"One of the things that I've learned about China is be very very careful, because there are a million arguments about why they can't do something," Mr. Desmarais says. "For many years I doubted them a lot, saying 'There's no way they can achieve these plans at the speed at which they're able to achieve them.' But I think I've found, with the history of having to be able to go so often, that they have a fantastic planning system, they have tremendous determination, they have courage, and a huge amount of brain power to achieve their goals."
These are lessons that Power Corp. has been able to impart to other Canadian businesses. Over the years, it has paired up with a number of companies to smooth their entry into China - and make money, by selling its investment in the ventures to the other firm once the project is established.
For instance, Power Corp. partnered with Bombardier Inc. on its original train deal in China, Mr. Desmarais noted. The companies worked together to win the contract. Bombardier then built the trains and bought out Power Corp.'s stake in the joint venture that the two firms had established with China National Railway Locomotive and Rolling Stock Industry Corporation.
"It took some time, I don't think we saw any significant business until four or five years ago, so it required a lot of patience," says Pierre Beaudoin, CEO of Bombardier Inc. "Because we believed in the long-term growth potential, we invested a lot to build relationships there."
For Bombardier's businesses, China is the country where Mr. Beaudoin sees the most growth potential of any in the world. And that means that Bombardier's relationship with the Chinese government is of the utmost priority, because items such as trains and planes are largely bought by state-owned companies.
"In many ways in China it is very clear who is the customer," Mr. Beaudoin says. "It is a communist country, the government does centrally control decisions."
While that might have been self-evident to Bombardier, not everything was.
"The challenge is understand, understand, understand," adds Jianwei Zhang, the president of Bombardier China. "Be clear. Understand the needs of the customer, understand the Chinese needs."
He recalls being asked by a Chinese customer why there wasn't a return clause in the contract for a train, enabling that customer to return the train to Bombardier if something was wrong with it. "For them it was very difficult to understand that you can't return a train," he says. "In practice, it's impossible. If there's a problem then you correct it, but how do you return a train?"
Another anecdote: a few years ago Bombardier executives were ready to sign a contract that had been under negotiation for several weeks. Just before the signing ceremony was scheduled to take place, they stumbled upon the realization that the two sides had different understandings of when the delivery date would be. The problem stemmed from a mistranslation of the English word "shipment." Bombardier's negotiating team thought that referred to the delivery from its facility to the port, while the Chinese translation was that the trains were put on the ship to China at that time. They had to renegotiate.
There are other hurdles. Chinese companies in a number of industries have quickly learned from their foreign competitors, and they are increasingly forces to be reckoned with. Bombardier's main competitor in China is now a Chinese firm. It can deliver an order in months, not years, and has lower costs.
Bombardier has more than 4,000 employees in China now, and by and large it requires them to understand both Chinese and English. As a result, its labour costs are higher than its Chinese competitor.
But the immensity of the Chinese market means there's enough business to go around. And for all of the energy that they've poured into China, Canadian companies are starting to reap rewards.
Nevertheless, most still describe their ventures in the country as investments for the next generation.Report Typo/Error
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