1.Doing Business in China 2014China/India Market Awareness Opposites & Equals Glasgow 22nd March 2013Crowne Plaza - The Roxburghe Hotel EdinburghWELCOME

2. Doing Business in China 2014Long Baijin General Manager Mainland China SDI China Welcome & introduction China Market overview & Routes to market 3. Doing Business in China 2014Agenda Time 09.00Item Registration and RefreshmentsSpeaker/notes09.30Welcome and Introduction China Market overview and business context Sector opportunities Routes to market Exhibitions and missions SDI support / market support Protecting your intellectual assetsLong Baijin, SDI China09.4010:00Long Baijin, SDI ChinaJohn Gray, Murgitroyd Panel members:Panel Discussion 10:20Market research Financial considerations Cultural considerationsJames Brodie, CBBC Colin More, HSBC David Moore, Eastmoore (GlobalScot) Jacqueline You, Cicada Corporation Scott Brown, Redfern Associates Jordi Martin Navarro, Klako Group 4. Doing Business in China 2014TimeItemSpeaker/notes11:20Networking Break11.40Case studies panel session Intro Who we are and what we do How we started doing business in China Dos and donts Assistance & support received Advice, tips and considerations from experiences Q&ACase study participants: Alan Meldrum, Percepta David Branch, Cochran Neil McArthur, LFH Engineering Richard Selwa, Unmanned Production Buoy Ltd.12.50Smart Exporter servicesSteven Turner, Smart Exporter Adviser13.00Networking Lunch13.30One to one sessions with specialist advisersAll speakers 5. China March 2014China Market Awareness Workshop Inverness and Edinburgh March 2014Long Baijin General Manager Mainland China Scottish Development Internationalwww.sdi.co.uk 6. China Key Facts 2013 Population: 1.37 b (est. Oct 2013) Area: 9.6 m. sq km GDP value: US$ 9.0386 tn Worlds 2nd largest economy GDP Growth: 7.7% Per Capita GDP: $6091 (2012), Worlds No. 122 Inflation: 2.6% Unemployment: 4.1% Foreign Trade: $4.16 tn - worlds largest goods trader Exports: $2.21 tn +7.9% Imports: $1.95 tn +7.3% Language: Standard Chinese =Mandarin(Note: According to CIA, Chinas GDP by PPP is $12.26 tn and per capita GDP is $9100)www.sdi.co.uk 7. China Political & Economic Update Reform Version 2.0 by Xi Jinping and the new leadership Continue the theme of political conservatism and economic reform. Key themes: China Dream Deeper pro-market economic reform market-based resource allocation freeing interest rates, exchanges rates, capital accounts Rebalancing investment and consumption rural land reform /property rights of farmers Urbanization to be detailed and demonstrated Anti-corruption by catching both tigers and flies implications! Key issues to address for the new leadership: Sustainable growth; food safety; pollution; property prices; income distribution; anti-corruption; health reform; social security; population policy; the hukou system; rural issues; employment, etc Territory disputes www.sdi.co.uk 8. Why ChinaA market of significant SizeA market of significant GrowthA market of significant ResiliencyA market which has increasing impact on businesses and families across the world - negative or positive (A Year Without Made-in-China by Sara Bongiorni)A market which will invades your territory if you do not invade itStill a global manufacturing base, despite of increasing salary pressureA source of fund and FDIA global market with virtually all major MNCs presentA market that the Scottish Government attaches great importance toA market that you should not ignore and cant afford to ignore!www.sdi.co.uk 9. Scottish Government New China Plan T&IPriority One: Trade & Investment To increase trade opportunities for Scottish business in China and encourage more Chinese investment in Scottish industry and infrastructure Targets Target 1.1: Double the number of Scottish companies (based on 2010 levels) supported to access Chinese markets by 2017. Target 1.2: Increase direct exports to China above the Scottish Governments export target of 50% by 2017 and to exceed this for China based on 2010 export levels. Target 1.3: Double the number of major Chinese investors with a presence in Scotland by 2017 based on 2012 levels. Levers 1. Utilise Ministerial visits to China to include trade delegations and encourage highlevel reciprocal visits to Scotland. 2. Increase the visibility of Scotland as a brand associated with high quality, innovation, creativity and world leading capability across our key sectors. 3. Increase Scottish Development Internationals (SDI) trade support expertise, staff and geographic footprint in China. 4. Support our enterprise bodies to promote the investment opportunities that are available in Scotland and China in the energy and low carbon sector.www.sdi.co.uk 10. SDI Key Sectors Focus in Mainland ChinaSectoral targets Financial Services Energy TAE&CILife SciencesEducation Food & DrinkTextileswww.sdi.co.ukTourism 11. China Opportunities Demographic/BehavouralApproach Over 1.2 b. mobile phone users Home to over 618 million Internet users, 80 percent of it access the Web via their smartphones 55% of Chinese netizens are under 30 E-commerce/online shopping: dramatic growth in the past years Social media important part of life now, e.g. Wechat, QQ and Sina Microblog Rise of middle class - target of world luxury goods suppliers The young consumers trend catching (brand buyers) Change of perception/taste (e.g. whisky) One child policy, though changing and loosening Food safety concern Trust imports: brands, products and overseas education Gift market relations building culture www.sdi.co.uk 12. China E-Commerce (online shopping)With Chinese internet users quickly approaching 600 million, and e-commerce revenue growth (from 2009-2013) growing at 70 percent annually on average, China is on pace to pass the US and become the largest e-commerce market in the world.www.sdi.co.uk 13. China Opportunities Sector Approach (1) Food & Drink: one of the fastest growth sectors Imports grow at 15% in the past five years China estimated to be the biggest importer of F&D by 2018 at 48 b. Whisky and Seafood inc. salmon are top exports from Scotland Textiles: The world's biggest apparel manufacturer with 20 million employees and $1,064 b. turnover. Export at $292 b. in 2013 Top target market of world top brands Tourism: Outbound tourists reach 83 m. in 2012 (against 10 m. in 2000). Worlds biggest consumer of luxurious goods - 25% of the world total, with 2/3 purchased overseas Education: Chinese students going to study abroad amount to over 410,000 in 2013, +3.58% - a market continues to grow year on yearwww.sdi.co.uk 14. China Opportunities Sector Approach (2) Life Sciences: 5.6% of the world market, expected the 2nd biggest market by 2015. Aging population, and universal coverage of medical care to be introduced China healthcare regarded as High Value Opportunity by UKTI, estimated at 250-350m worth of business potentially accessible to UK firms in next few years. Financial Services: No. 1 foreign reserve country - $3.66 tn by Sept 2013 Around $1304 b. under SWF management asset management and overseas investment Business services such as legal and accounting required by Chinese companies for overseas investment Energy: World largest energy consumer and 2nd largest oil consumer Proactively acquiring O&G assets overseas and exploring discoveries domestically Cleantech and energy efficiency opportunities TAE/Creative Industry 1.2 b. mobile phone users & 618 million Internet users great potentials for online games, music, videos China tries to obtain technologies and knowhow for all its key sectors www.sdi.co.uk 15. China Not All is Rosy Challenges and Risks Political and Economic Uncertainties (e.g. Norweigian salmon/Japanese car) Laws and Regulations/Changing regulatory framework Bureaucracy (officials vs civil servants. Do not expect them to serve you as the Scotland/UK government agencies do. It is the other way round!) Language barrier Business culture Guanxi based business culture Hierarchical corporate culture (e.g. in decision making) Yes may not mean Yes or Success of business JV management conflicts Cross the river by feeling the stones of the riverbed - Chinese way Corruption Nationalism/local protection (national treatment is not yet completely there) Competitive market IP Protection (inc. trade mark, design) Swindling/Scamming (no free lunch!) Local Partners/staff/HR issues Resources & commitment demanding Quality of life air polution/food safety/traffic jam And more China is not a market for everyone! www.sdi.co.uk 16. Access to China Market Do you have the resources (financial and human) for the market? It could be medium to long term before you see results Do you have unique selling point(s) Right time for your business and products? Market research Due diligence Visits/trade missions/exhibitions Business meetings/workshops Local partner/agent/distributor identification Export Representative office WOFE (wholly owne foreign enterprise: more popular than JVs now) Joint Venture (equity or Cooperative) M&As Licensing Oursourcing Implications of different entry modes www.sdi.co.uk 17. Scottish Companies Physical Presence in China Bridge of Weir David Ritchie Implements Fresh Catch Glasgow Caledonian University Aggreko Rosti Technical Plastics Howden Hua Engineering Co. Ltd Safehouse Habitats Atkins Score Group Azimuth Caledonian Alloys Ltd Worldmark Clyde Blowers (various operations) Hengan Standard Life Insurance Dundee University Simclar (Tianjin) Ltd. Edinburgh University Aberdeen Asset Management Glasgow School of Art Angus Dundee Glasgow University Aggreko Hengan Standard Life Beijing Cochran Howden Hua Engineering Beijing Shanghai Clyde Bergemann Tianjin Heriot Watt University The Edrington Group Shandong Ian Macleod Ltd Frank Sammeroff KAL Fountain Bridge Jiangsu Logitech JD Wilkie Napier University Kinloch Anderson Shanghai Neogen Europe Marine Harvest NCR (Beijing) Financial Equipment System Martin Currie RBS Michael Bradley Architecture SgurrEnergy Shenzhen William Grant & Sons Skyscanner Wolfson Microelectronics SQA Peak Scientific Standard Life Investments Power Jacks Wilson & Garden TEFL Scotland RBS Verdex Ltd. Weir Group Teknek Wolfson Microelectronics Wood Mackinzie Trespass Elmwood College Twig World Weir Groupwww.sdi.co.ukAnd more through export 18. SDIs Approach to China MarketOutward Opportunities Support Scottish companies to internalizewww.sdi.co.ukCollaborative Promote partnership opportunities in key sectorsInward Opportunities Attract Chinese companies to invest in Scotland for the benefits of Scottish economy 19. SDI Mainland China/Field Support SDI China (Beijing) set up in 1994 SDI Shanghai set up in 2003 Work in partnership with UKTI, CBBC, Scottish Government (Scottish Affairs Office Beijing), etcSmart Exporterwww.sdi.co.ukertneC a cnan F ertneC llaiicnaniiF lanoitanretnI :iahgnahSField Support: Conduct market research Identify business partners & suppliers Advice on market entry strategies Development market visit programme Introductions to business networks, e.g. GlobalScots Followup supportsrewoT efiL anihC :gnijieB 20. China Market SDI Plans (TBC) & Some Key Events Creative Industry & TAE 06-07/14 China Gaming Mission to Scotland 07/08/14 SDI Scottish Gaming Mission to China Joy Shanghai Time TBC Scottish Sensor Mission to China Energy Time TBC 08/14 03/15 Food & Drink 05/14 11/14 10/14 11/14www.sdi.co.ukScottish Oil & Gas Mission to China CIPPE Shanghai CIPPE BeijingChinese Buyers mission to Scotland/European Seafood Show (ESE) in Brussels Qingdao Seafood Show with a pavilion sponsored by SDI Great British Brands Festival (CBBC) FHC Shanghai 21. China Market SDI Plans (TBC) & Some Key Events Financial Services 04/14 Chinese AMC Mission to London/ Edinburgh 10/14 TBC Lord Mayor of City of Londons visit to China Life Sciences 04/14CMEF Shenzhen -Top medical equipment fare in ChinaTextiles 07/14 10/14UKTIs China Luxury Buyers Mission to Scotland Intertextile Fabrics Show in ShanghaiTourism 11/14 TBC 04/14 06/14Scottish golf tourism delegation visit to China China Outbound Travel & Tourism Market (Beijing) International Luxury Travel Market, Asia (Shanghai)Others 03/15 TBCScottish Cross Sector Mission to Chinawww.sdi.co.uk 22. China Food and DrinkDalian Seafood Show in 2013www.sdi.co.uk 23. China Food and DrinkDalian Seafood Show in 2013www.sdi.co.uk 24. China - Oil and GasFM with Oil and Gas group visit Sinopec - 2013 Beijingwww.sdi.co.uk 25. China - EducationFM visit Tsinghua University - 2013 Beijingwww.sdi.co.uk 26. China TextileCHIC 2013 Beijingwww.sdi.co.uk 27. China - TextileFashion show at CHIC 2013 Beijingwww.sdi.co.uk 28. China - CreativeChina Joy 2013 Shanghaiwww.sdi.co.uk 29. China Premier - Li Keqiang visit Scotlandwww.sdi.co.uk 30. Contact UsBeijing Office Initial Contact: Long Baijin Address: SDI Beijing Office, Rm 1006A, China Life Tower, 16 Chao Yang Men Wai Da Jie, Chaoyang District, Beijing 100020, China Telephone: +86 108525 3070 Fax: +86 10 8525 3086 E-mail: long.baijin@scotent.co.ukShanghai Office Initial Contact: Mingyu Ge Address: Scottish Development International, 8F, Tower 2, International Finance Center 8 Century Boulevard, Pudong, Shanghai China, 2000120 Telephone: +86 21 6062 7117 Fax: +86 21 6062 7102 E-mail: mingyu.ge@scotent.co.ukHong Kong Office:Taipei Office:Initial Contact: Fiona Squair Address: British Consulate-General 1 Supreme Court Road Admiralty, Hong KongInitial Contact: Reggie Wu Address: Scottish Development International, 4Flr., No.200 KeeLung Road Sec. 1Taipei City, 110, TaiwanTelephone: +852 2901 3086 Fax: +852 2901 3007 E-mail: Fiona.squair@scotent.co.ukTelephone: +886 2 8723 9975 Fax: +886 2 8723 9976 E-mail: reggie.wu@scotent.co.ukwww.sdi.co.uk 31. Doing Business in China 2014John Gray Director Patents Murgitroyd & CompanyProtecting your intellectual assets 32. Doing Business in China: Intellectual Property Considerations John Gray European and UK Patent Attorney 6 March 2014, Edinburgh Murgitroyd & Company 2014 33. What This Talk Covers Basic introduction to intellectual property (IP) Concerns of UK business Dispelling some myths The Dragon plays catch-up Adapting your IP strategy China available patent types Murgitroyd & Company 2014 34. What this talk covers pt 2 Trade Marks and Chinese transliterations Domain name issues IP Insurance Murgitroyd & Company 2014 35. Basic introduction to IP What exactly is IP? Why are IP rights important? How do I know if I have IP? Unregistered and registered IP rights Murgitroyd & Company 2014 36. China: Principal concern of UK business Murgitroyd & Company 2014 37. Dispelling Some MythsMy technology will be stolen, copied and sold cheaply, possibly by my Chinese partner. Many companies in China are skilled and prolific counterfeiters Correct There is nothing you can do about it Wrong Chinese IP laws are unsophisticated, so protecting IP in China is a waste of time and money Chinas IP laws remodelled on the German/European system and are very comprehensive IP rights in China are of poor quality Patents issued to foreigners are handled by most experienced Examiners and quality is improving. Murgitroyd & Company 2014 38. Dispelling Some Myths (contd)Laws and enforcement mechanisms favour domestic interests Supreme Courts in larger cities are handing down sophisticated judgments EU judges providing training German bus manufacturer was awarded $3M damages and an injunction against Chinese infringer in 2009 Consistency of judgments outside major cities is a recognised problem. 60% of judges have no IP training. This is being addressed Foreign businesses cannot succeed in litigation in China 90% foreign companies litigating in China win their case compared to, e.g. 3040% for foreign companies litigating in US; and at much lower cost Murgitroyd & Company 2014 39. The Dragon plays catch-up First UK patent granted in 1449 and UK-IPO set up in 1852 Concept of IP entirely alien to China as recently as the 1970s First Chinese patent granted in 1985 Chinese Patent Office acceded to all major IP Agreements and Treaties between 1985 and 2001 Chinas emergence as economic superpower reflected in patent filing statistics Murgitroyd & Company 2014 40. Statistics Patent Filings compared to other countries Murgitroyd & Company 2014 41. Adapting your IP strategy Manufacturing Sourcing of parts and components Selling your technology in China R&D Partnering with Chinese companies either in China or at home All demand knowledge of local IP environment and a suitably tailored IP strategy. Murgitroyd & Company 2014 42. China patent types available Invention Patent New and inventive technical solutions relating to a product or a method of producing or doing something. Includes improvements to existing solutions Detailed examination high inventive step threshold 20 year term (3-5 years to grant) appropriate for longer life cycle products Utility Model Patent New technical solutions relating to the shape and/or structure of a product which are functional rather than aesthetic. Methods and chemical compounds are excluded Granted without substantive examination lower inventive step threshold 10 year term (1 year to grant) - appropriate for shorter life cycle products Design Patent New designs relating to shape of a product which distinguishes its overall appearance Granted without substantive examination 10 year term (1 year to grant) Murgitroyd & Company 2014 43. China - Trade Marks First-to-file system Applying to register is very important as China grants vast majority of trade mark rights on first to register not use Plan ahead - get rights on file as soon as possible Register yourselves dont leave it to local agent Transliteration of Trade Mark Trade mark should be registered in English and in Chinese. Check meaning of transliteration and ensure it sounds similar to trade mark. Murgitroyd & Company 2014 44. Transliteration of Trade Mark Murgitroyd & Company 2014 45. Transliteration of Trade Mark - 2 Coca Cola = Ke Ku Ke Le which means allowing the mouth to rejoice. Pepsi Cola = Bai Shi Ke Le which means everything makes you happy. Murgitroyd & Company 2014 46. Domain Names Yes, it is possible to register domain names .com.cn Register through reputable domain name registrant Be aware of scams - example Murgitroyd & Company 2014 47. Domain Names Scam example Dear CEO, We are the domain name registration organization in China. Last week we received an application from someone wishing to register murgitroyd.com.cn. After initial examination, we noted it is same as your company name/trade mark. Would you like to pay us handsomely to register it for you? Murgitroyd & Company 2014 48. IP Insurance Insurance policy can cover the costs of enforcing/defending IP litigation Provides a more level playing field for small/medium sized company vs large company Like any insurance policy, devil is in the detail! Watch out for a policy which requires an opinion from a barrister of 100% prospect of success Murgitroyd & Company 2014 49. Summary Chinese IP laws are well established and comprehensive Enforcement problems are recognised and will improve over time Remember: an Invention Patent has a 20 year term and IP environment is sure to improve markedly within that period and Trade Marks can last indefinitely File your Trade Marks early Give careful consideration to Transliterations Murgitroyd & Company 2014 50. Doing Business in China 2014James Brodie Manager, Scotland and China Business Adviser China-Britain Business Council 51. China-Britain Business Council - Partnering with SDI/UKTI -Edinburgh, 6th March 2014@ChinaBritain 52. Background to CBBC Supporting SDI/UKTI Market Research & Development Cultural Considerations@ChinaBritain 53. Shenyang BeijingQingdao XianNanjingChengduWuhanShanghaiChongqing Hangzhou ChangshaGuangzhou Shenzhen@ChinaBritain 54. Support through regional offices 55. Construction Scotland Learning Journey 56. Bespoke Market Research (through OMIS) Manufacturing in China for long time Building good relationships Long-term approach & patience Working with local staff / team Regionally targeted in North China www.millergroundbreaking.com 57. Chinese Cultural Titbit Relationships = Order 58. No relationships = no order 59. Doing Business in China 2014Panel Discussion: Topics coveredPanel membersMarket researchJames Brodie CBBCFinancial considerationsColin More HSBCCultural considerationsDavid Moore Eastmoore (GlobalScot)Expert tips & recommendationsJacqueline You Cicada Corporation Jordi Martin Navarro Klako Group Scott Brown RedFern Associates 60. Doing Business in China 2014Networking Break Sign up for one to one meetings (13.30 onwards) at the registration desk Bookings taken on a first come first served basis 61. Doing Business in China 2014Case studies panel session: Topics coveredPanel membersWho we are and what we doNeil McArthur LFH EngineeringHow we started doing business in ChinaDavid Branch CochranDos and dontsRichard Selwa Unmanned Production BuoyAssistance & support receivedAlan Meldrum PerceptaAdvice, tips and considerations from experiences Q&A 62. Energy Solutions WorldwideCochran Ltd Newbie Works, Annan, Dumfries & Galloway, UK DG12 5QU.+44(0) 1461 202 111 www.cochran.co.uk 63. Chinese Boiler Currently in Production64Energy Solutions Worldwide 64. Manufacturing FacilitiesCochran head office and manufacturing facilities were established in 1898, covering an total area of 59,000 m2 Manufacturing partnership in Shanghai established in 201165Energy Solutions Worldwide 65. Delivery of London Olympic boilers to site66Energy Solutions Worldwide 66. One big one, One little one67Energy Solutions Worldwide 67. Cochran Timeline 1878Cochran Founded in Birkenhead1898Relocate to current location in Annan1930sFirst Export to PRC1980/90sDedicated Cochran team in PR Regional office, Business grows in PRC to become largest export market1995First overseas company to obtain Quality License from Chinese government2000Sold by Rolls Royce to MechMar (Malaysia), Establish Cochran HK2003Establish JV/ licence agreement with SHBV2010Sold by MechMar to SBHV, JV wound up, OEM agreement established2012Establish Cochran Shanghai Ltd as a WOFE68Energy Solutions Worldwide 68. China is a large country69Energy Solutions Worldwide 69. It requires investment70Energy Solutions Worldwide 70. It is Bureaucratic71Energy Solutions Worldwide 71. - , , && 72Energy Solutions Worldwide 72. Contract is just the start of the negotiation73Energy Solutions Worldwide 73. What have we learned from doing business in China??1. 2. 3. 4. 5. 6. 7. 8. 9. 74Its a BIG country It requires Investment You have to eat Funny food You might have to Drink too much Its Bureaucratic They Speak Chinese The Contract is the Start of the Negotiation You are Never really in Control Talk to People Take Advice Energy Solutions Worldwide 74. Thank you for your time, we would be happy to take any questionsCochran Ltd Newbie Works, Annan, Dumfries & Galloway, UK DG12 5QU.+44(0) 1461 202 111 www.cochran.co.uk 75Energy Solutions Worldwide 75. Doing Business in China 2014 Unmanned Production BuoyRichard Selwa Chairman & Founder March 2014Confidential UPB Ltd 201476 76. Agenda Why did UPB go to China? UPB Product Markets & Drivers Size of Prize Global Supply Chain UK Project FFFA Government Support Tips and Lessons LearnedConfidential UPB Ltd 201477 77. Why did we Go to China? Niche Oil & Gas Company Developer & Producer Mass Manufacturer Capture and Develop series of Marginal or Stranded Fields Why China? Chinese Oil companies China (2.5 billion) International (1.8 billion +) Mass Manufacture Key Parts (2.5 billion)CNOOC Signature with First Minister-Beijing November 2013 Confidential UPB Ltd 201478 78. UPB Product What is it? Economic range 600-15,000 bopd 200,000 bbls oil storage Gas used for fuel Re-usable, low environmental footprint CAPEX and OPEX 1/3 of next available solution Confidential UPB Ltd 201479 79. UPB Product - Applications Marginal Fields Where existing technologies do not allow economic production Economic >3 million bbls recoverable Tail-end Assets Where an existing production system is no longer economic e.g. post FPSO CoP Typically