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

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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

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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.

First Annual China Business Summit Held in Israel

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RAMAT GAN, ISRAEL, JULY 27 - The 2011 Annual Conference on Business in China held in cooperation with the Israel Export Institute and the Israel Manufacturers Association gathered more than 550 business owners, senior managers and academics in Leonardo City Tower.

Among the subjects discussed were the:

  • Latest economic and commercial developments in China
  • Business models applicable to the Chinese market
  • The Chinese 12th five-year plan (2011 - 2015) - its principals and the implied business opportunities
  • Chinese investments in Israel: source of apprehension or an opportunity?
  • Credit insurance - what are the possible courses and available solutions for Israeli companies?
  • Intellectual property issues - what is new in China in this aspect?

Among the Speakers were:
Avi Hefetz, director General at the Israel Export and International Cooperation Institute, Dan Katarivas, head of the foreign trade department at the Israel Manufacturers Association, Nili Shalev, head of supportive tools formation at the Foreign Trade Administration at the Israeli Ministry of Industry Trade and Labor, Adv. Ashok Chandrishikar, Haim Cohen, CEO at D&B - Dun and Bradstreet, Yacov Pedhatzur, CEO at Netafim Asia, Zvi Halamish, CEO of Ashra and more.

Zvi Shalgo, founder and CEO at PTL Group, participated in a panel of CEOs from Israeli companies already active in China. He presented the Changzhou Industrial Incubator Initiative (CI3) as a way of dealing with local competition, and explained how this new model helps foreign manufactures to reduce the initial investment and risks associated with entering a complex and unfamiliar market.

He also mentioned that "foreign companies now require local manufacturing investments to maintain their competitive edge, but many Israeli companies shy away from investment in manufacturing in China because of uncertainty regarding the success of sales. The new Industrial Incubator allows the beginning of production in small series and subsequent increases depending on the volume of sales in the Chinese market, without the high investment required for setting up a factory."

Launch of Changzhou Industrial Incubation Initiative

Posted by Elena Luk'yanenko
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TEL AVIV, JULY 18 - PTL Group, headed by Zvi Shalgo, launched a new Israeli initiative in China: an industrial Incubator in Changzhou. The incubator is meant to allow Israeli and foreign companies to open manufacturing operations, and simultaneously reduce their risks of investment and market entry into China which are renowned for being complex.


The project, named China Industrial Incubator Initiative or CI³, is a partnership between two Israeli-owned companies - PTL Group and Elan Industries. Both operate in the fields of operational management and assist in developing companies and industrial enterprises in China. The plant will soon be launched by the LycoRed- Makhteshim Agan partnership.

The CI³ industrial incubator has been designed for medium-sized companies with international activities, which seek to penetrate the Chinese market. These companies have realised the urgent need for opening production sites in the largest market in the world, in terms of global growth rate.

Zvi Shalgo, CEO of PTL Group and Chairman of the Israeli Chamber of Commerce in Shanghai remarked, "Once, you could make do with marketing and sales activities in China. Today however, the trend has reversed due to changes in the Chinese economy. Now companies exporting to China encounter increasing competition from anonymous Chinese companies, which are cost effective in the global market. The Chinese government encourages high quality domestic production at a very competitive price."

Foreign companies now require local manufacturing to maintain their competitive edge, but many Israeli companies shy away from investment in manufacturing in China because of uncertainty regarding the success of sales. The new venture paves the way for rapid production and a reduced time-to-market. This means an increase in production is simpler where and when sales justify it. Investors can thereby reduce the risks of a failing investment.

He added, "Entry into the Chinese market is not simple and easy by nature. The Incubator is designed to provide conditions that will allow companies to develop industrial activities alongside logistics until their progress in the market is such that they can go out and set up a plant independently."

The Incubator complex consists of 13,000 square meters occupied by Israeli and international companies seeking to start activities in China. It is located in Changzhou, located 45 minutes away from Shanghai. Changzhou is considered one of the most attractive cities for foreign companies, in large part due to the government, which encourages foreign investment and is characterized by an open, innovative approach. The site was established with the support of the local administration of Changzhou, which has sponsored the project and sees it as a unique model in promoting foreign companies.

The 12th 5 year plan – is China just blowing smoke? Alternative energy and its potential

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In 2009, thermal energy was the country's primary source of electricity production, representing 80% of electricity generation, followed by hydro-power at 16%, nuclear power at 1.8% and other non-hydro renewables at 1.24%.

The 12th 5 year plan is ground-breaking in its emphasis on the importance of sustainable growth and using renewable sources of energy. Water consumption in industrial processes is to be cut by 30%. Non-fossil fuels are to account for 11.4 % of primary energy consumption. GDP CO2 emissions are to be cut by 17%. Forest coverage is to rise by 21.66%. Companies, such as Nalco, which sees the potential in this shift, is adamant to get involved and aims to grow in China by 20% in the next 5 years.

Does the Plan Mark a Transition?

This new 5 year plan is by no means an eco-political tectonic shift. China treads a fine line between slowing growth and inflation. But, this plan marks the realisation that continued reliance upon foreign resources undermines its security. China’s heavy involvement in Africa, Afghanistan, Indonesia and South America belie an insatiable thirst for raw materials, from oil to rare earths, timber through to copper. This reliance upon foreign resources, particularly from areas of unrest, is not ideal. Coupled with the notion of defence is of course the problem of our environment. In a recent RUSI report (Royal United Services Institute), John Mabey remarked:

“Climate impacts will force us into a radical rethink of how we identify and secure our national interests. For example, our energy and climate security will increasingly depend on stronger alliances with other large energy consumers, such as China, to develop and deploy new energy technologies, and less on relations with oil producing states.”

Doing business in China: Lessons for Swiss MBA students

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SHANGHAI, May 4, 2011 - The Graduate School of Management in Switzerland, in partnership with the Shanghai Swiss Center, held a Joint International Seminar, which aimed to provide an opportunity for Swiss MBA students to know more about China. The talk covered the challenges and problems of doing business in China, business strategies and the requisites of success.

Arie Schreier, VP, PTL Group was invited as a guest speaker to present his insight on doing business in China from a clear, practical point of view. He referred to different approaches for different industries and used his extensive experience of the country, covering the differences between China and other places when doing business. He went onto explain the role of PTL Group in the emerging market and how it specializes in management of foreign sales organizations and distribution channels. He also referred to the 'black holes' of doing business in China. The lecture was met with great interest and discussions soon followed.

We hope the Swiss MBA students gained a better understanding of the Chinese business environment and the mentality of Chinese managers. Meanwhile, PTL group will continue to share its experience of the management market in China.

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Operational Audits are an increasingly important area. This thread relates to why they exist and how they benefit companies. An Operational Audit is a means of reassessing an existing company with a view to finding its weaknesses and then helping it become more lean, profitable and efficient. If the company is markedly distressed, an Operational Audit is likely to lead to an Operational Turnaround. At this point, interim management may be required (discussed later).

The Painful Truth of Operating in China

Why do Operational Audits exist? Regardless of the format of the company - be it a JV, a WOFE, an FIE or any other blasted acronym - a disproportionate number of companies face problems and resulting profit losses. Many of these problems can be ascribed to a lack of talented employees, but a great deal of problems derive from management issues. However, few entities and their CEOs wish to admit that they might have problems until the last moment when it is too late. When the threat of liquidation appears on the horizon, the first place one finds the manager is most likely in a law firm, attempting to wind up the company.

Operational Audits exist to prevent further losses by targeting a list of factors, from working out whether employees are being paid the right amounts, to supply chain management. They then assess where improvements can be made.

Triggering factors for an Operational Audit - Changes

Leadership Changes in management are arguably one of the best times for an operational audit. An assessment will provide up-to-date and impartial information, thereby helping new management/personnel learn the strengths and weaknesses of the company. But more importantly, an Operational Audit can provide an opportunity for changes in strategy or direction at a critical time.

Posted by Elena Luk'yanenko
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Establishing a manufacturing or assembly plant in China requires thorough consideration of various factors. Perhaps the most important question is whether one sets up in an Industrial Zone, Industrial Park, or Special Economic Zone and which will give you the best returns on your investments in low initiation costs and operational expenses.

However, other factors can be equally important. The region, size of the nearest city and nature of its industries will determine the availability of inputs such as human resources and energy. Furthermore, distances from suppliers, the nearest international port and potential customers are crucial.

Increasingly, the Chinese government is paying more attention to setting up Industrial Zones or Industrial Parks for investors and industries.

In general, there are three kinds of Industrial investment locations, each with their own benefits and disadvantages:

  • Special Economic Zones (SEZ)

  • Private Industrial Parks

  • Industrial Incubators

In this post, a brief clarification and explanation of the similarities and differences between the three options will follow.

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Initial Funding and Injecting Capital into Chinese Business

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In this post, we discuss one of the hottest topics encountered by foreign companies in China: transferring and registering a company’s initial funding. The suggestions that follow are relevant to anyone thinking of establishing a Chinese business, be it a Foreign Investment Enterprise (FIE), a Wholly Foreign Owned Enterprise (WFOE) or a Joint Venture (JV) with a local company. This post covers the solutions for transferring initial funding before establishing a company and to the company bank account after company registration.

Transferring Initial Funding to a Third Party before Establishing the Company

Applying for a business license in China usually takes four to six months. Many companies cannot stand that long in order to use the funding to cover the initial costs of setting up an office, purchasing equipment, etc. They therefore prefer to transfer the initial funding to their local agent or team before they get their business license.

However, once the business license is granted and the company is approved by the government, these funds—used for establishing the company and proving that it is financially viable – are not legally considered to be a part of the company’s registered capital. According to Chinese law, any monetary transfers must be made directly between the foreign investors from a foreign bank account to a Chinese bank account set up under the company’s name for capital deposits, not by using a third party.

In a number of cases, we met investors who had transferred tens of thousands of US Dollars to local suppliers who then found it difficult to explain these transactions in the company’s balance statements, despite the fact that the money was used for rent or for purchasing equipment.  It proved difficult to show the local authorities that these purchases were part of the company’s initial funding.

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New Strategies in International Procurement Management and Global Supply Chain

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Hundreds of logistics and supply chain experts and professionals participated in a seminar initiated by the Israeli firm MASHIK, a business partner of the international consulting firm A.T. Kearney.

The seminar focused on innovative tools and strategies for improving efficiency in global purchasing, together with new methods for locating additional suppliers, ensuring product quality and advanced strategies of management for each link in an increasingly complex and global supply chain.

The seminar was opened and given by Mr. Arie Ben-shmueli, CEO of Mashik Ltd., who referred to the recent recession which the global economy has suffered. In such circumstances, he asserted that the main test for a firm lies in its ability to adapt to the relative conditions of different suppliers, transport alternatives and the changes in currency exchange rates etc. Ben-Shmueli analyzed the rising powers in the economic world, drewing particular attention to China and India.

Mr. Jan Van der Oord, Partner, A.T. Kearney & Zlatko Bazianec, A.T. Kearney International Consulting Company, presented a survey of international companies, which revealed various methods for maintaining business' flexibility, dealing with risk management and reforming the sourcing and logistics sectors. In a joint lecture with Gehard Kasulke, sourcing manager in the world's third largest cellular company, T-Mobile International, the two emphasized the necessity for international vision and suitable analysis of the supply and sourcing factors in the current era. They gave various examples of supply chain structures and detailed the advantages in outsourcing some of the sourcing management to professional bodies.

Eitan Shaul, VP of Sales and Marketing, Zim Integrated Shipping Services Israel, analyzed the transport and shipping trends in the wake of the recession, stating that 90% of the world's trade is transported via maritime transport, compared with 9% by land and only 0.25% by air.

Among the speakers was also Mr. Mepi Frankel, Director of PTL Group, who focused on the issues of sourcing in China, and on some of the prominent trends in the supply chain in China expected in the coming years. Mepi talked about the great potential in developing business relationships in China and about the challenges Western sourcing managers and quality assurance personnel face. He shed light upon the issue of cultural differences, the differing perspectives and the problems of communication with Chinese suppliers.

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Corporate Turnaround in China

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Every company is unique in the face of crisis and will respond differently depending on the situation at hand. In light of China’s unique business culture, differences in recognizing corporate decline and approaching the associated processes in conducting a turnaround exist between China and the West.  Foreign firms will need to recognize these differences and tailor their actions at different stages of the turnaround process to suit.

Spotting a turnaround situation

Although corporate recovery discussions and articles often focus on the latter stages of the turnaround process such as restructuring, a vital step towards corporate recovery is first recognising and acknowledging signs of crisis and decline, and subsequently deciding to take action and make changes.

China Software Industry

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China's software industry has seen a rapid growth this year. According to figures from January to August 2010 revenue went up by 29,8% to CNY828.6 billion. The growth rate was 8.8 percentage points higher than in the same period last year. The industry will likely to grow much higher coming years and therefore remain a highly interesting industry for foreign companies trying to penetrate into the Chinese market.

Revenue by region and sector

By region, 87.5% of the revenue was earned in the eastern areas of China, among which includes Shanghai, Guangdong and Shenzhen.

The western areas, including Guangxi and Xinjiang, were responsible for 7.7% of China's software revenue and only 4.8% of the revenue was earned in the middle areas of china, including Henan, Hubei and Hunan.

PTL Group gains ISO 9001:2008

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Shanghai, 22 November 2010 - Following a process lasting almost two years, PTL Group has had its work processes accredited to the internationally recognised quality management system standard, ISO 9001:2008.

“Achieving ISO 9001:2008 certification is an important milestone for PTL Group. This certification illustrates to customers our strong commitment to quality at all levels of our organization.” said Zvi Shalgo, Chairman and CEO. “Customers want to be confident that they are doing business with an organization that can meet or exceed their needs in a timely manner. Successfully completing the rigorous process required for certification is a clear sign that we are devoted to continually improving our quality management systems."

"In working towards this award, we have analysed and challenged every aspect of PTL Group's operations, involving every employee and a number of clients. This has resulted in many improvements to both what we do and how we do it,” he continued.

The award was made through NQ Global Assurance, a leading assessment, verification and certification body and works in partnership with a wide range of businessesto help improve performance in quality, environment and health and safety management. In the future the audit will be performed every twelve months from the date of certification to ensure maintenance of standards.
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PTL Group Hosts Official Delegation from Changzhou in Israel

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Tel Aviv, November 2010 – PTL Group hosted an official delegation from Wujin District (Changzhou City, China) in Israel. The delegation, headed by Wujin deputy governor, also included the Director of the Administrative Committee of Jiangsu Wujin Economic Development Zone (WEZ), three vice directors from the Organization Department , the Administration Office and the Development & Reforming Bureau of the Municipal Government of Wujin District, and a project manager from the WEZ.

The delegation toured in factories from South to North of the country, and held a series of meetings with Israeli industrialists organied by PTL Group. The visit agenda included meetings with Israeli companies that already operate in China, and other companies which are considering to establish a production facility in China.

This is the first delegation to arrive in Israel from Wujin Economic Development Zone.

Wujin is located in Changzhou City, in the center of Yangtze Delta Region, the most developed region in China. The area is developing rapidly in recent years and Changzhou city becomes an important center of the industrial triangle in Jiangsu province.

By the end of 2009, more than 3,100 foreign enterprises from above 100 countries and regions have established presences in Changzhou, 45 of which are Fortune 500 companies.

The city's attractiveness stems from several factors:

  • Its excellent location (about 40 minutes by train from Shanghai or Nanjing)
  • High level infrastructure
  • Construction and operation costs are relatively low
  • Consumption power in the city is on the rise. In 2009, GDP of Jiangsu province reached 37.05 billion USD, an increase of 11.7% over the same period a year earlier. GNP per capita was 10,000 USD in 2009, well above the average in China.
  • Quality of local government is another factor that encourages foreign companies to settle in the city. In the latest “2009 China City Competitiveness annual” Changzhou was selected as the city with most innovative municipal government and ranked the third in terms of municipal government service capability.
  • The local government actively supports and promotes foreign companies from the following industries: machinery, electronics, IT, renewable energy, advanced materials and bio-pharmaceuticals.
  • PTL Group currently manages a construction project for the Israeli factory in Wujin and we enjoy effective support and cooperation. We also examine options for future projects at this location because of the benefits local government provides to the foreign investors and the region's rapid development.

The purpose of this delegation's visit was to establish familiarity with the Israeli industry and to examine cooperation with Israeli companies from the target industries of Changzhou city.

Mepi Frankel, Director of PTL Group, escorted the delegation during the visit. His target was to strengthen the contacts between the representatives of the Israeli industry and Wujin Economic Development Zone and to promote future projects of PTL Group’s clients.

Stone Shi, Director of the Administrative Committee of Jiangsu Wujin Economic Development Zone, was impressed by the Israeli technological innovation and said that the visit reinforces his feelings about the Israeli industry. “It's my first visit to Israel but certainly not the last", he said.

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PTL Group Shares Secrets of Successful HR Management in China

Posted by Elena Luk'yanenko
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On October 20, 2010 training institute De Baak held a Master class on Human Resources Management in China at the recently launched Dutch Design Workspace in Shanghai. It was attended by senior managers from Dutch firms and governmental organizations. Zvi Shalgo, CEO and founder of PTL Group and Harry Genfa Liu, Deputy Director General of CELAP were invited to share their experience in managing HR in China.

Harry Genfa Liu focused on a historical aspect of HR in China and the ways it affects Chinese companies today, while Zvi Shalgo presented a hands-on approach on m Chinese employees backed up by real life cases based on his experience.

According to Zvi Shalgo foreign companies penetrating into the Chinese market, need to come up with an HR strategy specifically designed for the Chinese market. “Some companies make a mistake by implementing the European HR strategy on China operations”  he stresses. “Foreign companies need to be aware of the culture differences and align their “China strategy” with the local HR environment. Job hopping is a popular phenomenon in China, thus keeping your employees loyal to your company is a challenge to say the least.” Shalgo continues by mentioning the raise in salaries over the years in big cities like Shanghai.

“If I compare salaries I paid when I set up office in Shanghai 10 years ago, they are double from what I am paying today. There is an ever-growing job market and it's getting harder to find local talent.  Due to the lack of local talent in China companies end up fighting over the few available talents. It is a very competitive environment to operate in.”  According to Zvi Shalgo HR strategy in China should be designed for long term where foreign companies seek to create a platform of stability, self development and engagement of local Chinese employees.

Presentations were followed by round table sessions where Master class participants had a chance to discuss specific HR issues. During this session, participants of the Master class took the opportunity to educate themselves on several China HR topics, such as: differences in salaries and recruitment procedures compared to Europe. At the end of the day there were positive reactions among the audience of the Master class. They got a better understanding of HR in China and how it differs from the European standards.

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Expanding Production Closer to Target Markets - The China Case

Posted by Elena Luk'yanenko
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TEL AVIV, JULY 29 - About 40 senior managers from Israel local industries came to the professional seminar, organized by PTL Group in cooperation with the Kibbutz Industry Association.

The seminar was opened by Amos Shalev, head of the export department of the Kibbutz Industry Association and a senior exporter himself. Shalev referred to the fact that we are now in a period of change. “Today, he said, operating in emerging markets is a necessity. Production in China for the Chinese market is the order of the day”.

Mr. Shalev dispelled the negative image of factories in China, and shared his own experiences from plants he visited there that had left a good impression on him. “These plants”, he said, “are impressive and effective thanks to good management and full responsibility of the Israeli companies”.
 
 

Zvi Shalgo, CEO and Chairman of PTL Group and the Chairman of the Israeli Chamber of Commerce in Shanghai, reviewed the current trends in Chinese markets.

Mr. Shalgo described the privatization process in the Chinese market and noted that today less than 30% of companies are state owned while the rest of the Chinese market is open to competition. This competition however, he explained, is limited and controlled by government. In this context he referred to the business license’s restricted ‘Scope of Business’ and the expectation from foreign companies to contribute knowledge or investment in their China operations.

Mr. Shalgo reviewed the rise of the Chinese private companies, referred to the government support they enjoy and showed how the gap between Chinese and Western industries is narrowing, both in China and in global markets.

The next speaker at the seminar was Ilan Maimon, an experienced industrial entrepreneur in China. As a partner in PTL Group Industrial Project Management initiative, Mr. Maimon discussed the process of establishing a factory in China: from defining the company’s needs and planning the project in general, through finding a location and negotiating with the government, until the actual design, construction, certification and approvals for the new plant.

Mr. Maimon related to the practical aspects of setting up a manufacturing facility in China. He stressed the importance of effectively managing relationships with the local government and efficiently managing procurement processes. He also referred to the exceptionally rapid pace of construction in China and to how crucial it is for company professional teams to guide and supervise the running-in period. Finally, he presented and discussed a new project being built these days: PTL Group’s Industrial Park & Greenhouse in the city of Changzhou.

Roger Lu, CFO and VP Upstream of PTL Group, opened it with a discussion of government relations and permits in China. Mr. Lu, who has over 10 years of financial management experience in foreign companies in China, is a PTL Groups’ leading contributor to negotiations with local governments on the Licensing and Registration of Manufacturing Sites in China.

Mr. Lu opened explained that without government support it is very difficult to do business in China. Therefore, he said, before beginning the licensing process, the foreign company should obtain the government's commitment to support the Business.

Before starting a construction project one must ensure that the plant can receive all necessary permits for manufacturing and selling, build a schedule and expedite the process towards the target date. “Good relations with the government”, he said, “can shorten the licensing process from two years to six months.

Regarding negotiations with the government, Mr. Lu recommended to prepare a flexible investment model in advance. He suggested not to attend a meeting and try to find out what are the support options, but to present the project, arouse the government interest in it, and only then begin negotiations on the various options for support.

The seminar was summed up by Shai Givon, CFO of Lycored Group, a global company supplying raw materials to international companies in the dietary supplements and food industries, such as Nestle, Herbalife and others. Mr. Givon is in charge of the Lycored Factory and Logistics Center Construction Project in China, which is managed by PTL Group.

He explained that Lycored started the construction project of a new factory in China in order to provide a better service to their customers in the South East Asia and to satisfy their supply needs. Mr Givon shared with the audience some of the intra-company processes needed to be carried out prior to the beginning of the project.

He addressed the “China Phobia” that characterized both Western shareholders and clients, and presented Lycored's way to cope with it. As he said, it took three years to overpower the fears, by reducing the risks of the project significantly and by involving the clients in the planning process. Lycored was looking for a business model that will not include the considerable investment on land and factory construction, explained Mr. Givon. Accompanied by PTL Group’s team they were looking for an industrial park that will be open minded enough.  And as he said “the Chinese flexibility came through”.

At the moment the the factory is in latest stages of construction and Lycored is in the middle of recruitment process for the Chinese subsidiary. Mr. Givon shared with his listeners some lessons derived so far:
  • Learn from others’ experience – visit all relevant factories in the area.
  • Open your mind; learn to work the way and in the rhythm of the Chinese.
  • It’s crucial that negotiation will take place in the presence of your Chinese representative, that can handle the local negotiation style.
  • In China a personal commitment worth more than a contract.
  • Setting up a factory with a local partner is not recommended.
  • Although people think that China is Capitalist – it isn’t. The government has a stance and decisions are not necessarily economic.
  • Look for places that want your factory, offer incentives and even funding.
  • Local managers and workers are in a high professional level, not less than in the West. It’s just a matter of fee.
The event concluded by a lively free discussion following question from the audience. The listeners were eager to get hands-on information about costs, they were worried mainly about quality control, supervision means and other management issues.
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China’s Paradox of Talent: HR survival strategies

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on Thursday, 29 July 2010
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The Chinese labour market is a paradox of talent. Despite a large workforce there is a shortage of skills. The resulting excess demand for talent has created a seller’s market. Skilled locals have more employments options and are more likely to leave current employers if they feel dissatisfied. These employees seek career advancement, new challenges and opportunities. Employee retention poses a challenge to firms, with high turnover rate of around 20.8% and 21.8% in 2009 according to Hewitt China.

Seminar: Successful Management in China

Posted by Elena Luk'yanenko
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Tel Aviv, July 21, 2010 - About 50 senior financial managers from the local companies attended the professional seminar, held by PTL Group in cooperation with PriceWaterhouseCoopers.

The seminar was opened by Zvi Shalgo, CEO and Chairman of PTL Group and Chairman of the Israeli Chamber of Commerce in Shanghai. Mr Shalgo reviewed the latest economic moves of the Chinese government and discussed Chinese companies breaking into global markets. He noted their hold in China’s domestic market and the government support they enjoy. Yet, these companies are set to face challenges arising from newly forming global competition rules, which also provide new business opportunities.

"Research & Development is currently the main bottleneck of the Chinese industry. The ideal business solution would be to create real partnerships between Israeli Startups that are strong in technological development and large Chinese companies. Yet, this is not happening due to fears of copyright infringement"

Mr Shalgo stated that copyright issues often prevent hi-tech industry from entering China. However, as Chinese companies start to develop original products, China will need to strengthen copyright enforcement policies, which will soon be of great interest to major Chinese companies aiming for global markets. Changes in this area are expected to take place.

Panel members from left to right: Assaf Steinberg (PwC Israel), Tal Reshef, Zvi Shalgo (PTL Group), Arie Schreier (PTL Group)

Arie Schreier, VP Downstream of PTL Group, clarified a myth foreign companies believe about business in China. According to Mr Schreier "those who come to China pre-suppose the existence of fields that will be out of their control, or that they should avoid. He notes the essentiality of transparency and supervision of the whole supply chain - from production through sales, shipping, distribution, credit management and collection. He said,"Despite the concern of many foreign companies, it’s certainly possible to build infrastructure that will coordinate information and allow full inspection of work processes in China just as in source markets. This is the way to achieve competitive pricing in the Chinese market."

Roger Lu, PTL Group’s CFO, who maintains regular contact with Chinese authorities for company clients, spoke next: "China has many rules and regulations, but everything is subject to negotiation, you just have to know how to manage it" Roger also referred to the differences between the process of conducting negotiations of the Israelis and the Chinese, and shared the different benefits one can obtain from local government to establish business operations in China.

Assaf Steinberg, Senior Manager at PWC reviewed possible business structures and types of activities in China and their implications in terms of tax and profit removal laws of China. His lecture concentrated on the dramatic change that has occurred since the reform of tax policy on 2008. He also addressed the increasing openness of China and the uncompromising government attitude towards manipulations of transactions. He said that "currently the hottest topics in China are capital gains tax, duty of record and report, and the transfer of tax from local authorities to national authorities”. He further stated that "tax authorities in China are becoming more sophisticated, in line with the rules of the global market."

Tal Reshef, a researcher and lecturer on business culture in China, discussed the concept of management and administration in ancient China and its contemporary role. Through stories about the Emperor of China, Mr Reshef demonstrated basic concepts regarding Chinese culture: centralization of power, the harmony of opposites and China as the center of the world.

The event was concluded by Eran Lesser, Co-CEO of John Bryce Training, which provides advanced IT training in Beijing and Shanghai. Mr Lesser described the company's considerations and the processes leading to expansion into China. He introduced their business model which uses the physical, legal and managerial infrastructure of PTL Group. He also discussed the advantage of being able to form collaborations with local bodies in China such as universities, magazines or industrial parks. At present, the company is considering expanding its operations in China.

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