What should Israeli companies do to break into the China market?

“You need to reduce your level of confidence and understand and that you need to learn, absorb and internalize over many, many months the method of doing business in China.”

By
March 5, 2018 18:08
3 minute read.
What should Israeli companies do to break into the China market?

Speaking on Monday in Tel Aviv on how Israeli companies can succeed in China were (left to right): Hang Lung Properties Chairman Ronnie Chan, CEO of Cukierman & Co. Haggai Ravid, Deputy General Manager of Leaguer Jimmy Jin, Managing Director of China Everbright Limited John Chan, Visualead CEO Nevo . (photo credit: Courtesy)

Be patient.

Find a good Chinese partner.

Be the first to know - Join our Facebook page.


Don’t just come in and pretend you know everything.

These were some of the tips doled out by a panel of four Chinese business executives and two Israelis who currently reside in China at the GoforIsrael conference in Tel Aviv on Monday.

“You need to reduce your level of confidence and understand and that you need to learn, absorb and internalize over many, many months the method of doing business in China,” said Haggai Ravid, the CEO of Cukierman & Co. Investment House and an Israeli American who has resided in Shanghai for three years now. “It will take more time than you would hope. But at the end of the day, it will very much pay off.”

Hosted by Cukierman & Co. and the Catalyst CEL Fund, the annual conference hosts hundreds of Chinese and European investors interested in networking and acquiring the latest Israeli technology.

Chinese investment into Israeli companies is starting to take off, albeit slowly.

While the number of Chinese investments in Israeli venture capital funds has declined since 2014, according to an IVC Research Center report, the number of Chinese financial firms investing in Israeli hi-tech companies has nearly doubled since 2013, raising a steady $500 million to $600m. annually over the past three years.

In 2017, Chinese investors accounted for 12% of the total capital raised by all Israeli start-ups, which is still smaller than the mergers and acquisitions and buyout activity from America and Europe.

In technology verticals like healthcare, pharmaceuticals and advanced manufacturing, China may still have something to learn from Israel, the panelists said. But in fields like consumer technology and online shopping, China is way ahead.

“In terms of consumers and adoption of technology, China is maybe 10 years ahead of Israel, when it comes to payment, consumer behavior, engagement with the brands,” said Nevo Alva, the CEO of Visualead. “We’re not there yet.”

Based in China for the past few years, Alva added that the Israeli companies which succeed in China are not competing directly against Chinese firms.

“If you look at companies like IronSource, what is the difference, why do they show nice success in China? Because they don’t compete with Chinese companies. They sell to the Chinese a product that is outside of China. They compete with Western companies...

A foreign company cannot beat a Chinese company chasing Chinese consumers. No chance.”

And Alva had a contrarian message to companies like Alibaba, the giant e-commerce firm.

“I would say that Alibaba is much more a start-up than many of its cohorts in Israel,” Alva said. “They move very fast. If something fails, they put it aside and move on. They’re even a bit too entrepreneurial for their size. I would add more patience.”

That led Ronnie Chan, the chairman of Hang Lung Properties, to joke: “An Israeli entrepreneur is telling us that a Chinese company should be more patient. Now, that tells you something about China,” given that Israelis are notorious for lacking patience in business.

Chan also recounted how when he visited Israel seven years ago with a delegation of Chinese executives, all the technology they encountered was already found in China, implying that some of Israel’s successes might be hyped.

According to Ravid, in order to successfully enter the market and attract suitable Chinese investors, Israeli companies should reconsider joint ventures. He added that having a Chinese partner was necessary but that more flexible types of profit-sharing arrangements were desirable.

Israeli companies could try to sign a different agreement with a golden parachute clause and tight protections for intellectual property until the Israeli firm feels comfortable.

(Intellectual property protections are relatively weaker in China than they are in much of the West.) Specifically, Ravid recommended using the Changzhou-Israel Innovation Partner, a “one-stop shop” that offers stronger intellectual property protection. Chan recommended traveling across China and not just staying in the Shanghai hub.

“There are many, many cities in China that alone are bigger than Israel in terms of population,” he said.


Related Content

May 19, 2018
MK questions if injured Arab Israeli activist was hurt by police

By HAGAY HACOHEN