The Bilateral—A CCBC Podcast

China is on a globally unprecedented mission: to green its economy, to broadly increase quality of life for its citizens, and to create a sophisticated, fair and modern market for business. At the macro level, these goals would inspire increased confidence from most foreign executives seeking to trade and invest in this complex landscape – but what are the on-the-ground commercial implications for companies operating in these shifting tides?

CCBC and PwC China have co-authored a report which seeks to unravel that question through the lens of Environmental, Social and Governance (ESG) guidance for Canadian organizations in China. Tune in to the latest episode of The Bilateral with co-host Noah Fraser, Managing Director, China, CCBC for a discussion of the findings of this critical research with co-author Callum Douglas, Beijing-based director of ESG for China and APAC for PwC.

To wrap up our three-part miniseries on the 14th Five-Year Plan, CCBC Managing Director China Noah Fraser interviews his counterparts at the US-China Business Council (USCBC) and China Britain Business Council (CBBC) — Matt Margulies, Senior Vice President, China, USCBC, and Tom Simpson, Managing Director and Chief Representative, CBBC — on the eve of the conclusion of the Two Sessions or “lianghui.” The conversation dives into the parallels and divergences between our three bilateral relationships, and move into practical takeaways from the five-year plan and the Two Sessions, including the real meaning behind those GDP growth targets, foreign investment negative lists, financial market liberalization and much more.

This three-part miniseries is sponsored by Neo Performance Materials.

Next in our awards miniseries is Viva Naturals, Silver winner in the Outstanding Member category. This episode features Sarah Kutulakos’ conversation with Candice Yin, who handles China e-commerce for Viva Naturals, a Toronto-based provider of vitamins, supplements, and wellness products. Viva was established in 2011 and started exporting to China via cross-border e-commerce in 2017. The company’s growth has been amazing.

Key takeaways from Candice:

• A successful Chinese e-commerce strategy can allow a small Canadian company to compete on a global scale. Viva’s China growth has spurred new co-manufacturing in Mexico for organic food for the Chinese market, an expanded fish oil processing plant in Canada to meet growing demand, and doubling of Viva’s headquarters staff.
• Since the 2017 China launch, annual sales growth ranged between 56% to 300% per year.
• How they knew it was the right time to go to China.
• How cross-border ecommerce can truly be a “China light” strategy. Pre-pandemic, Candice was only traveling to China 1-2 times/year and Viva’s CEO would go only once every two years. Their third party TP handles all the in-China details for Viva’s flagship stores on both TMall and JD. Because they are on the cross-border platform, packaging is exactly the same as in the US and Canada.
• Promoting product, using stars and influencers using livestream, including their criteria for choosing, and how a particular influencer sold >10,000 units in five minutes!
• Although they sell many products, fish oil and chia seeds are their leading products to drive traffic.  
• They plan to diversify to other countries. The US is Viva’s largest market (60% of revenue). China is #2 and surpassed Canada in 2020. Europe is next followed both other Asian countries, including Hong Kong, Taiwan, and Singapore.
• Recommendation: CCTV National Treasure, found here. 

This multi-part miniseries is sponsored by SnapPay.

Next in our Business Excellence Awards miniseries is Canada Goose, Gold winner in the Outstanding Member category. This episode features a conversation between CCBC Vice Chair Scott Brison and Dani Reiss, President and CEO of Canada Goose, at CCBC’s AGM Business Forum in the fall of 2021. Scott and Dani cover a variety of interesting topics, including:

• Canada Goose’s Human Nature initiative and its mission to “keep the planet cold and the people on it warm.”  
• The December 2018 opening of the first Canada Goose store in China, and how the business has grown significantly despite the headwinds of bilateral relations over the past few years.
• How people-to-people ties trump politics, and the strength of the Canadian brand, in China and across the world.  
• Canada Goose’s methodical and thoughtful China entry strategy, choosing to go direct to consumer, and running China from China, with a local team which understands China better than anyone at HQ.
• How important IP protection is for a brand based on authenticity. The company tackles counterfeit product where the clothes are made and sold, by raiding locations, training border agents how to detect fake goods, and helping consumers understand how to buy authentic Canada Goose products.
• The complementary role of bricks-and-mortar retail vs online. Canada Goose had 18 stores in China at end of 2021, and in some cities, the cold rooms in their outlets help consumers experience subzero temperatures for the first time.
• Teaming up with Chinese designers for collaborations to make products that are hard to come by, using it to create more demand than supply.

 This multi-part miniseries is sponsored by SnapPay.

Radley Mackenzie is the founder of SinoSports Development in Toronto, which received the Bronze Award in the education category at CCBC’s 2020 Business Excellence Awards.  SinoSports combines education and sports, arranging camps, coaching, and recruitment of Chinese athletes to Canadian private schools.

Key takeaways from Radley:

• Sports help Chinese kids to be more well-rounded, something the traditional Chinese education system lacks.
• Drivers of sports development in China include top-down factors from government – it has benefits for public health and helps youth build character, grit, and leadership skills. Bottom-up drivers are parents recognizing the benefits of sports for their children.
• As with many Chinese sectors, there is a dizzying array of impressive numbers to consider. The National Development and Reform Commission has invested US$1.4 trillion into sport, including facilities and infrastructure. Youth sports participation was a $53b industry in 2018 and is growing 14%/year.
• People are watching sports on tv and on their mobile phones. A Douyin short video clip with ice hockey centre Connor McDavid did relatively poorly, only having 13 million viewers. Game 4 of the Stanley Cup had 60 million views, more than all the combined views in the US.

Rapid-Fire Questions:

• Most popular sport in China? Basketball, with 600m fans and 300m participants. Soccer and swimming are also popular. Winter sports are growing, with more than a million figure skaters, and 20 million ski visits in 2019. Only about 10,000 people play hockey, but they are a sought-after demographic.
• Best-known professional athlete: Basketball player YAO Ming.  
• Recommendation to better understand China – a book by Peter Martin called China’s Civilian Army: The Making of Wolf Warrior Diplomacy.

This multi-part miniseries is sponsored by SnapPay.

Cyndi McLeod, CEO, Canada, for Global University Systems, was CCBC’s 5 at 50 winner in the Alumni category. Cyndi is an expert in strategic international partnerships and international education, and she has worked in both public and private education. Cyndi started engaging in China early, leading the way in British Columbia’s international education efforts back in 1999.

Highlights from Sarah’s conversation with Cyndi:

• Among her favourite exchange programs: training of Chinese respiratory therapists and of front-line customer services service employees for the 2008 Beijing Olympics.
• Cyndi has also been an education entrepreneur, including in early childhood education. She mentions the different clockspeed of Chinese entrepreneurs – in edtech, for example, if you can’t deliver a return in two months, it won’t work.
• Shifts in government priorities have a big impact on all levels of education. There is an ebb and flow of freedom versus control as industries evolve. You have to anticipate changes and stay ahead of them.
• She misses trade missions and describes how she used them to build bridges with Chinese and Canadian colleagues. You need to have a really good interpreter to help you get the most of these. Cyndi also recalls the 2019 CCBC Women’s Mission and its visit to Shanghai Disney.
• How to transition seamlessly between cultures. She’s had great Chinese mentors and staff around her. They were especially helpful in helping her understand government policy in her sector.
• She talks about the most unique foods she’s had to eat in China, and that while she always drank her own baijiu at banquets, there is definitely less social drinking than in the past. It was always a good source of laughter and camaraderie.

This multi-part miniseries is sponsored by Manulife.

Joe Ng, Founder and Chairman of The JNE Group of Companies, is a winner in CCBC’s 5 at 50 Entrepreneurs category. He founded Joe Ng Engineering in 1980, offering engineering design and consulting services to large steel companies in North America. When the steel industry went into a rut during the 1982 recession, he had to look elsewhere for business and explored China’s potential.

Key takeaways from Joe:

• His 1982 visit to China was a small step that ballooned into three 10-year expansion plans over 30 years. He noticed China’s Five-Year Plan but figured his company was too small for five-year plans, thus the 10-year plans.
• His first 10 years involved matching China’s needs with Canada’s capabilities, making use of Canadian factories idled by the recession by moving them to China. This involved taking apart a plant in one country and reassembling it in another. All three plants are still in operation.
• In his second 10 years, he worked on infrastructure projects enabled by Canadian development financing – projects that brought benefit to Canada by requiring purchases of Canadian products.
• As China developed, its needs changed, and in the third 10-year plan, he found a need for Canadian project management on Chinese-led international projects. Canadian engineers could communicate and better understand safety and process requirements.
• How to develop good business relationships (and not drink too much maotai) – JNE became well-known for only accepting projects that yielded adequate return. This earned him the respect of his counterparts. It’s crucial to really understand your bottom line going in. Don’t fall into a trap of losing money the first time; there will be no second time.
• Philanthropy he’s most proud of – endowing the JNE Chair of Infrastructure Design at McMaster University.

Ron Ball is a winner in CCBC’s 5 at 50 Entrepreneurs category. Now retired, Ron founded the Escalator Handrail Company, later renamed EHC Global, in 1977 in Oshawa, ON, with only one employee, and his success sets a great example of how dedication and commitment can contribute to the Canada-China relationship. In 2018, Ron became one of the few Canadians to receive the prestigious Shanghai Municipal Government Magnolia Silver Award.
 
Highlights from Sarah’s conversation with Ron:

• Any of our listeners who have been to China know just how many escalators there are (and thus how many handrails are needed). Big drivers of demand for escalators: malls and transit (bus stations, airports, subway systems). EHC’s expansion into China in the 1990s was a classic case of following customers into the market. Now 75% of the world’s elevators and escalators are built in China. EHC is a mid-size global company, with operations in 15 countries and manufacturing in Canada, Germany and China. 60% of global sales are at EHC’s Shanghai operation.
• When the Asian financial crisis hit in 1997, Ron moved to China to take charge there, but EHC’s headquarters stayed in Canada. Ron remained living in China for more than 20 years. Even though the market shifted to China, Canada benefited greatly by this arrangement, with stable employment in Oshawa, ON, including keeping the R&D operation at headquarters. Early in the Canadian operation EHC exported a lot, especially specialty items. Keeping R&D in Oshawa was partly for intellectual property (IP) reasons but also because Canada has better engineers.
• Ron attributes his success as a CEO in China to having strong soft skills – it’s important to be tolerant, patient, and open-minded.
• EHC was afraid of having its IP stolen in China, but that didn’t happen. Why? At first they only brought in old technology; it wasn’t until 12 years ago that EHC brought its best technology to China. When it did, EHC took critical steps – setting up a separate manufacturing plant site with a cadre of employees who had been with the company for more than 5 years, having a high level of security, and being very careful with documentation. Raw material shipments were sent first to a separate warehouse where all identifying information was stripped off. They also gave confidentiality bonuses – 20% pay increase, identified as a confidentiality bonus, so that it would have merit in labour court in China.
• EHC’s company culture has been a huge strength. What does EHC do differently than a typical Chinese company? EHC has strong HR leadership, pays well (not exorbitantly), treats people well, and this results in much lower turnover than average. The factory is highly effective and efficient – equal to or leading their global operations. They treat people like family, and they respond with loyalty.
• Advice to a company considering doing business in/with China today? Ensure there is a market for your product in China. Don’t look for low cost labour. Hire good advisors (accounting, legal, etc.).
• Ron describes the COVID-19 quarantine experience in returning to China last year.

This multi-part miniseries is sponsored by Manulife.

Jennifer Fang, Managing Partner, Highnoon Capital & Consulting Inc, is CCBC’s 5 at 50 winner in the Immigrant category. Jennifer has long and deep business experience helping multinationals in China (GM, JP Morgan & Chase, BMO, PwC), and has devoted her career to facilitating the two-way capital, people and business collaborations between Canada and China. Key takeaways from Sarah’s conversation with Jennifer:

• Early exposure to Canada as a student in China had a big impact on Jennifer, back in the 1990s. She chose UBC for study and ultimately immigrated to Canada.
• At GM Canada, Jennifer was a member of the founding team that established GM’s joint venture in Shanghai. The Buick minivan still dominates the Chinese market today, and Shanghai GM is GM’s most profitable subsidiary, as well as the largest JV in China. She cited GM’s JV with SAIC as a case study for success, and few know that it is also a Canadian success story, as GM Canada originally shipped parts there. Among the reasons for success: good culture fit and quick, effective localization. GM also stayed for the long haul and didn’t pull out in the dark days. This now pays benefits in China’s growing electric vehicle (EV) market.
• Jennifer laid out a four-point strategy framework for deciding on a JV vs. a WOFE subsidiary.
• What is China like for a Canadian company entering the market today? “The beauty and the beast.” It’s like a deep ocean with abundant wealth and opportunities (the beauty), but it’s also very challenging and complicated environment to navigate (the beast). A company needs to use a holistic strategic planning process, know what it wants, find the right partner, recruit the right team, and focus on the post-deal value creation process. Key questions to ask:
  • Is it possible to set aside a pool of capital for China possible? How much is prudent?
  • Are there any showstoppers?
  • What is the value of China to the company’s long-term success?
• Canadian companies can’t be complacent. Customers want you to have global capability, including China, and if you don’t, you can’t compete. And China requires hard-edged competitiveness. 
• We need to generate more awareness of Canada’s brand equity in China. When a Chinese entrepreneur is asked to describe Canada and answers “stability, multicultural, talent, innovation,” then we’ll know we’ve done it right.
• Key lessons learned: 1) Commit for the long term or don’t bother. 2) Need full support from top executives, plus the board. 3) Build bench strength in China. 4) Help is available via a toolbox of resources (including CCBC).
• What sectors are most welcome now for Canadians to develop business with China? Healthcare/care economy/retirement services, high-end/advanced manufacturing, EVs, and hydrogen cells.

Hon. Jack Austin is the Lifetime Achievement Award winner in CCBC’s 5 at 50 initiative. Jack’s nomination describes him as “likely the longest serving person in both public and private life in building Canada’s modern relationship to China,” active in one or more capacities from 1970 to the present time. He has done so in four different domains: diplomacy and government, legal practice, corporate leadership, and academic leadership.

Key takeaways from Jack:

• The impetus for Canada’s recognition of China back in 1970 was to involve China in the United Nations and help it become a supportive player in global trade, governance, etc. China was very poor in 1970 and unlikely to become an effective global trading country for several decades.
• Early commercial agreements focused on capability building, including oil drilling and recovery, creation of modern industry, and developing a tax system.
• Jack relates his experience with a whole series of Canadian and Chinese senior leaders over 50 years.
• He opines on what a future Government of Canada should do to forge a bilateral relationship that works for Canada, following resolution of the current diplomatic difficulties.

This multi-part miniseries is sponsored by Manulife.