There are two reasons why many companies are still hesitant to do business in China. The first is the fear that there are too many regulations and too much government intervention in their industry. The companies are concerned that their control over the Chinese company is too limited and that they are only used for the transfer of capital and technology. The second is the belief that it is too late to really benefit from China’s state of development in 2009. Many of the multinationals set up shop here in the mid-1990s, and there is some concern that most of the loot has already been doled out. . . Both of these ideas cause and should cause some concern, but they should not become a reason to stop doing business in China. The following is an example of why there is nothing wrong with moving to China late, in an industry that is under heavy government control.

Vossloh AG is a listed German company in railway infrastructure and technology. One of its main products is steel rail fastening systems that attach the track to the sleepers below. In 2006, Vossloh opened a representative office in China to start business here and explore the market. Shortly after, in March 2007, Vossloh began construction of a manufacturing plant in Kunshan, a high-tech industrial development zone on the outskirts of Shanghai. Due to industry regulations, they established their presence through a joint venture with NISCO, an iron and steel industrial giant from nearby Nanjing. Vossloh managed to maintain a stake of around 80%.

Helped by the advantages of settling in a location encouraged by the government Outside of Tier 1 cities in China, Vossloh was able to complete construction of its Kunshan plant in just three months, just in time to start work on some of China’s most advanced rail infrastructure projects. Vossloh’s current and past work in China includes the new high-speed line connecting Shanghai to Beijing, the Olympic line between Beijing and Tianjin, and the prestigious Golmud – Lhasa railway through Tibet. Even before production started in 2007, Vossloh had already secured mega-contracts worth €185 million. The demand for fastening systems on the Shanghai – Beijing route alone will keep the factory running at full capacity for most of 2010. The success of this project means that Vossloh will be able to successfully participate in many other infrastructure projects that the Chinese government has planned for the future.

Vossloh’s foray into China proves that late entry into the Chinese market and industry regulations for establishment do not have to be a problem for your company’s success. The joint venture with NISCO is working out quite well for Vossloh as they have found a strong steel supplier in them, one that is just as concerned about the well-being of their business in China as they are. It has also provided them with the necessary government connections (not to be confused with corruption) to be able to participate in the larger projects, and Vossloh’s 80% stake is highly beneficial. His entry in 2007 was simply based on opportunity. Through its representative office in 2006, Vossloh looked at the Chinese market and noticed the large number of railway infrastructure projects that were starting up. That alone was reason for them to set up operations here. The fact that they weren’t alone in this market didn’t stop them for a minute – and it shouldn’t stop you either.