Shanghai: +86 (21) 5486 7259   US/Canada: 1 (514) 706-7887
Cemondia
   
 
 

Chinese firms have liquidity and Chinese consumers are hungry for new products and services, especially those coming from abroad. Add the fact that the world is full of great small to midsize businesses looking for ways to grow and so follows the logic of the Chinese “Push-Pull” Investment strategy:

 

Step 1: Start with a good small or midsized company outside of China that has a promising product or service attractive to Chinese consumers.

Step 2: Give it a fresh liquidity push through a Chinese outbound equity investment.

Step 3: Use this same Chinese business partner’s network to pull the product into the Chinese market.

More often than not this strategy works beautifully. Looking at the dynamics of such deals I came to envision a situation where two parties are on either side of a very large rock trying to get it up the hill: one side is pulling (product) while the other is pushing (equity). Whether or not the deal is successful depends on the simple laws of physics.

Why ‘Pull-Pull’ Doesn’t Work:

Pull on both sides of the rock at the same time and the rock stays right where it is. Trying to pull product into the massive Chinese market and your own market at the same time is not a good idea. “Pull-Pull” will stall your company by overextending your resources, not only because Chinese market dynamics are likely very different from those of your local market, but also because China is just so very far away. Instead, you should consider a liquidity push from your Chinese partner. This can take the form of an equity investment into your company or the creation of a joint venture.

Why ‘Push-Push’ Doesn’t Work Either:

Money pushed into a foreign company as a purely financial investment from China typically happens for the wrong reasons. I once heard a Chinese investor say, “I am not a salesman and I do not want to be involved in the business”. That should be your signal to go elsewhere. If the Chinese partner does not have a genuine interest in your business and does not see the advantage of leveraging their position in Asia to help pull your company in any way, the investment is not being made for the right reasons. Do you really want a silent investor half a world away? Find one across the street instead and thank me later. When problems appear, and they usually do, you can resolve your issues at the local coffee shop instead of having to deal with an escalating international situation which can often grow larger than the initial problem itself.

Why You Need To Push and Pull At The Same Time:

Physics teaches us that things need more force to get them to start moving than to keep them in motion. Investment and market execution must be synchronized from the start, and that’s when communication comes into play.

Obviously you do not need to read this article to know that problems in communication are the main cause of failure in this type of deal. I had a recent experience where a critical clause in a contract was translated into Chinese (by a large firm, even!) as the exact opposite of its original French meaning. This glaring error almost became a deal breaker. Furthermore, interpreters are typically young and though their TOEFL scores may be high, they often have a tendency to reinterpret and soften arguments during negotiations making all parties seem over polite and indecisive. If things seem to be floating, try shorter and more direct questions and insist on a short and direct answer. Ultimately, the success of your investment deal resides on building a synergy with your new business partner. You will come to rely on a dynamic where you and your new investor can exchange new ideas freely, so stay persistent in seeking ways to create and maintain that environment.

In conclusion, the Chinese “Push-Pull” strategy means finding a business partner in China, striking a deal that involves some new money flowing in through equity, then using your Chinese partner’s position to promote your product or service in China. This way the forces in play are well-interconnected and will help your company grow, while your new Chinese partner also gets rewarded through IRR and new business opportunities.

So take a moment and seriously consider the Chinese “Push-Pull” investment strategy and get that rock up the hill! Success can be yours, just keep in mind a few simple laws of physics.

 

Carl Breau

CEO | Cemondia Inc.

Shanghai, January 2014

LinkedIn

Attend conference on Push-Pull investment

plane

 

 
Secured Customer Login
 
LinkedIn Twitter Google+

 

Archives

Chinese "Push-Pull" Investment Strategy

   

The "Doing Business in China" toolbox

   
From the Chinese website

The quest for lithium

   

 

 
September 2015
Conferences with EDC
Starting from September 21st in Montreal, Carl Breau, along with Denis L’Heureux from EDC, will be giving a number of conference across Canada on “How to get Paid when Selling to Chinese Companies”
 
August 2015
Saimen welcomes Jiapei Xue
Saimen is proud to welcome Jiapei Xue as our new Branding and Marketing Manager in Shanghai. Jiapei brings over 6 years of direct experience in China Market Entry distribution and marketing.
 
June 2015
Cemondia CEO MC at Canada celebrations
Our CEO Carl Breau will be the English-French-Chinese Master of Ceremony at the Canada Day celebrations in Shanghai!
 
November 2014
Cemondia part of Quebec Premier China Delegation
We are proud to be part of the Official Quebec business delegation accompanying Quebec Premier Philippe Couillard to China from October 24th 2014 to November 1st. The delegation will be visiting Shanghai, Jinan, Qingdao and Beijing.
 
May 2014
Cemondia signs agreement with NVS Associates
Cemondia signs agreement with NVS Associates for marketing strategy and sales support in China. Matrizelementar Lda, who owns the NVS Associates brand, is a Portuguese company specializing in the sale of high-end real estate and also provides services to high net-worth individuals seeking immigration to Portugal.
 
March 2014
Dahua goes through a facelift!
Saimen LLC, a Cemondia company, reaches an agreement with Shanghai Dahua brazing materials Co. for the elaboration of their export marketing strategy and will also manage their export sales. Established over 25 years ago, Dahua is a leader in high performance brazing materials, serving manufacturers in all areas from appliances to aerospace.
All rights reserved. Copyright 2015/2016 © Cemondia inc.