Hong Kong’s unequalled bridging role linking European firms with China presented itself as an ideal opportunity for former corporate banker Jennifer Chan. After founding Sinova Management Consultancy Limited in 2002, Ms. Chan has seen her business boom, up from one employee to 20, and from a single office to a growing international network. The consultants are multilingual. ‘If you’d asked me a few years ago, I could never have dreamed of such an expansion,’ Ms Chan said. And with China continuing to boom, Hong Kong provides the sound fundamentals for a predicted further growth of 40% in the next one to two years.

Born in Hong Kong, Ms. Chan spent most of her young life in the Netherlands before returning to Hong Kong at the end of 1991, following her university education.

Utilizing her financial training and cross-cultural experience, Ms. Chan worked for 11 years with Dutch banks Rabobank and ABN Amro and Belgian-Dutch bank Fortis, with a portfolio covering both small and medium-sized enterprises (SMEs) and multinational companies (MNCs).

Flying start

‘I had trusted relationships with clients who had followed me from bank to bank, when one asked me if I could assist them with a big investment in China. They wanted someone who knew the language and the culture,’ said Ms. Chan, who, along with diverse cultural experience, speaks English, Dutch, Cantonese, Mandarin, French and German. ‘I asked my clients to give me a couple of projects so I could start, and they did.’
Referrals soon followed, as Ms Chan leveraged her own network and Hong Kong’s established infrastructure to advise clients on doing business in China, sourcing from China, or moving their production to China. Being ‘on the spot’ gave Sinova the edge over European-based China consultancies that cannot offer the same local knowledge.
Unlike most of its competitors in Europe, Sinova is able to locally implement some of the recommendations they give to foreign firms on doing business in China. The information Hong Kong has on mainland China is tremendous.
Europe can get information out of China, but it is likely to be censored or, even if it is not, European businesses are heavily reliant on translators. Hong Kong has the best of both worlds: free Internet, free press, and it is right next door to China.

First step Hong Kong

Ms Chan’s advice to European firms with China on their radar is always to use Hong Kong as their platform. ‘Even if firms are not yet intending to sell to China, I advise them to set up the structure here,’ Ms. Chan said. ‘Most of my clients want to have a sourcing entity (a buying office) for China and, if it is a Hong Kong company, the corporate finance situation is very favorable to them should they later want to set up a regional sales office.’ Hong Kong corporate tax rate is lower than most European countries, it has a stable financial system, and its workforce has international exposure, which is a great advantage.
Hong Kong’s rule of law and established arbitration system also cushions firms making the entry into China.
Disputes are settled promptly, eliminating the worry that a lawsuit could drag on for years without either clarity or resolution, affecting their daily operations. And, in the worst case scenario, you can always liquidate a company in Hong Kong.

Going global

In April 2005, Sinova opened an office in Shanghai. In November 2006, it opened in the Netherlands. Its clientele now comes from around the globe, including the Netherlands, Belgium, the United Kingdom, Germany, Austria, the United States, Australia, and Taiwan.

Services

Sinova offers clients many services. Some of the services most relevant to exporters include the following:

● Business advisory: market research and feasibility studies;
business partner identification and matchmaking with local organizations; arrangement for financing and funding.

● Corporate services: registration and administration of branch operations of foreign companies in mainland China and Hong Kong; general administration of Chinese, Hong Kong, and offshore companies to comply with local statutory requirements; introduction, negotiation and liaison with bankers and law firms and audit firms.

● Management services: administration of international financial transactions; representation and assistance in business start-up and interim management.

● Accounting and treasury: order administration/
reinvoicing, accounting and related business administration; invoicing; acting as bank account signatory.
● Business support: monitoring overseas operations, local troubleshooting, negotiations with local parties;
day-to-day operations.
● Trade services: processing of trade documentation under Letters of Credit (L/C), from application to receipt of L/C by banks, documents against payment (D/P), documents against acceptance (D/A), and open account; handling all shipping correspondence on behalf of clients; arranging introductions to banks and financial institutions for establishment of trade finance facilities.

Questions

1. What advantages are there to an exporter wanting to enter China and/or Hong Kong for using an agent like Sinova?

2. Are the benefits of using Sinova most valuable to small exporters or can the multinational larger firms also benefit? Explain.

3. If an exporter has used a company like Sinova, at what point in the exporter’s market development would it be more profitable to stop using them?
Discuss.