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                                         Chinese Market:
                               Opportunities for Portuguese
                                       Companies
                                                                                            Wu Bin
                                                                SPI Chief Representative in China



             Porto – 16 Novembro 2004 –Sheraton Porto Hotel, Porto
             Lisboa – 17 Novembro 2004 – Pequeno Auditório do Nucleo Central do Taguspark, Oeiras


             Sociedade Portuguesa de Inovação
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                                                         Summary
                 1. Exporting to China

                       Main Sectors with Export Potential, SWOT Analysis,
                       Successful and Unsuccessful Examples, Practical Advices

                 2. Buying from China

                       Why Purchasing in China? What to Purchase from China?
                       Difficulties and Barriers

                 3. SPI Services

                       Your partner in China

       Chinese Market: Opportunities for Portuguese Companies
       November 04
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Exporting to China                                                      cm        cm




                                                 Exporting to China




       Chinese Market: Opportunities for Portuguese Companies
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            Main Sectors with Export Potential to China

                  1. Wine & Drinks
                  2. Foodstuffs
                  3. Top class fabrics & garments
                  4. Top class leather shoes
                  5. Furniture & Houseware (kitchenware, ceramic
                     ware, textiles, decorative items)
                  6. Building Materials (cork products, stones, ceramic
                     tiles, sanitary ware)
                  7. Machine Tools
                  8. Moulds (plastic injection)


       Chinese Market: Opportunities for Portuguese Companies
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                                         SWOT Analysis: Wine
                 1. Strenghts
                        a.    Long-tradition of winemaking;
                        b.    Good wine quality;
                        c.    Renowned Port Wine Image;
                        d.    New comers for Chinese consumers.


                 2. Weaknesses
                        a.    Lack of image in China;
                        b.    Invisible presence/few promotions;
                        c.    Local importers/distributors unwilling to buy;
                        d.    Little support from wineries.

       Chinese Market: Opportunities for Portuguese Companies
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                                         SWOT Analysis: Wine
                 3. Opportunities
                        a. Huge potential for imported high-quality wine;
                        b. Few Portuguese wines, little competition;
                        c. Consumers taste/preference.


                 4. Threats
                        a. Strong competition/dominance by French, Italian and
                           Spanish wines;
                        b. Competitive offer from Australia and California;
                        c. Low price from Chile, South African and Argentina.



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                           SWOT Analysis: Textile / Fabrics
                1. Strenghts
                       a. New material/high-tech fabrics is the new attraction in
                          China;
                       b. Competitive combination of quality and price, European
                          offer.


                2. Weaknesses
                       a. No image/presence;
                       b. Companies are not committed to marketing and promotion.



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                             SWOT Analysis: Textile / Fabrics
                 3. Opportunities
                        a. Large consumption of garments in China requesting high-
                           quality/top class fabrics;
                        b. Market is seeking new materials, with competitive offer.


                 4. Threats
                        a. Italy is very strong in this sector, due to its quality/class;
                        b. Most importantly, Italian companies are very aggressive in
                           promoting their products (Portugal has to learn from them).



       Chinese Market: Opportunities for Portuguese Companies
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                            SWOT Analysis: Leather Shoes


                 1. Strenghts
                        a. Quality shoes from Portugal;
                        b. Previous presence in China.


                 2. Weaknesses
                        a. Few promotions;
                        b. Companies not committed to overseas market.




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                            SWOT Analysis: Leather Shoes
                 3. Opportunities
                        a. Brand/quality shoes with comfort/good price is the new
                           fashion among consumers;
                        b. Special design shoes enjoy market niche for imported
                           shoes.


                 4. Threats
                        a. High-quality locally-made shoes from both joint venture
                           and domestic manufacturers dominate the market;
                        b. Local distributors prefer suppliers with commitment and
                           support, like Italian suppliers.


       Chinese Market: Opportunities for Portuguese Companies
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                 SWOT Analysis: Furniture & Houseware

                 1. Strenghts
                        a. European design is currently quite attractive in Chinese
                           market;
                        b. Portuguese design would be a new hot spot for demand.


                 2. Weaknesses
                        a. Lack of image, in terms of the industrial sector;
                        b. Almost no promotion/participation in trade fairs (namely
                           National Pavilion in Chinese fairs).




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                  SWOT Analysis: Furniture & Houseware
                 3. Opportunities
                        a. House purchase increase in China;
                        b. New fashion raises new decorative items and furniture
                           demand (young generations are seeking new furnishings
                           from abroad with competitive offer).

                 4. Threats
                        a. European countries like Italy and Spain are taking
                           advantages of their strong image in China, receiving more
                           buyers;
                        b. Supplies from Japan, South Korea, Taiwan and Hong
                           Kong become largest wholesalers in China for imported
                           furnishings.

       Chinese Market: Opportunities for Portuguese Companies
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                                         SWOT Analysis: Cork

                 1. Strenghts
                        a. Nr.1 Supplier with a strong image in China;
                        b. Market dominance.


                 2. Weaknesses
                        a. High cost, compared with competitive suppliers;
                        b. Chinese consumers not familiar with cork products, due
                           to lack of promotions.




       Chinese Market: Opportunities for Portuguese Companies
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                                          SWOT Analysis: Cork
                 3. Opportunities
                        a. Increasing consumption of wine boosting demand for
                           more cork stoppers;
                        b. Cork tiles application & promotion stimulates further
                           import of cork to China.

                 4. Threats
                        a. Spanish suppliers are very good in attracting Chinese
                           buyers (even stealing Portuguese customers);
                        b. Strong competition among Portuguese suppliers;
                        c. Chinese local processing factories supplying a competitive
                           combination of medium quality/low price stoppers.


       Chinese Market: Opportunities for Portuguese Companies
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                          SWOT Analysis: Machine Tools
          1. Strenghts
           a. Strong increase of exports to China in the last 3 years;
           b. A higher level of R&D and Innovation.



          2. Weaknesses
           a. Lack of image in China (low participation in trade fairs);
           b. No local presence to provide technical and after-sales support
              to Chinese buyers and end users.



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                             SWOT Analysis: Machine Tools
                   3. Opportunities
                         a. The huge market potential needs to be further tapped;
                         b. Strong demand of CNC machine tools;
                         c. Local presence will be more competitive for overseas
                            manufacturers in terms of brand, function, quality, price,
                            service, duration of delivery;
                         d. Turn-key project will be the new mode of business.

                   4. Threats
                         a. Competition is always very fierce and, without firm
                            commitment and investment in this market, it is difficult
                            to compete in this sector;
                         b. Lack of image of Portugal and Portuguese machine
                            tools in Chinese market.

       Chinese Market: Opportunities for Portuguese Companies
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                                     SWOT Analysis: Moulds
                   1. Strengths

                      a.      High production capacity and ratio of moulds of large-
                              scale, high-precision, complexity and long life duration
                      b.      High application level of CAD/CAM/CAE technology
                              including 3D design and 3D analysis during its forming
                              process with the high-speed measuring technology and
                              counter engineering as the back-up;
                      c.      High application level of hot runner technology, air-aided
                              injection forming technology, and high-pressure injection
                              forming technology;
                      d.      High standardization level of plastic mould and utilization
                              rate for standard pieces;
                      e.      Good quality moulds material and advanced surface
                              dealing technology.
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                                     SWOT Analysis: Moulds

                      2. Weaknesses

                             a. Almost invisible and unknown name of Portuguese
                                moulds in Chinese market due to lack of long-term
                                commitment and direct participation in the market;
                             b. Limited presence of Portuguese mould industry both
                                in the professional fairs in China and in the market,
                                providing local support;




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                                          SWOT Analysis: Moulds


                  3. Opportunities
                         a.      Great potential, as illustrated before, for the next
                                 decades;
                         b.      Potential demanding for mould and plastic mould;


                  4. Threats
                         a.      Fierce competition from: Chinese manufacturers in the
                                 low and medium class dies; Japanese/Taiwan in the
                                 medium and high range; Germany/Italy in the high
                                 range moulds.


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                                            Successful Example

                 Joint Venture
                 One Top Cork Supplier from Portugal and the Nr.1 Winery in China


                 Reasons for Success (Portuguese Company)
                        •     Winning a long-term big client;
                        •     Selling more cork to other clients in China;
                        •     Creating good image in China, taking advantage of the
                              strong brand name of the Chinese partner;
                        •     Taking control of core technology;
                        •     Natural industry / business / investment shift;
                        •     Successful investment.

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                                          Successful Example
                 Reasons for Success (Chinese Company)
                        •     Saving costs, compared with imported cork stoppers;
                        •     High quality stoppers, compared with local stoppers
                              processing factory;
                        •     Supplying stoppers to other wineries;
                        •     Part of the multi-sector investment strategy.

                 Reasons for Success (Joint Venture)
                        •     Strong demand of high quality stoppers from Chinese
                              wineries;
                        •     Providing local-made good stoppers at competitive price;
                        •     Strong demand from Nr.1 winery in China.

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                                        Unsuccessful Example
                 Export to China
                 Portuguese Olive Oil Company


                       Portuguese manufacturer:
                        •     Top brand olive oil producer;
                        •     Global exporter;
                        •     Excellent European brand.

                        Chinese buyer:
                        •     Nr.1 shopping center in Beijing (maybe in China);
                        •     Top brand image sense among Chinese consumers;
                        •     Good distribution network.
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                                       Unsuccessful Example

                 Reasons for “Divorce”
                        •     No market support to Chinese buyer;
                        •     Never visited China (requested by the buyer several
                              times);
                        •     Waiting at home for the orders (1st order is done at the
                              initial visit of buyer to Portuguese supplier);
                        •     Slow response for the daily email/fax communication;
                        •     No reply to the proposal from buyer for further business
                              development.



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                                       Unsuccessful Example

                 Current Situation
                        •     Chinese buyer, decided not to work with Portuguese
                              supplier;
                        •     Chinese buyer is now working with Spanish olive oils
                              and they are having extreme success;
                        •     Portuguese olive oil company has not yet realized it lost
                              one of the most important markets and huge profits.




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                     Business Culture: Barriers and Reality

                 •     Most Chinese companies/people do not know Portugal;
                 •     Portuguese products are not yet known in China;
                 •     Many Chinese companies do not speak English or
                       Portuguese;
                 •     Strong market support is highly expected from Chinese
                       buyers when negotiating;
                 •     Some P.R. activities are necessary as there are too many
                       suppliers, both domestic and abroad;
                 •     Chinese distributors & consumers attach great importance
                       to the brand name.


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         Practical Advice for Portuguese Companies

             Short-Term
             •     Considering Chinese market as priority export market;
             •     No sow, no reap; Chinese market needs your “investment” by all
                   means, a gradual step;
             •     Selling Portuguese edging products, unique and competitive
                   (unique means both attractive and meet local taste; competitive
                   means both price and quality compared with Chinese and other
                   foreign competitors);
             •     Frequent promotions and gradually build your own image;
             •     Work closely with your Chinese partners;
             •     Finding a good local partner and obtaining their best cooperation
                   by supplying the best offer.
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        Practical Advice for Portuguese Companies

             Mid-Term
             •     Market segmentation and development based on the principle
                   of appropriate market research;
             •     Fostering your own brand name in China by frequent
                   participating in local and nationwide affairs thus creating a
                   sound image;
             •     Working closely with your Chinese partner and supporting
                   promotions; have your own presence increasing gradually
                   (local representative office, e.g.).




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        Practical Advice for Portuguese Companies

             Long-Term
             •     China is a place for the long-term commitment, devotion,
                   gradual evolution and eventual success, not for short-term
                   speculation.
             •     Study it carefully all the time and practice, adapt to it
                   (localization) and make innovation (internationalization).
             •     Money, Time, Patience and Relation.
             •     Flexible small & medium enterprises with specialties.




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                                                                 Buying
                                                                from China




       Chinese Market: Opportunities for Portuguese Companies
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                                     Why purchasing from China


                  1. China becomes a world leading manufacturing base


                  2. Supplying quality products with competitive price


                  3. Wide application of OEM mode




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                                                What to purchase

            1. Various commodities;
            2. Agriculture & garden tools and appliances: sprayer, pump,
               motor and other electric farm and garden appliances.
            3. Gifts, toys, handcrafts, shoes, bags, etc.
            4. Textile products;
            5. Tools and small hardware;
                                                                There are many more…




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                                          Difficulties & Barriers
                  1. Risk always exists for int´l business, either quality, credit,
                     payment problem;

                  2. Communication is difficult: a different language; emails do
                     not work effectively; contacts are mostly done through
                     phone and meetings;

                  3. More time consuming;

                  4. Travelling to China without local support (local staff
                     speaking Chinese) would be extremely difficult, for both
                     meetings and logistics;

                  5. Cultural difference plays an important influence on the
                     success of the business meetings.

       Chinese Market: Opportunities for Portuguese Companies
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SPI Services                                                         cm        cm




                                                       SPI China
                             Services and Business Scope




       Chinese Market: Opportunities for Portuguese Companies
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SPI Services                                                                cm        cm




                                                      SPI China


                  •       Market Assessments
                  •       Building Partnerships
                  •       Local Representation
                  •       Promotional activities
                  •       Organization and support of missions to China
                  •       Creation of representative offices/subsidiary




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SPI Services                                                      cm        cm




                                         MUITO OBRIGADO!




       Chinese Market: Opportunities for Portuguese Companies
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SPI Services                                                                                          cm        cm




                                                                     Pequim - R.P.China
                         Porto - Portugal
                                                                XueYan Building A108, Tsinghua Science Park
                 Edificio “Les Palaces”                         Tsinghua University, Beijing 100084 P.R.
                 Rua Júlio Dinis, no. 242, 208 – 4050-
                                                                CHINA
                 318 Porto, PORTUGAL
                 Tel: 22 607 64 00                              spichina@spi.pt
                 Fax: 22 609 91 64
                 spiporto@spi.pt

                                                                      Columbia (Maryland) - EUA
                        Lisboa - Portugal                       10025 Governor Warfield Parkway, Suite 214
                 TagusPark                                      Columbia, MD 21044 USA
                 Núcleo Central, 232                            Tel: +1 410 997 5600
                 2780 - 920 Oeiras, PORTUGAL                    Fax: +1 410 997 3554
                 Tel: 21 421 22 49                              spiusa@usaspi.com
                 Fax: 21 421 12 01
                                                                        Irvine (California) - EUA
                 spilisboa@spi.pt                               2102 Business Center Drive, Suite
                                                                220E
                                                                Irvine, CA 92612 USA
                                                                Tel: +1 949 253 5702
                 www.spi.pt                                     Fax: +1 949 253 5703
                                                                spiusa-irvine@usaspi.com

       Chinese Market: Opportunities for Portuguese Companies
       November 04

				
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