A cooperative agreement signed between the Israeli and Chinese governments will help support Israeli companies

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In the last five years, we have witnessed the buildup of an Israeli cooperation with the city of Changzhou, Jiangsu Province. PTL Group, which stands behind various Israeli projects in the city, is one of the major driving forces in this buildup.

The agreement, which was signed between the Israeli Office of the Chief Scientist, the Chinese Ministry of Science and Technology and the Science and Technology Department of Jiangsu Province, addresses the cooperation with Jiangsu Province and Changzhou's Innovation Park. Changzhou, which is 50 minutes by high-speed train to Shanghai, is regarded as one of the major cities in China for business activities of Israeli technological companies in the country.

According to this agreement, Israeli companies can benefit from a comprehensive support package, which include bonuses and extenuations above and beyond what was set as standard in similar agreements. This bonus package includes, among other things, tax reductions, unique grants that help to accelerate the start up stage, specific loans and incentives in order to attract more Israeli industrial companies to the park. Israeli companies that operate in the medical sector will benefit from additional assistance in order to obtain the necessary permissions from the CFDA (Chinese Food and Drug Administration).

Matrix opens Nanjing IT training center, a joint venture with PTL Group

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IT integrator Matrix IT unit John Bryce Hi-Tech College and PTL Group have opened new training center in Nanjing in collaboration with the Nanjing Quality & Inspection Center, which authorizes every software product developed in the city before marketing.

The new center in Nanjing is another milestone passed since Matrix's entry into China over six years ago. Matrix started with establishing John Bryce Colleges in Shanghai and Beijing and today serves international clients such as Intel, SAP, EMC, Autodesk, and Adobe, as well as Chinese corporations such as China Mobile and ZTE. To date, John Bryce China has trained over 8,000 senior high-tech engineers. A year ago, Matrix and PTL Group launched a Development Center for Mobile Apps in Changzhou.

The Mobile Internet: A Powerful Trend Accelerating the Modern Chinese Society

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Mobility in China

As we’ve seen over the past two decades or so, the acceleration of emerging hardware technologies and their increasingly inter-connectedness with the internet has truly transformed our planet. Not only are the tools that we use daily for study, business and pleasure evolving at a breathtaking pace, but so are the very definitions of these functions in our lives.

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E-commerce in China: Gain entrance into a completely different world

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Every minute 48,000 e-commerce transactions are made online in China

In a keynote speech at the 16th Credit Suisse Asian Investment Conference Jack Ma, founder of Alibaba, highlighted the differences between the ecommerce industry in China and in the USA. According to Mr Ma, “in the U.S., e-commerce is just online shopping. In China, e-commerce is a lifestyle.” This important distinction in the consumer perspective of e-commerce in both countries is critical to understanding the market. In the U.S. e-commerce is an additional market for companies, next to their offline main business. However, in China, where the infrastructure is not as developed as in the Western world, for some consumers e-commerce is the only way to fulfil their desires.

China’s 12th Five-Year Plan - Part 3

Posted by Tyler Kretzschmar
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This is Part 3 of a 3-part series on the 12th Five-Year Plan.

Part 1 simplifies and summarises the plan, and Parts 2 & 3 will discuss the importance of the Plan for those interested in the Chinese market.

Click here for image source.

What does the Five-Year Plan mean for SMEs looking to enter the China market?

One thing that SMEs must be aware of is the rising cost of doing business in China. One of the implications of higher quality of life in China is increased wages, meaning increased production costs in the manufacturing sector. Some estimates show that the cost of labour has increased by 20 percent annually since 2008. And despite any delays in carbon tax, environmental awareness is sure to come at least partially at the expense of companies as well. These changes correspond to the shift toward high-tech manufacturing, as companies in low-end sectors will likely find it difficult to profit as they have in the past.

China’s 12th Five-Year Plan - Part 2

Posted by Tyler Kretzschmar
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This is Part 2 of a 3-part series on the 12th Five-Year Plan.

Part 1 simplifies and summarises the plan, and Parts 2 & 3 will discuss the importance of the Plan for those interested in the Chinese market.

How has the 12th Five-Year Plan developed since its implementation?

The Five-Year Plan is not set in stone. As a drafted document to oversee social and economic development over the course of five years for the most populous country in the world, a certain level of coordination with local governments through supplementary and supporting legislation, as well as flexibility with the Plan are paramount to its success. As such, some aspects of the Plan drafted in 2011 are today, in 2013, slightly different after re-evaluation.

China’s 12th Five-Year Plan – Part 1

Posted by Tyler Kretzschmar
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This is Part 1 of a 3-part series on the 12th Five-Year Plan.

Part 1 will simplify and summarise the plan, and Parts 2 & 3 will discuss the importance of the Plan for those interested in the Chinese market.

This is an abridged version; for more information on the background and specifics of the 12th Five-Year Plan click here: chinas-12th-five-year-plan-part-1.pdf


Background & Overview

A term synonymous with China’s continuous development strategies, the 12th and current Five-Year Plan breaks from tradition and acts as a milestone in Chinese policy-making;  a shift in the path that China has been on for more than three decades. First approved on March 14, 2011, the partly philosophical and partly strategic programme encompasses a mix of goals, benchmarks and principles for the Chinese top and local government bodies to follow regarding the social and economic future of the country, between 2011 and 2015.

The Philosophy behind the Plan

China may have escaped some of the more drastic consequences of the global financial crisis that affected markets around the world in 2008, however given the globalised nature of the world’s markets, a Chinese economy that is based heavily on exports would undoubtedly suffer if foreign countries stopped importing goods. Economic stability is one of the key goals for Chinese policy-makers, something that cannot be achieved when GDP relies so heavily on demand outside of one’s own borders. In 2011, the US, Europe and Japan accounted for 48 percent of China’s exports, highlighting the need for a GDP base that is less reliant on countries whose economies are struggling.  

Capitalising on China’s growing middle class – estimated to reach 700 million by 2020 – constitutes using a different model than one of growth solely focused on exports and investments. Thus, looking at private domestic consumption as a new primary market feature is imperative in building a stable and well-rounded Chinese economy.

What are the key economic aspects of the 12th Five-Year Plan?

Compared to previous Plans, the 12th envisions more broad based developments in the economy as opposed to simply attaining specific levels of growth. Looking at the future of the country, the Plan’s overarching themes seek to promote sustainable growth and development for a well rounded economy and an improvement in the overall quality of life for Chinese citizens.

Entering the Chinese market: more challenges, more rewards

Posted by Tyler Kretzschmar
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on Monday, 22 April 2013
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The global financial crisis and the fast growing Chinese consumer market, as well as the abundant wealth available for investment in China today, amplify the growing need to penetrate and operate in the Chinese market. It is no secret that China offers numerous opportunities to expand a business; however what remains a mystery for many small and medium sized enterprises (SMEs) is how to effectively address the challenges of entering and operating in China.

One such challenge is the growing market itself, giving way to an increasing number of competitive local companies. The 12th Five Year Plan that laid the roadmap for China’s social and economic development for 2011-2015 shifted the focus of the Chinese policy makers to the strengthening of China’s dynamic new homegrown companies, referred to in China as Domestic Private Enterprises (DPE), both home and abroad. In 2010, 60 percent of China’s GDP came from DPEs – this is in striking contrast to the 38 percent they contributed in 2005. The fact that GDP is expected to quadruple itself between 2007-2025 also gives perspective into the business threats facing foreign companies in China and in home markets in the next few years.

Furthermore, the 12th Five Year Plan’s goal to increase the overall quality of life for Chinese citizens is creating higher operating costs in some sectors. One example is minimum wage increases (up to 13 percent each year), translating into more costly production in many of the developed manufacturing hubs along the coast. Another is China’s goal of a 40 percent reduction in carbon-dioxide emissions per unit of GDP by 2020, constituting elevated environmental taxes for manufacturers. 

VIDEO: TELEPHONE TRANSLATION APP IN ISRAEL

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An exciting look at how Lexiphone and its translation app are expanding in China with the help of PTL Group.

The Israeli robotics industry is aiming to the Chinese Market

Posted by Lily Li
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On January 7, 2013, Mr. Zvi Shalgo the chairman of the Israeli Chamber of Commerce in Shanghai and the CEO of PTL Group was quoted during a special meeting organized by the Israeli Robotics Association as saying “Foxconn is not alone! The giant Chinese company is intending to replace its workforce by a million robots by the end of 2014. “This reflects a growing trend in China: large local companies are now investing in robotics and automation, because of the dramatic increase in wages."

He said: "Since the new regulation of labor laws in China, which led to a radical increase in salaries, many enterprises have collapsed. The Chinese industry sees robots as a solution to the diminishing workforce problem. Due to the policy of 'one child' in China, the working age population shrinks, which will naturally lose the demographic advantage. " 

Mr. Zvi Shalgo, who introduced the principles of management in China, which are very different from those found in any other market, said "Your initiative and technology is the only competitive power you have in China, so, do not share it with foreign partners." PTL Group of Companies has developed over the years under a model allowing Israeli companies to enjoy a risk reduction investment along with responsible growth in China, without giving their technology to a Chinese partner. On the other side, the partnership with the local government which is willing to spend on benefits and incentives (millions of dollars) to attract industries with unique technology does not require a technological partnership in return. This option therefore is recommended.

Another speaker was Dror Marom, CEO of ACS (Motion Control) who has been operating in China for two years. The company develops motion control systems for the electronics, semiconductor, medical scanners, and digital printing market. Until 2010, ACS had two distributors in China, but given its results, the company realized that only a local presence would achieve a successful outcome. The company now operates in China through PTL Group in order to save the investment required in establishing its own subsidiary in China. PTL Group provides a total management shell including recruitment, handling administrative matters and personnel, finance and office management, so that local workers recruited are only concerned with managing sales. Marom also mentioned, that competition in China is tough, so "as an Israeli, your advantage is the unique technology you have, which should be kept."

2012 Honorary Citizen of Changzhou

Posted by Lily Li
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On Dec 18, 2012, Mr. Zvi Shalgo, CEO of PTL Group, was bestowed the title of “Honorary Citizen of Changzhou” during an official ceremony involving a number of foreign companies, in the Changzhou Shangri-La Hotel. The Changzhou Honorary Citizen Award is the highest distinction in recognizing the extraordinary contribution made by expatriates to the city of Changzhou.

PTL Group wins again at ATTA award: The award for “Transformation of 2012”

Posted by Lily Li
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The ATTA Award ceremony was held in Hong Kong, on Friday, November 23rd, and PTL Group was invited to submit a case study for consideration. We are happy to announce that we were awarded with a prize for the second year running:
Transformation of 2012 - PTL Group Ltd for the business change and transformation of a foreign owned China joint venture.”

PTL Group took a unique approach in our presentation to the award committee, by presenting a number of transformation cases in order to change the perception of how to obtain turnaround projects. Rather than looking for companies with severe issues that need Turnaround, members should be offering preventative methods, by identifying issues for most companies before they reach the dire stages, and then offering steady transformation processes to improve their operations.

We aimed to highlight a number of selected projects within the last year that came out of performing soft audits, and show that this methodology could be very beneficial for all in the association. China is more about transformation rather than turnaround. Transformation is needed constantly – if companies stop transforming there's a chance they'll collapse. When we identify problems at an early stage, we encourage  the managers to adopt or create change in the company.

Dutch Trade Delegation's visit to Changzhou and Jintan Economic Development Zones, a great Success!

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The branch associations FME-CMW and GMV China, organized a Dutch Trade Mission to Shanghai and Beijing, China from the 4th to 9th of November. The Mission was aimed at operations and export managers from companies that want to make the step in search of setting-up production and sales in China. The delegation consisted of companies that focus on two of nine key business sectors; Agro-food and High-Tech Manufacturing, sectors in which the Dutch government had implemented international economic policies over the past few years.

During their visit to Changzhou, the participants visited the Changzhou Industrial Incubation Initiative (CI3). This is a 13,000 square meter area that consists of manufacturing and office space, in the Wujin Economic Zone (WEZ), Jiangsu province. There, companies are able to create a cost-effective establishment that includes the development of their own production and sales facilities in China. 

In the morning, Zvi Shalgo (CEO, PTL Group) gave a presentation about the opportunities for Dutch SMEs in the Chinese market, and the challenges in managing production and distribution channels in China. Afterwards, the participants went for a guided tour within the CI3 compound.

For lunch there was a meeting hosted in the presence of Yao Xiaodong, Mayor of Changzhou (a city with approximately 4.6 million citizens), and the visit to Jintan was officially opened. To create a better understanding of the companies that are operational in the Jintan area, the delegation then visited several companies operating in various industries. After the company visits, presentations were given by Roeland Schuurman, Representative Officer of the Netherlands Business Support Office in Nanjing (NBSO), Zvi Shalgo and Ding Rongyu, Mayor of Jintan.

The day ended with a diner hosted by the government of Jintan, in the presence of all the Jintan government officials. The NBSO in Nanjing, representative of the province of North-Brabant of The Netherlands, and the vice-consul of the Consulate of the Netherlands in Shanghai were also present at this official event. 

Overall, this was a mutually beneficial event and a big success for Dutch companies willing to learn about doing business in Jintan area and China, and to be able to establish high-level connections with the local government. It also strengthened the healthy economic relationship between China and the Netherlands. PTL Group would therefore like to thank the Jintan Government and all other partnerships involved for their efforts making this day a success.  

Survey: Operational Excellence in China

Posted by Elena Luk'yanenko
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survey
We launched "Operational Excellence in China" survey in cooperation with Dezan Shira Associates. This survey is intended for senior management executives of international companies operating in China. The main objective of the survey is to gather information about key factors affecting operational excellence of companies in China. Questions cover HR, Finance, Logistics, Operations, Legal and Tax issues.

To follow up this survey we will hold "Operational Excellence in China" seminars in Shanghai on June 7 and in Beijing on June 14 where we will analyze survey findings and provide practical solutions for better management and internal controls. If you would like to attend this event, email to Lily Li at This e-mail address is being protected from spambots. You need JavaScript enabled to view it. .

Operational Audits: Lessons for Internal Control in China

Posted by Zvi Shalgo
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In the past three decades, the technological gap between foreign and local goods provided enough of a competitive advantage to cover a serious lack of operational management and infrastructure in China-based foreign-invested enterprises, but this is no longer the case. 

China is undergoing an “operational revival” of sorts, and excellence in operational management and infrastructure has become a top priority. Today, as China’s market is the business focus for many established players and new entrants.

One of the primary drivers for operational audits in China is that language and cultural barriers prevent China-based GMs from reporting accurate and comprehensive information about on-the-ground operations to a company’s headquarters. In fact, much of the information reported is not based on multiple sources, but rather a translation of the opinions of one local manager or partner.

Furthermore, developing internal “self improvement cycles” requires an openness to constructive criticism and multidisciplinary intervention that is uncommon among traditional Chinese managers.

An operational audit can help to fill the informational void and bridge cultural barriers in China to establish checks and balances and strengthen internal control. Pure financial or legal audits to assess internal control systems are insufficient, as these audits rely on data willingly submitted by the audited company. An operational audit is a key to the accuracy of such data in the first place. 

Operational audits can uncover a variety of behaviors that can dramatically affect a company and will likely not be otherwise uncovered, including:

  • Employees who signed perfectly legal labor contracts but are not fulfilling their job description (or, even worse, labor contracts for employees who simply do not exist)
  • Production losses visible in the factory but not recorded in the books
  • Company resource usage recorded in the books that does not happen in real life

Additionally, improved interdepartmental communications and improved management confidence are all by-products of an effective operational audit.

In this article, we highlight five lessons (all gained from operational audits) for establishing effective internal controls:

  1. Ensure an Active and Accountable Knowledge Transfer
  2. Invest in Recruitment Screening
  3. Systematize Internal Processes
  4. Keep an Eye on Distribution Channels
  5. Prioritize Loss Prevention
Posted by Zvi Shalgo
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While China is on an accelerated path to become a consumer oriented market international companies face ever growing managerial challenges trying to keep up. Over two decades of attracting massive foreign investment and the creation of fast technology transfer mechanisms made China the world’s main manufacturing base. 2011 and the new 12th five year plan shifted the focus of the Chinese policy makers to the strengthening of China’s dynamic new homegrown companies both home and abroad. Domestic Private Enterprises (DPE) as they are called here contributed over 60% of the Chinese GDP in 2010. This is in striking contrast to 38% they contributed back in 2005. Adding to this the fact that the Chinese GDP is expected to quadruple itself (2007-2025) helps to draw a general perspective of the business threats and challenges facing Western companies in China as well as in home markets in the next few years.

The financial crisis since 2008 from one side, and the fast growing Chinese consumer market as well as the abundant wealth available for investment in China today, amplify even more the growing need to penetrate and operate in Chinese markets.

Turnaround & Transformation Triggers

China is well known for being a challenging management environment for foreign companies. There are many cultural and structural market reasons that create those unique difficulties. As the new year of the dragon begins it will be interesting to focus on two recent trends affecting manufacturing small and medium sized enterprises (SME). These are both good reasons for many European based companies to reconsider their approach towards opening a new operation in China; globalisation of supply chains and the increased threat of competition by Chinese DPE in China and within a few short years in Europe’s own backyard.

Seminar: New Models for Setting Up & Managing Operations in China

Posted by Elena Luk'yanenko
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Three factors – the beginning of a new year; the globalization of industry and emerging trends in China - led the Manufacturers’ Association of Israel (MAI) to run a seminar themed New Models for Setting Up and Managing Operations in China.  Approximately 85 senior managers from various industries attended.  The event was held on the 16th floor of Tel Aviv’s world famous Industry House, which offers breathtaking views of the Mediterranean.

Israeli experts and business managers with a strong knowledge of China's commercial connotations, shared their experience of successfully managing industrial projects and business activities there.  Conference participants also had the opportunity to examine established Israeli companies in China and interact with Israeli business professionals who have a firm history of operating a business there.

The seminar was opened by Amir Hayek, CEO of MAI; and Jackie Eldan, Consul General of Israel in Shanghai. Both men focused on the tremendous growth and potential of the Chinese market.  They also emphasized the importance of engaging China as a trade partner.

Zvi Shalgo, CEO of PTL Group and Chairman of the Israeli Chamber of Commerce in Shanghai, gave an address titled “Strategies for Sustaining Competitive Advantage in the Chinese Market”, during which he analyzed multiple facets of industrial management in China.

Mr. Shalgo reviewed current trends in Chinese markets, most notably the rise of private companies.  In his talk, he also illustrated how the gap between Chinese and Western industry, locally and internationally, is narrowing.   He referred to different models of manufacturing solutions in China and explained one of this year’s hottest emerging trends for Chinese business: the industrial incubation model.

PTL Group wins ATTA Turnaround of 2011 Award

Posted by Elena Luk'yanenko
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October 22, 2011 - Zvi Shalgo, CEO of PTL Group was presented with the ATTA Turnaround of 2011 award at the 2nd annual ATTA conference which was held in Hong Kong on October 21-22, 2011.

The annual conference included several panels discussing the expected business environment in Asia for turnaround and transformation in 2012. A lively Q&A followed with a sense that Asia could see accelerated business and financial distress in the next two years, which would lead to enhanced opportunities for ATTA memebers.

The highlight of the event was the first ATTA Awards ceremony with a key note speech by noted turnaround expert Jean Luc Perbos.

Jean Luc Perbos presents Zvi Shalgo, CEO, PTL Group with the first ATTA award for a mid size turnaround in China

Download ATTA Newsletter Issue 1 Volume 1

Zvi Shalgo speaks on setting up production in China at seminar for Dutch manufacturers

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OCTOBER 25, Zoetermeer, Netherlands – PTL Group held a seminar in co-operation with FME and EVD. The aim of this seminar was to inform Dutch companies about setting up production facilities in China. The event was attended by approximately 60 Dutch business owners and senior executives. Key note speakers consisted of  Jan Hak, president of GMV-FME, Maarten Roos, R&P China lawyers and Zvi Shalgo, CEO of PTL Group. Facilitator Harry Starren, CEO of De Baak, was in attendance as the moderator of the seminar.

To further support the seminar, a report was published on the specific topic of "Equipment Manufacturing and Machinery in China". The report focuses on the opportunities for equipment manufacturing in China and the importance of the Chinese market for the Dutch manufacturing and technological industries. The report provides tips and guidelines for setting up production in China, ranging from business structure and employment to the sensitive issues which companies must consider when operating in China.

After Harry Starren gave a brief introduction, Marije Hulshof, Director of NL EVD International, gave an update about the opportunities for Dutch SMEs in Chinese markets. PTL Group's CEO, Zvi Shalgo, discussed the history of doing business in China, emphasising that earlier foreign companies used only to source from China. These days, they don't just source or manufacture in China but also sell in the local market. Zvi Shalgo also presented current trends, such as critical timing issues and incubation support models, as well as opportunities to benefit from Chinese government funds. He suggested that Dutch SMEs should consider incubation as their first step when setting up in China, and discussed the stages of establishing a factory in China. He also presented incubation concepts and critical considerations for choosing one. Maarten Roos followed by talking about intellectual property and concerns of foreign companies.

Following the presentations, there was a panel discussion in which key note speakers, answered numerous questions from the audience. The subjects discussed ranged from HR to finance, and other issues related to setting up production facilities in China. Once the panel discussions finished, there was the opportunity for companies to engage in networking, which provided a platform for all attendees to share and discuss their ideas about business in China.

Increasing labour costs? Should I stay or should I go

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Offshoring and increasing labour costs

Every country with cheap labour eventually gets richer - the labour costs increase and alas, we nomadically relocate to another country. Generally, the key benefit of offshoring is lower labour costs. In light of China’s fast-increasing labour prices, companies are faced with a dilemma - to stick to one’s guns and remain in China, potentially losing that attractive profit margin, or to shift one’s industry to another developing market. This article sums up some key stats and argues for staying in China. The key tenet of this proposition is that a Yuan revaluation is inevitable, leading to an appreciation in buying power. The domestic market in China will experience a surge. This, coupled with China’s increasing investment in inbound SMEs and a superb infrastructure are but a few of the pillars of a competitive multinational in China.

The current labour problem

According to the IMF, China’s labour is now the third most expensive in emerging Asia, after Malaysia and Thailand. New labour laws arguably offer more job security to the detriment of employers and transport prices are rising with the cost of oil. All the while, there is the question of a Yuan revaluation and the resulting impact of an appreciation on the export Industry.

Boston Consulting Group listed a number of multinationals, which have already shifted production, including Caterpillar, Ford, Flextronics and toy manufacturers such as Wham-O. These have moved to other cheaper Asian countries or back to their home markets.