Israelis lack long-term view needed to enter Chinese market, VC tycoon chides
China’s consumers won’t accept less than the best and their wealth is growing, says real estate mogul Ronnie Chan
Doing business with China takes time, but it’s well worth the wait. That was the resounding message at the GoForIsrael Conference last week to Israeli companies aiming to enter the East Asian giant’s booming consumer and industrial markets.
“You must be cutting-edge. Make your plan from the beginning and be patient,” advised Ronnie Chan, Chinese real estate tycoon and venture capitalist, chairman of the Hang Lung Group, in an interview with The Times of Israel at the sidelines of the conference. Chan is facilitating the upcoming visit of Jack Ma, founder and chairman of e-commerce behemoth Alibaba Group in May this year.
China’s economy is growing fast, Chan said, and consumer preferences are transitioning to high-quality luxury goods and items, while Chinese investors are eyeing foreign markets.
In the past ten years, the Chinese consumer has become the most “advanced in the world” and to compete in China’s market, companies will need to provide the most cutting-edge technology, he said.
China is expected to have more millionaires than any other nation by this year, and, according to a report by US-based firm McKinsey, by 2021 China is expected to have the most affluent households in the world.
In 2016, some 7.6 million Chinese households purchased luxury goods — a number larger than the total number of households in Malaysia or the Netherlands. Chinese luxury consumers account for more than $7.4 billion in annual spending, representing almost a third of the global luxury market — twice what French or Italian households are spending, the report says.
While capital investment from China to Israel has waned in recent years with Chinese investors accounting for just 12 percent of the total capital raised by all Israeli startups, according to a recent report by IVC Research Center — an amount which is far less than the mergers and acquisitions and buyout activity from America and Europe — Chan says that things can change very quickly.
Israelis are “very entrepreneurial,” he said, but “sometimes they lack a longer-term view, which is essential for achieving success in China. People who look at the short-term and leave the China market would be surprised that China may have changed in an instant.”
Cyber-tech, medical devices, pharmaceuticals and software for global content are strategic sectors where Israeli companies can make strides in Chinese markets, according to the panel of experts at the conference.
Demand for education-based technologies is also increasing due to China’s one-child policy which has boosted investment in the next generation by parents and grandparents, said Shengyan Fan, managing partner at the Catalyst CEL Fund, a private equity fund that invests in Israeli companies that seek to expand in China.
When it comes to adopting technology such as mobile or cashless payments, Chinese consumers are at least ten years ahead, and Israeli entrepreneurs can use this to their advantage to test new products and service models quickly, said Nevo Alva, the CEO of Visualead, a company that creates visual QR codes, and which was the first Israeli company to be acquired by the Alibaba Group.
An important factor that could drive collaboration between Chinese and Israeli companies is that the research and development process in Israel is much faster, said Sean Jiang, CEO of China’s Yafo Capital Investment House Ltd., an investment and banking firm that focuses on the high-tech industry.
Israeli companies should also consider joint ventures, more flexible types of profit-sharing arrangements, agreements with golden parachute clauses and tight protections for intellectual property, advised Haggai Ravid, CEO of Cukierman & Co Investment House, which focuses on the Israeli, Chinese and European markets. Ravid also recommended traveling across to other parts of China than just the Shanghai and Beijing hubs.
The 18th annual Israeli GoforIsrael conference took place at the Hilton Hotel in Tel Aviv and was organized by Cukierman & Co Investment House and Catalyst Funds. It featured panel discussions on topics such as digital health and retail technology and elevator pitches from Israeli companies to the potential Chinese investors.
GoforIsrael plans to host its next conference in Foshan, China, with the participation of Chinese investors, partners and senior executives from Israel’s most innovative technology companies in May of this year.
