Pioneering, Wholly Foreign-Owned Company: To be successful in China, your business doesn’t need to be either

There are two reasons why many companies are still hesitant to do business in China.. The first is the fear that there are too many regulations and too much government intervention in their industry. The companies are concerned that their control over the Chinese company is too limited and that they are only used for the transfer of capital and technology. The second is the belief that it is too late to really benefit from China’s state of development in 2009. Many of the multinationals set up shop here in the mid-1990s, and there is some concern that most of the loot has already been divvied up. . . Both ideas cause and should cause some concern, but should not become a reason to stop doing business in China. The following is an example of why there is nothing wrong with moving to China late, in an industry that is under strong government control.

Vossloh AG is a German publicly traded company in railway infrastructure and technology. One of its main products is the steel rail fastening systems that attach the track to the sleepers below. In 2006, Vossloh opened a representative office in China to start its activities here and explore the market. Soon after, in March 2007, Vossloh broke ground on a manufacturing plant in Kunshan, a high-tech industrial development zone on the outskirts of Shanghai. Due to industry regulations, they established their presence through a joint venture with NISCO, an iron and steel industrial giant from nearby Nanjing. Vossloh managed to maintain a stake of around 80%.

Helped by the advantages of settling in a location encouraged by the government Outside of Tier 1 cities in China, Vossloh was able to complete construction of its Kunshan plant in just three months, just in time to start work on some of China’s most advanced rail infrastructure projects. Vossloh’s current and past work in China includes the new high-speed rail connecting Shanghai to Beijing, the Olympic line between Beijing and Tianjin, and the prestigious Golmud-Lhasa railway through Tibet. Even before production began in 2007, Vossloh had already won mega contracts worth €185 million. Demand for fastening systems on the Shanghai – Beijing route alone will keep the factory running at full capacity for most of 2010. The success of this project means that Vossloh will be able to successfully participate in many other infrastructure projects that the Chinese government has planned for the future.

Vossloh’s raid on China It shows that late entry into the Chinese market and industry regulations for establishment should not pose problems for the success of your company. The joint venture with NISCO is working out quite well for Vossloh, as they have found a solid steel supplier in them, one that is just as concerned about the well-being of their business in China as they are. It has also given them the requisite government connections (not to be confused with corruption) to be allowed to bid on the biggest projects, and Vossloh’s 80% stake is very beneficial. His entry in 2007 was based purely on chance. Through his representative office in 2006, Vossloh observed the Chinese market and noted the large number of rail infrastructure projects that were starting up. That alone was the reason for them to set up operations here. The fact that they weren’t alone in this market didn’t stop them for a minute: and it shouldn’t stop you either.