNCs [trans-national corporations] move in, the demand for better-trained staff equipped with these skills will increase."
APEC-CARE's In says: "Foreign players should re-examine what they can bring to the market... The rapid growth areas are in human resource development especially entrepreneurial development, hospitality/healthcare, info-telecommunications, banking and insurance."
Chong of A&L Business Consulting sees opportunities in the cheap, but relatively unskilled, labour market, the vast consumer market, which is restricted but opening in stages, and cheap land and buildings, mainly in the less-developed provinces. "Until the Chinese workers acquire higher skills, the influx of foreign companies would be mainly low-end manufacturing ones... In times to come, when labour costs rise as a result of labour demand outstripping supply, and as worker skills improve, capital intensive/higher-end manufacturing such as high-precision engineering/manufacturing will have to replace low-end ones. When the Chinese people become wealthier and more affluent, higher-end service industries such as insurance and fund management will see potential there," she says.
Those businesses that are already in China will also have more opportunities as the country opens its market and more foreign companies come in. Viz Branz, which has been marketing instant cereal products in China for 11 years, sees a big market in coffee brewing. It is selling coffee throughout Southeast Asia, but not in China.
"With more foreign arrivals, the Chinese will become aware of more than what they are used to now," says Tan Kok Hiang, CEO of Viz Branz, a regional cereal and beverage products manufacturer. "For example, the Chinese are tea drinkers. Now there are a lot of Starbucks in Shanghai and Beijing and they learn the concept of sitting in cafés and drinking coffee." Viz Branz smells opportunity here. "It gives us another prong to attack," says Tan. Also, he see more prospects and envisages the company operating in a more structured environment.
But opportunities are not expected to be available all at once. They will come "slowly and incrementally", says Ma of Enterprise Innovation Consultants. "The Chinese government has to evaluate what sectors to open up and how much, how fast."
But Ma says there is still much to be done in the way of infrastructural improvements and updating of existing laws. "New laws are coming soon on the listing of companies, the approval of foreign companies that can operate in China and the shareholding that foreign companies can hold in Chinese companies," he says. The Chinese also had to change their attitude towards foreign companies.
Viz Branz's Tan agrees that much is still to be done before China can claim to be an open economy. "There are many restrictions, the infrastructure is not there, the legal system is unique, the financial system is not proper, the tax system is also questionable," he says.
But Sin Hwa Dee's Chng is unfazed, saying a lot of infrastructure is being built. "If we were to open a plant there, we don't have to worry so much about roads, cables, infrastructure as in the past. Things are moving very fast - even hygiene standards are improving," says the innovative food entrepreneur, who recently launched her instant chicken rice balls. In time, she hopes to see more than her soya sauces in China's supermarkets.