Risk Management

Shaaz Nasir

Is China worth the risk for SMEs?

Canadian small businesses can succeed in China but they shouldn’t be seduced into believing there aren’t any risks, says a Canadian trade specialist.

Erin Wilkinson, Export Link Coordinator at The Business Link in Alberta, says there is a lot of hype these days about outsourcing opportunities in China but often the risks can significantly outweigh the benefits. She notes that companies should not forget to consider these same opportunities in other markets such as Mexico.

“When you get something cheap, there is often a reason for it,” she cautioned participants at the FITT national conference in Vancouver.

Wilkinson cited the recent recall of pet food in Canada and the United States after the discovery of contaminated ingredients. The source of the contamination came from China where, she says, there are often different standards of manufacturing and quality control.

Small businesses therefore need to go into China with their eyes open and be well briefed. They need a good business plan and need to carefully articulate that plan to potential partners. They must also assess doing business with China to ensure their cost savings will outweigh the risks.

“Entrepreneurs are very successful about their products and services but they often do not take the time to focus on communications and planning,” she says.

When outsourcing to China, SMEs need to communicate their special requirements and standards, and ensure adequate methods of quality control locally. But it doesn’t stop there: they also need to consider protection of their ideas and patents.

“Anytime you go abroad, you risk exposure of your intellectual property. This can happen when exporting or outsourcing a product, or even just when sharing ideas or samples with potential partners,” Wilkinson says. “It’s an issue we always have to be aware of in doing business anywhere in the world.”

Wilkinson says some companies protect their intellectual property by outsourcing different processes to different companies to ensure that no one person outside their organisation is exposed to the whole process. Of course, doing this can also increase costs and logistical problems.

Despite the risks, there are lots of ways to ensure success in China, says Wilkinson. And help is always available from trade officials with the Government of Canada and provincial governments.

Article from the Government of Canada