May 2005
Would your show work in China?

The Chinese economy is exploding, and the hype surrounding the market is difficult to ignore. Does the economic expansion translate to big bucks for U.S. show organizers?


By Heather Kirkwood

Considering taking your show to China? If not, you could be missing an incredible opportunity. Marketers from across the world are salivating over the opportunities the Chinese market represents, and many European and Asian show organizers are already in the market. And why not? It’s hard to overlook the potential of a market with one-fifth of the world’s population and a consumer middle class that grows annually faster than the populations of most countries.

China has been called the sleeping giant. But if China spent the last half of the last century sleeping, than today the giant is taking a morning stretch and flexing its economic muscle — growing GDP at a rate between 7 and 9 percent annually over the last five years. American imports from China totaled more than $210 billion in 2004 and exports more than $34.7 billion. To meet the demand for all this trade, the exhibition industry in China is growing just as rapidly — 20 percent annually, according to the Chinese government. 

 And foreign show organizers are already realizing success there. VNU, a Netherlands-based trade show organizer, is well entrenched in China, organizing 22 shows and maintaining two in-country offices. But it’s a success story that comes from humble beginnings, says Michiel Kruse, Director, VNU Exhibitions Asia (www.keylong.com). When the company first ventured into the Chinese market in 1998 with an agricultural show, the project was a flop. Inexperience with the Chinese market and communication between VNU and its government partner resulted in a less than successful event.

But the promise of the Chinese market was too great to leave behind, so in 1999 VNU formed a partnership with Keylong, a private-venture Chinese show organizer based in Shanghai. Together they produced two shows, CRC The China Retail Conference, originally produced by Keylong, and PetExpo, a show VNU brought from Europe. This time the match was a success — so much so that VNU decided to go all the way. After a year and a half of negotiations and paperwork, VNU was given permission to form a full joint-venture company with Keylong. The company’s first office opened in Shanghai in 2001 with 18 employees. Today, the office has a staff of 85 and a branch office in Guangzhou.

The promise land
It’s easy to understand why VNU didn’t let its initial experience in China deter the company from further investment. China has the attention of show producers from around the globe. Executives from Wall Street to Fleet Street are keenly interested in doing business in China — a place with the potential to be a market unmatched by any they’ve ever known. China is quickly becoming an economic powerhouse in the global economy. Thousands of multinationals from around the world are pouring money into the Chinese market, eager to take advantage of both cheap labor rates and the world’s fastest-growing source of middle-class consumers.

Today, China is the world’s manufacturing center. It produces half of the clothes worn by people around the world and one-third of the planet’s mobile phones. It has leaped ahead of Japan as the country with the largest trade surplus with the United States and is second only to Japan as the foreign country that holds the most U.S. Treasury bills. China is the world’s largest mobile phone market, and the second largest market for personal computers.

The country is also currently fueling the world’s commodity markets, as its manufacturing engine grows ever hungrier for the raw materials necessary to make everything from computers to cars. Today, China is the largest global consumer of copper, aluminum and cement, and last year surpassed Japan as the world’s largest oil importer — despite the fact the country has large oil reserves of its own.

Year after year, China’s Gross Domestic Product (GDP) grows at rates other economies can only dream about — 9.1 percent in 2003, compared with 3 percent in the United States. In fact, it’s growing so fast that the Chinese government is taking steps to cool down its economic engine, lest it overheat. 
 
Lost opportunity
“I’m growing increasingly concerned that American show organizers and suppliers are missing substantial opportunities to become involved in the Chinese market at a point when its most important to do so,” says Steven Hacker, Executive Director of the Dallas-based International Association for Exhibition Management (IAEM, www.iaem.org).

“When I visit China, the one question I get over and over is ‘Where are the Americans?’” says Hacker. Indeed a number of European and Asian organizers blazed the trail for foreigners hoping to organize events in China.

The dearth of American show organizers doing business in mainland China can be attributed to a variety of factors. Some speculate that American organizers tend to be insulated from the rest of the global market because the United States itself is such a large country. It’s always been easy enough for Americans to pick the low hanging fruit in their own backyard — thus, why invest the resources and time to look elsewhere. Another factor is the sheer bewilderment many organizers have about where to start in such a vast and strange land. Yet, as the world’s economy becomes increasing global, these factors must be overcome.

Still, organizing shows in China is different from organizing shows anywhere else in the world, according to the companies already doing business there. While the potential rewards are great, so often are the risks. To get into the market, organizers must be willing to make investments of time and energy — not just money. And in the end, say many, they must be willing to take a leap of faith.

“It’s very easy for organizers to get swept up in the hype surrounding China these days,” says Steve Sind, President and CEO of Global Events Strategies LLC (www.event-strategy.com), a trade show consulting company based in Tucson, AZ. “But organizers need to understand you don’t just try out a show in China. You’ve got to be very strategic about it because it requires a big commitment.”

For starters, just as with any other market, organizers need to invest time in learning the intricacies of the market they hope to serve in China. But, unlike many other international markets, organizers need to find and cultivate a relationship with a Chinese partner — both for legal and practical reasons. This process can sometimes prove tedious. Finally, U.S. organizers are often surprised by just how competitive the exhibition industry is in China. Organizers should be prepared to give an event time to take root.

“You’ve got to be prepared to do business the way business gets done in China,” advises Dan Londero, President, Reed Expositions China (www.reedexpo.com). “Deals aren’t always structured the way you might be used to in the United States, Europe or Australia. There are a lot of layers involved with regulations in China — some companies are private enterprises to varying degrees. Eventually everything here is linked back to the government. The connections between businesses and government run deep and can get confusing. Sometimes it’s hard to know who owns what.” But, for those willing to learn, and go with the flow, the rewards could be enormous.

Entering the market
Once you’ve completed the initial market research (see sidebar on page 35), you must decide how to enter the Chinese market. There are several options, each involving different risk/reward ratios.

Licensing your show brand name to a Chinese organizer or a multi-national organizer already in the market involves the least amount of risk. In this scenario, the partner assumes most of the responsibility and most of the risk — simply paying a licensing fee. The income potential, however, is limited. You also have limited control over how the show is run, and thus the image being created for your brand in the Chinese market.

Another approach is to collaborate with a Chinese organizer on a U.S. pavilion in a Chinese show or a Chinese pavilion in a U.S. show. Revenues, again, are usually limited to the scope of the pavilion, however, the risk involved is less, and it’s a good opportunity to become more familiar with the market, as well as a potential partner for future events.

If you’re willing to make a greater financial and time investment, you may opt to form a joint partnership. These deals are usually confined to specific shows, but both parties play an active role in organizing the event. Show organizers in the market strongly suggest having a representative on the ground under such an arrangement. This ensures both parties are communicating and makes it easier to smooth out problems when they arise.

Another option is to create a subsidiary in China, typically a joint-venture company. The legalities of this arrangement can be complex, however, if you plan to organize many events in China, establishing an office in country becomes practical.

For many show organizers, just as it was for VNU, the process may involve gradually stepping through these options. Today, VNU works with a mix of these scenarios. The joint-venture company still produces its original shows, CRC and PetExpo — which have both doubled in size since 1999. But, VNU also uses its experience in the market to work with other companies that have strong show brands to bring to China. For example, VNU Exhibitions Asia co-produces the China Seafood Exposition with Diversified Business Communications, which has a strong seafood show brand with its other events.

Creating partnerships
One of the most strategic decisions you can make when entering the Chinese market is selecting a local business partner — whether it’s a collaboration on a pavilion, a partnership to organize a show, or a business partner in a joint venture.

By law, organizers in China (unless they have subsidiaries based in Hong Kong) must have a Chinese partner. Only Chinese companies are currently allowed to hold the license for an event, making it impossible for foreigners to go it alone. But those already doing business in China say their partnerships are invaluable relationships they’d form whether or not it was required.

“From just a logistics standpoint, you need partners here just to negotiate your way around,” says Londero. “This is a complex place, and Chinese partners will keep you from making a lot of mistakes.”

The right Chinese partner will be able to help form relationships with the appropriate industry groups, government officials and potential exhibiting companies. They’ll be able to help with venue and contractor negotiations, as well as help a foreign organizer understand how to best market to Chinese exhibitors and attendees.

To make the right match, market pros unanimously suggest an investment of time. Make an initial trip to China to meet with potential partners in person. Be mindful of the culture. You’ll likely go out to eat and spend some time socializing before talking shop. Don’t underestimate the importance of this aspect of the process.

Once you’ve formed a partnership, be willing to trust your partner’s gut instincts. “We tend to be very research oriented. When we’re launching a show, we want to see all the numbers and talk to all the consultants,” says Kruse. “But things move so fast in China. Your Chinese partner may see opportunities and want to act quickly. Don’t overanalyze things. It’s better to have 10 opportunities with eight successful shows, than just two opportunities because you weren’t willing to act fast enough.”  

U.S. exports to China

Year	Value of exports	% of change  from the previous year
2000	$16.3 billion	24.4%
2001	$19.2 billion	18.3%
2002	$22.1 billion	14.6%
2003	$28.4 billion	28.5%
2004	$34.7 billion	22.2%

In 2004, U.S. exports to China reached $34.7 billion, up 22.2 percent from $28.4 billion in 2003.

Source: U.S. International Trade Commission, U.S. Department of Commerce

Top U.S. exports to China

Item	Value in 2004	% of change from 2003
Power generation equipment	$6.2 billion	34.2%
Electrical machinery and equipment	$6 billion	26.7%
Oil seeds and oleaginous fruits	$2.4 billion	- 17.6%
Optics and medical equipment	$2 billion	30.4%
Air and spacecraft	$1.9 billion	- 20.4%
Inorganic and organic chemicals	$1.9 billion	32.3%
Plastics	$1.8 billion	43.7%
Cotton	$1.4 billion	86.1%
Iron and steel	$1.3 billion	9.6%
Pulp and paperboard	$754 million	25.5%

The fastest-growing export category between the U.S. and China is cotton, growing 86.1 percent in the last year.

Source: U.S. International Trade Commission, U.S. Department of Commerce

Tap U.S. government resources
The U.S. Department of Commerce (DOC, www.doc.gov) offers a variety of services. Most are not tailored for show organizers, but can still be quite helpful when researching a specific market or potential business partner overseas. The best place to start is to contact your local DOC office. To find the office near you, consult the map on the DOC home page. Some programs to inquire about include: trade missions, the DOC Market Research Library, international business counseling services, Platinum Key Service, International Partner Search program and the Gold Key Matching Service and Trade fair listings. For a complete description of these programs and how to tailor them to your needs, go to www.expoweb.com.

Seek advice from the Chinese government
China Council for the Promotion of International Trade (CCPIT, www.ccpit.org) is responsible for all foreign trade in China. They can assist with obtaining market research, as well as with helping U.S. organizers find potential Chinese partners. CCPIT has a number of regional offices that can provide more localized data. The China International Exhibition Corp. (CIEC, www.ciec-expo.com.cn), part of CCPIT, is charged with arranging and coordinating economic, trade and technological exhibitions held in China and involving foreign countries. They organize, as well as sponsor, international exhibitions. They can also help coordinate efforts between U.S. organizers and the relevant associations, businesses or institutions in China. CCPIT’s U.S. office can help you make contact with CIEC. CCPIT U.S. offices: (703) 412-9889; (972) 437-6321.