Since May 1st, the Shanghai Expo has attracted more than 15 million visitors, writes JOHN COLLINSin Shanghai, China
SMOG HANGS over Shanghai in a constant reminder that China’s economic miracle is still largely an industrial one.
The teeming metropolis that is China’s business and finance hub city and home to more than 18 million people, is even busier than normal this week. The three-day Dragon Boat national holiday saw hundred of thousands of Chinese being bussed into the city to visit the Shanghai Expo.
It’s the modern equivalent of the World Fair, on which the Chinese have lavished more than $50 billion – more than the cost of the Beijing Olympics in 2008. Since May 1st, it has attracted more than 15 million visitors; attendance peaked on Tuesday when 552,000 people passed through the gates.
Although she has spent 14 months working on preparation for Expo, Deirdre Walsh, founder of China Green, a firm that advises Irish companies on doing business here, says it hasn’t received much media attention in Ireland because the event is internally focused.
“About 95 per cent of the visitors are Chinese and most of them are rural people,” Walsh says. “Travel to them is a dream so it’s their chance to see different world cultures at the national pavilions.”
Among the visitors this week were President Mary McAleese, who attended for Ireland Day yesterday, and more than 60 Irish chief executives here on a “CEO retreat” as part of the Ernst Young Entrepreneur of the Year competition. At a reception in the Pudong district on Tuesday, President McAleese demonstrated the rapid pace of change in Shanghai.
“Seven years ago I came here and I saw a plan for the Pudong New Area, now it is all around us,” she said, referring to the gleaming skyscrapers at the heart of the district. “Not only has Shanghai blossomed but so has the relationship between Ireland and China.”
Alan Dixon, Asia Pacific director with Enterprise Ireland, has seen that relationship growing first hand. Education services, aviation leasing and training, software and IT and engineering are the main areas that he sees Irish firms going after.
According to Frank O’Keeffe, the Ernst Young partner in charge of the Entrepreneur of the Year, one of the most important ingredients of the programme is to challenge participants by exposing them to a different economy.
“This year the best opportunity for us globally was to visit Expo,” says OKeeffe. The theme of the show is urban living, with the tagline “Better Life, Better City” appearing on all the Expo promotional material around the city.
O’Keeffe says the reconfiguration of the world’s population – more than half now live in cities for the first time – presents huge business opportunities, many of which were being showcased at the urban best practice pavilions.
With queues to enter some national pavilions running up to four hours, the Ernst Young group’s exposure to Expo, even after two days, was limited. But all around Shanghai you can feel an energy that reminds you that it is Asia, and China in particular, that is driving the global recovery.
Rapidly rising house prices and high levels of debt held by local government investment vehicles are just two of the indicators that have led some to suggest a bubble might be forming. The Chinese banking regulator moved quickly in April to restrict the amount of credit available for second homes with almost instant impact.
While many of the Irish entrepreneurs in Shanghai were being exposed to China for the first time, others have already made inroads.
In 2003, Robert O’Donnell’s Advanced Innovations was a small loss-making contract manufacturer of electronics in Limerick when he came to Shenzen, the electronics manufacturing hub of China, with a view to establishing a factory that would run at lower cost.
O’Donnell realised early that it made more sense to partner with local manufacturers, turning Advanced Innovations into what he calls a “virtual manufacturer”, which designs, sources and sells products in the US and Europe.
While cheap manufacturing attracted O’Donnell, he has seen the local economy transform itself rapidly. His firm supplies smartphones to smaller regional mobile operators in the US who aren’t big enough to have a relationship with large handset makers like Nokia or Motorola. Next year he expects to supply 400,000 high-end handsets based on Google’s Android operating system. The phones will not just be manufactured by firms in China but also designed here.
Liam Casey, managing director of PCH International and a former winner of Entrepreneur of the Year, has been dubbed Mr China. He has been doing business here since the mid-1990s and echoes O’Donnell’s view.
“Back in the early days of PCH, China was a knowledge-based challenge. You really had to find the factories. Once you did that, you were in business. Today China has completely changed. It’s got world-class execution.”
PCH designs, manufacturers and ships product on behalf of some of the biggest consumer electronics brands in the world.
The job could be done cheaper elsewhere but Casey says the skills and production capacity in the Pearl River delta region, home to China’s electronics hub, mean it is quicker and more reliable that any other region in the world.
Not that China is without its risks and challenges. Conor Flanagan, a director of LotusWorks, which supplies engineering and technical services to multinationals, says his firm spent almost three years trying to establish a joint venture with a former state-controlled firm in China before giving up. His firm learnt a lot from the experience and subsequently won a contract with a US multinational with a facility in Dalian as a result of contact made through its Chinese website.
Brewer and pub chain the Porterhouse is using Expo to put its toe in the local market. It has built a pub on the site which will be pulled down and hopefully assembled at a downtown location post-Expo. The Porterhouse in Shanghai was doing a brisk business this week, but co-founder Oliver Hughes has found plenty of frustrations setting up in the local market.
“You’d want to be match fit,” Hughes says, laughing. “There’s a lot of hard work and a lot of red tape. They wear a communist hat and a capitalist hat, but I have to say they set out to be extremely helpful and are guys who want to do business.”
Listen to a special business podcast on China at irishtimes.com/business/podcast
