by Peter MeCoy

Introduction

One of China's best-kept secrets, Tianjin's history of over 600 years as a trading port has given it a depth of culture and strength of friendship unmatched anywhere in the country. Always striving to achieve recognition in its own right, Tianjin has earned its claim to fame early on with the production of China's first wristwatch, the first television and (not really a surprise) China's first bicycle!

Basic Statistics

· Tianjin has a population of 10 million people and is the key logistics hub for Northern China. The deep-sea port, international airfreight terminal, railway network and highway system provides easy access to all of China and overseas.

The human resource pool is significant, with 20 universities, 320 vocational and technical schools, and 159 scientific research institutes.Of the companies listed in Fortune 500, 64 of them have invested in Tianjin, including 22 of the top 50.

There are 16 speciality and general purpose economic development in and around Tianjin, all of which offer various incentives to investing companies.

Why Choose Tianjin?

Investors in China generally should try to avoid setting up in smaller cities and towns around China, unless a limited selection of joint venture partners forces the issue. Smaller cities and towns tend to have a very limited number of foreign companies, therefore the companies that do actually invest tend (unwittingly) to become cash-cows for the whole township. Limited facilities for foreigners create a less-than-pleasant lifestyle for the expatriates, with the consequence of the expatriates requiring frequent "big-city" trips.

If we therefore eliminate the smaller locations from the equation, this leaves the big three cities of Shanghai, Beijing and Tianjin as viable alternatives (southern Chinese cities such as Guangzhou face other issues and only those who are accustomed to the ruthless business attitudes of places like Hong Kong should consider investing there).

Shanghai at first glance seems an attractive place to do business, since so much effort is made to attract famous companies, however it is important to remember firstly that once the money is paid up, you are on your own. There is little or no on-going assistance and with such a large number of major corporations already operating in the city, almost everybody becomes a minor player. The second issue with Shanghai is its relationship with the rest of China. The relationship is not good, with significant levels of rivalry and mutual distrust (similar to Cape-Town, Johannesburg; Dusseldorf, Cologne, Paris, rest of France, Sydney, Melbourne etc). If a company wishes to do business in Shanghai, it must be in Shanghai. If it wants to do business in the rest of China, it must be anywhere else. Operating costs in Shanghai are significantly higher than elsewhere, particularly labour, land office and living costs.

Beijing seems to be focussing more and more on becoming a commercial and political centre, thus is really attractive for international accounting firms, banking, legal etc. Manufacturing and hard service (transportation etc) companies are being pushed further and further out of the city.
Tianjin has become the best choice of the three for several reasons. Firstly, Tianjin considers itself somewhat behind the other cities in terms of development and is striving to catch up. This means there are better deals for potential investors who seek to negotiate. Secondly, Tianjin's attitude is different to the other cities. They don't focus on simply having the greatest number of foreign investors, rather they want a reputation of having the greatest number of successful foreign companies. This means that there is ongoing care and attention to all investors, large and small. Regular meetings of investor companies are held to find out what further assistance is required. During one such meeting, a foreign company raised a problem involving the National Railway service. Within 24 hours, there were three top executives from the National railways in the GM's office trying to find a solution to the problem.

First Key Steps

When investing in Tianjin (or anywhere else for that matter), there are several points which must be watched in order to increase significantly the chances of success. Many large companies set up joint ventures or WFOEs (Wholly Foreign Owned Enterprise) using a specialist team trained in negotiations, due diligence etc. It is of vital importance that at least one key member of the team has had significant general management experience in China. Quite often, these teams do not have such a person and as such are unaware of the long-term operational consequences of particular clauses in the contract they are signing. This is of particular concern in the case of a joint-venture, where a minority share local partner can end up with complete "behind the scenes" control over the company.

Secondly, get advice! This may seem obvious, but so often company representatives believe they already know everything they need to know despite never having worked in China before. Tianjin in particular has a number of experienced expatriates and consulting professionals who are happy to assist the newcomer. Getting their advice early on can save a company millions in preventing the mistakes so often made by those who think they know it all. Don't forget, when you come to Tianjin, everybody wants to see you succeed (except perhaps your competition!)
Thirdly, learn the rules of the game. It never works to expect China to change everything to suit you. This is China home territory and an overseas investor, regardless from which country they are from, must play by local rules. Many of the rules are clear, but knowledge of the subtleties of doing business can make or break a company. Again, consulting experienced expatriates is the best approach.

Conclusion

Investing in a new company is a big decision. Large amounts of money are involved, and the investors or parent company will expect success. Choosing the right place to invest and then proceeding wisely will greatly increase the chances of success (however there is still much to do after start-up!) Tianjin provides one of the best investment environments around China and should be considered seriously. This is not to say that it is perfect; there are always areas for improvement; there will be the usual frustrations and difficulties for which no city in the world is immune; but at least there is always a strong willingness to improve whenever a problem arises.
Overall, Tianjin remains to most attractive place to invest from a business point of view. It has yet to develop a high lifestyle profile such as Shanghai; all the ingredients are there, but very few people know about it yet!