Opportunities abound for well-prepared Irish companies seeking to do business in the new frontier that is post-communist China, writes Clifford Coonan

"Heading to China on business?" is a question investors in all sectors are asking these days.

China has become the world's factory, where around half of all finished goods are made at prices that have manufacturers anxious from Ballymount to Boston.

Then there is China's domestic market - 1.3 billion consumers, although it remains a poor country and the real figure is considerably less than that.

Still, if an Irish services company can get access to even half of 1 per cent of that figure, the rewards can be astonishing.

China has a frontier feel to it which is attractive to the entrepreneurial spirit.

Markets in the West are mature and saturated, whereas freshly capitalist China is open season for the clued-in Irish company seeking to cash in on China's rise.

"The fact that 60 Irish companies have established a presence here shows the level of interest," says Alan Buckley, Enterprise Ireland's representative for Greater China.

"We always point out the tremendous opportunities there are for doing business but also that one has obviously to be very careful," says Buckley.

Buckley's comments reflect those of entrepreneurs and investment advisers across the spectrum about the first steps to doing business in China. Preparation is key.

While it still maintains its frontier feel, China has already come a long way in the 30 years since former leader Deng Xiaoping began to open up the economy. Perhaps more pertinently, it has come a long way in the last five years.

Irish companies thinking of entering the Chinese market should be aware that a lot of Chinese companies now have access to capital and technology themselves and have much less need for foreign direct investment than they used to.

In fact, doing your homework is the only way to answer all the questions about doing business in China. What skills do I need to manage business operations there?

Should I form a joint venture or partnership with a Chinese company or opt for wholly-owned company?

How do I get staff, manage staff and, increasingly, keep staff? What do I need to do to win over the Chinese consumer, or what do I need to do to convince a local government to allow me to set up a manufacturing facility?

"You need to know what you want to do in China, whether it's for low-cost manufacturing or to access the market here.

"The classic Irish companies like Kerry, Glen Dimplex - they all knew what they wanted to do when they came here," said Liam Casey, chief executive of PCH, which sources low-priced components in China for some of the world's biggest IT and telecoms companies, and in doing so has become Ireland's biggest exporter from China.

Dr Paul Clifford is a director of Mercer Management Consultants, which has advised hundreds top companies globally on their China strategy.

He has been involved in investment projects in China for a quarter of a century. He first came to China in 1974 and has seen it move from the centrally planned highly ideological China of the Cultural Revolution era to the modern economy, socialist with Chinese characteristics.

"The first piece of advice I would give to an SME setting up in China is to think very hard about the costs, hidden and ongoing, of establishing your own presence in China," says Clifford. The first step is not to enter the Chinese market looking for a partner, instead you need to think about whether a partner is needed at all and what they can bring to the table.

People often look at the partnership angle way too early, instead of examining what their strategy is and then choosing to take on a partner or going for a wholly-owned subsidiary.

"The best partner will usually be an entity that complements your capabilities and that doesn't look exactly like you. If a Chinese producer is already talking to your clients, the chances are the game may already be up," says Clifford.

"The worst thing to do is to rush in and grab the first hand offered," says Clifford.

For Catherine Toolan, who works for the international services company Aramark providing food, facilities and other support services for businesses, schools and hospitals in China, her company was already there, but stringent planning was still needed.

"Our facilities company had been fully acquired in 2004 so Aramark already had a presence in China. We had completed substantial research through industry bodies and local consultancy on the market we wished to enter," Toolan says.

"I spent six weeks travelling throughout the tier one and tier two cities visiting current facility operations and understanding the food service market from an operational perspective and conducting due diligence on some of the companies we were considering acquiring," she says.

"Following this I made the decision to move to China and prepared strategic and business plans in terms of the area of the market we would focus on entering and how we could develop and market our competitive advantage," she says.

Former Tánaiste Dick Spring, now executive vice-chairman of the international financial services company Fexco, has a keen interest in developing closer links with China.

"There's a learning curve for the Irish and the Chinese but, with the growth in tourism, the Olympics in 2008 and the World Fair in Shanghai in 2010, there will be opportunities for our business in China," says Spring.

"The Chinese value the relationship which will be built up and the trust that comes from same. This takes time and requires patience but it is worth it. Many Chinese hold themselves out as being well connected and offer to cut corners etc, but these are to be avoided. Stay with a good law firm," he said.

Weighing up the joint venture versus wholly owned unit is important. The days when foreigners were only allowed into the market by way of joint ventures are over, though it still applies in some sectors, including the media or in the car industry.

General Motors and Volkswagen operate joint ventures with Shanghai Auto and, while car component businesses are allowed to be wholly-owned, it's very difficult as a first-tier component maker to get access to a carmaker without a joint venture partner.

One of the main benefits of operating a wholly-owned venture is that it can lower the risks of bringing your core technology to China.

Sometimes people will put the technology into a wholly-owned unit, but will have a joint venture for the final assembly and distribution.

Coca-Cola, for example, has long protected its famously secret recipe for the syrup by operating a wholly-owned venture to produce the concentrate but joint-ventures around the country for bottling.

"You need to identify where you want your company to fit within your industry," says Toolan.

"What are your unique selling points, how can you differentiate and add value for customers/clients while maintaining cost competitiveness."