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: SMEs work around travel curbs, long quarantines to persist with China expansion

SMEs work around travel curbs, long quarantines to persist with China expansion

CHINA has been an outlier in maintaining an unrelenting zero-Covid policy, but some Singapore small and medium-sized enterprises (SMEs) are still knocking at its doors, pushing ahead with previously adjourned plans despite the challenges posed by pandemic curbs.

Firms told The Business Times (BT) that the opportunities presented by the world's second-largest economy have driven them to navigate roadblocks to establish a physical presence in China - from setting up a wholly foreign-owned enterprise (WFOE), to putting together a dedicated team of employees on the ground, to working around travel curbs to enter the market.

According to Enterprise Singapore (ESG), the volume of internationalisation activities the agency has facilitated to China has fallen to 70 per cent of pre-Covid levels over the past 2 years. Such activities include facilitating market advisory, organising events, partnership introductions, government advocacy and generating project leads, said Wong Yoke Hui, ESG's global markets director (China).

Meanwhile, the Singapore Chinese Chamber of Commerce & Industry (SCCCI)'s Singapore Enterprise Centre in Shanghai received 1,282 queries from firms interested in expanding into China in 2021. This marks a 50 per cent increase from 2020, though it was still 15 per cent lower than the 1,513 queries received in 2019, before the pandemic.

While interest remains, obstacles to doing business have risen. China has been determined to stamp out Covid-19 infections through mass testing, extensive contact tracing and abrupt citywide lockdowns, while foreign travellers entering the country face extended quarantines that can go up to 21 days.

Strengthening on-the-ground presence

For Christopher Lim, chief executive officer (CEO) of software robotics firm Glee Trees, his plans to incorporate a WFOE in 2020 were initially stalled by the pandemic. Stuck in Singapore, he called China-based corporate secretarial service firms for help, only to be told that he needed to be in Shanghai to verify documents and prove the legitimacy of his company.

In May 2021, Glee Trees managed to obtain a free virtual registration address with assistance from SCCCI's Singapore Enterprise Centre in Shanghai. This allowed it to remotely set up its WFOE in Shanghai.

"Setting up a WFOE assures our Chinese customers and partners that we will be there for the long haul. We can better support them in resolving technical issues, and a WFOE also enables the flow of transactions in yuan," said Lim.

Lim also eventually secured a 3-month visa to enter the country through his participation in the China International Import Expo in November 2021. He took the opportunity to source for an appropriate location for Glee Trees' physical office, eventually settling for a space within Shanghai's Changyang Campus, the city's first downtown artificial intelligence (AI) park.

Similarly, businessman Wei Chan chose to enter China amid the pandemic so as to tap its advancements in AI and machine learning. In late 2020, he and a Singapore partner remotely set up an information technology (IT) firm in Suzhou offering integrated digital solutions and robotic process automation for SMEs, and hired 10 Chinese employees via Zoom.

It was only when Chan entered China in June 2021, however, that he realised his remotely assembled team fell short of expectations.

"You can never fully size up a person's character through Zoom. Some of my employees claimed that they had worked in certain multinational corporations, but the work they presented to me was not up to par and they were sitting idle in the office," Chan said.

He ended up extending his stay in China to 6 months in part to "restructure and stabilise" his newly formed team. By the end of his trip, Chan had let go of 4 of the 10 employees he had previously hired.

Moving around China was hardly a walk in the park, either, with travellers made to adhere to strict health protocols. To avoid being caught in a snap lockdown, Chan stayed clear of some cities that had reported a surge in Covid-19 infections.

"For commutes between certain affected cities such as Wuxi, Jianhu and Nanjing, we had to do a swab test 48 hours before the trip. Hotels and eateries would also check for the status of our health and travel code before they allowed us in," said Chan.

China's travel restrictions, quarantines and document prerequisites continue to be the main challenge for Singapore SMEs looking to enter the market, said SCCCI. Apart from being subjected to a 14+7 days quarantine period for most Chinese cities, foreigners also need to apply for an official invitation letter via a China-based entity before travel, the chamber added.

The existing regulations have pushed semiconductor equipment maker NexGen Wafer Systems to prioritise building up a core customer support team on the ground to better meet its customers' needs.

To support its growing sales in Shanghai in the last 2 years, the firm increased its number of full-time Chinese employees from 1 to 4, NexGen's CEO Cheung Ting Kwan said.

Before the pandemic, NexGen relied on a cross-border resource-sharing model, sending employees from its Singapore headquarters to China to provide after-sales support to clients there. It also has offices in the US and Austria.

"Covid-19 made us realise that we can no longer easily move resources in and out of China, or even within China. We need a dedicated team for the market," Cheung said. Armed with a bigger team of full-time staff today, NexGen plans to incorporate a WFOE in China by end-2022.

Online channels still effective

For some firms, digital platforms remain the first and easiest touchpoint with the market. "While some companies have become more cautious in setting up entities in China, with some delaying their expansion plans, we are also seeing more businesses entering China via online modes," SCCCI said.

In response to China's changing business environment, ESG's Wong said the agency has been intensifying efforts to help companies "build mind-share and enhance networks" through digital means such as e-commerce and virtual missions.

Last July, ESG organised the first virtual food trade mission to Chongqing, which allowed Singapore food companies such as Yeo Hiap Seng, Prima Food, and MWD Beverages to connect to in-market distributors.

Said Jonathan Hui, director of MWD Beverages, which sells premium beverages such as vitamin-enriched drinks: "While we didn't secure any Chinese customers from the virtual food trade mission, we managed to get valuable market exposure and increase word-of-mouth of our products." ESG also facilitated 4 virtual runs of its China-Singapore Global Innovation Alliance Acceleration Programmes in 2021, where over 30 startups and tech SMEs - including Glee Trees - connected with potential partners in Beijing, Shanghai and Shenzhen through business matching sessions.

While entry into the market remains "limited", ESG's Wong noted several areas that offer good opportunities for Singapore companies: China's drive towards an innovation-led economy; the green economy and sustainable development; the rapid digital transformation of its economy and industries; and its shifting consumer landscape, which sees growing demand for healthier and elderly-friendly food products.

Time and tide wait for no man

Still, SMEs told BT that there is only so much one can do remotely when going abroad, especially when entering a market for the first time.

There is also little time to waste for a market as fast-moving as China, where technological advancements and innovations evolve at lightning pace.

Said Kurt Wee, CEO of biotech firm Celligenics: "In the span of 2.5 years, the amount of funding pivoted into China's biotech sector has been tremendous. So despite the quarantines, we decided that we would still try to press ahead."

In the 2 years before the pandemic struck, he used to travel to China every 3 to 5 months. Last November, he returned there on a 3-month trip to strengthen existing partnerships with hospitals and further in-depth discussions on pre-clinical trials, protocols and intellectual property.

He was also able to finalise the acquisition of a commercial property in Chengdu, where Celligenics will build its good manufacturing practice (GMP) facility. Celligenics provides solutions using breakthrough stem cell technology.

"When you're there, you can then better understand the development of the market, the pulse of the business sector, and the constantly evolving regulations," said Wee.

Likewise, delaying his IT venture into China was never an option, says Chan of Pine Garden's Cake: "Time and tide wait for no man. Of course it's difficult, but my take is that if I can get through this, I can get through anything."

Source: The Business Times © Singapore Press Holdings Limited. Reproduced with permission.