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Werner Hoyer, President European Investment Bank and European Investment, Infrastructure, and Innovation

By |2018-01-12T19:13:49-05:00January 12th, 2018|Categories: Global Business News, Global Business Strategy|Tags: |

Investment, infrastructure and innovation were the theme of Werner Hoyer’s discussion with the New York European American Chamber of Commerce discussion on January 12.
Dr. Hoyer, in conjunction with a panel of finance, economic, advisory, and risk experts, described the investment environment in the European Union noting areas of opportunity and risk.

The European Investment Bank (EIB) focuses on building EU internal markets supporting and contributing to the general equilibrium across Europe.  The European Council gives direction to the bank, and the bank must abide by their investment direction.   For example, support for Russian development from the bank was stopped when sanctions were imposed on Russia as a result of Russia’s take over of Crimea.

Dr. Hoyer described the two primary areas of investment focus in Europe to be infrastructure investment and innovation.  Infrastructure investment is part of the DNA of the bank.  Developing infrastructure was one of the primary reasons for its incorporation.  Today, Europe finds itself in needs of infrastructure development in roads, bridges, tunnels, and buildings.  The bank funds this development.

Dr. Hoyer mentioned about 1/3 of the investment activities of the bank include providing easy access to financing for small and medium sized businesses.  In Europe approximately 80% of financing comes from banks, vs. in the US where approximately 75% of financing comes from the capital markets.   This helps financing for innovative companies and aligns with the growth of country supported innovation centers.

Renewable energy, healthcare, and  technology were three innovative investment areas that were robust and growing.  Birchtree Global has also seen a rise in these industries in our portfolio of globalizing clients.   He was pleased to note the change in position on climate change by the US administration did not seem to affect the growth of innovation and the commitment of US states and cities to maintaining and growing the focus on renewables.   He cited his meeting with Jerry Brown, Governor of California, and Mike Bloomberg as evidence of this commitment from US states and cities.  The growth in the EU economy and the decline in unemployment contributed to the warm investment environment.

Challenges remain in EU member states, such as Greece and Portugal, however good efforts and results have been made over the last two years.  Low interest rates are challenging and increasing rates without stifling growth are a tconcern.  He noted as a challenge that the BREXIT decision was a bad one.  He noted the rise of nationalism, whether “America First” or “Brexit” was economically limiting growth.   Enhancing competition and innovation were seen as ways in which these challenges might be overcome.

For additional information check out the European American Chamber of Commerce (www.eaccny.com) and the European Investment Bank (http://www.eib.org).

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Canada in January!

By |2013-08-08T14:54:56-04:00August 8th, 2013|Categories: Birchtree News, Global Business News, Uncategorized|

Canada in January!

Janet Walsh and Birchtree Global staff will be speaking at the 2014 HRPA conference in Toronto. It is one of the best run business conferences with which we’ve been associated and we’re looking forward to returning. Our speech will be on “Key Considerations in Global Start-Ups”. We look forward to skating in the park next to the conference facility and enjoying the vibrant culture of Toronto.

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Business Exchange to Bangalore

By |2013-01-10T17:10:36-05:00January 10th, 2013|Categories: Birchtree News, Global Business News, Global Business Strategy, Uncategorized|

Dinner at Consul General's

Janet Walsh and five New York Rotarians are embarking on the first New York-Bangalore business exchange. The group was hosted at a gala dinner at the home of the Indian Counsul General of New York. The purpose of the trip is to develop a deeper understanding of the business and cultural environment of the two countries. The team will be hosted by the Rotary community in Bangalore. The group will spend time with Infosys and Toyota and tour the region. Bangalore is well known as the technology capital of India. Birchtree Global’s team have set up businesses in Bangalore and have been pleased to see their client’s grow and develop in this location.

Later this year, Bedford-Armonk and other NY Rotary chapters will host guests from Bangalore to the New York City region. It is anticipated that this group will lead the development of future exchanges around the globe.

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China passes new legislation focused on employer and individual misuse of entry visas and permits

By |2012-07-06T09:52:03-04:00July 6th, 2012|Categories: Asian Business, Global Business News, Uncategorized|

On June 30, 2012 China passed legislation specifying entry and resident requirements affecting employers and individuals.  Although the legislation is effective July 1, 2013, stricter enforcement by Chinese immigration authorities is expected between now and then.  This new legislation also includes a new visa category for highly talented foreign workers, new bio-metric screening technology, and specific registration resident processes.

Companies that have traditionally given little thought to sending workers to China on tourist visas to conduct business should rethink their strategy in the light of heavy fines and penalties that accompany violations of this new law.  China conducted a series of audits of its immigration compliance programs in selected cities around the country and found much evidence of lax enforcement.  The focus in the coming months and years will be on stricter enforcement of existing policies including examination of “invitation letters”, and registration by foreigners of their location with the local police authorities (something typically done at hotel registration).

Businesses with anticipated Chinese travel requirements or current Chinese interests are encouraged to view the entire travel requirements on the Chinese embassy website or speak with their immigration professional.

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Janet Walsh Interviewed by Joyce Bone on “Establishing Business Operations Overseas”

By |2012-07-03T22:47:35-04:00July 3rd, 2012|Categories: Birchtree News, Global Business News, Global Business Strategy, Global Finance, Uncategorized|

Janet Walsh Interviewed by Joyce Bone on “Establishing Business Operations Overseas”

Listen to Wall Street Radio Joyce Bone July 22, 2012 interview with Janet Walsh on key legal, financial, tax and human resources success factors in establishing a business overseas.  Janet discusses doing business in the CIVETS and BRIC countries as well as types of industries going global and location incentives.

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“Funding Foreign Direct Investment in China(c)”

By |2012-06-04T16:04:29-04:00June 4th, 2012|Categories: Asian Business, Global Business News, Global Business Strategy, Global Finance, Uncategorized|

“Funding Foreign Direct Investment in China(c)”
by
Janet L. Walsh

The Chinese economic market is powerfully attractive to foreign direct investment. Despite predictions for a slow down, projections for the rate of real GDP growth in China is currently a robust 8.7% (United Nations, 2012).

Companies interested in expanding operations into China do so to follow their customers, improve their supply chains or manufacture at reduced cost.  Companies considering a move to China may find it helpful to look at the entry strategies of firms currently operating in this market.  Different types of businesses are expanding into China but the following four broad categories of organizations represent some of the most active areas of foreign direct investment (FDI).

a. Medical and health related technology, manufacturing, and services

b. Alternative energy, solar, wind

c. Light manufacturing including consumer goods, industrial production

d. Technology related businesses, manufacturing, and services

Although in the recent past, FDI into China focused on manufacturing there is a rising demand for service sector, professional services including legal, financial, accounting, human resources and retirement.  Several areas are of particular interest to those interested in this market.  For example, incentives for FDI in China include an aging population, the average age in China is 37 (Dezan Shira, 2012) and more than 60% of the population smokes (Ma, 2010) making health care, retirement communities, medical device manufacturing, and technology businesses take notice.

Services businesses however face different market entry hurdles than do manufacturing firms.  Firms in this sector often face additional regulatory requirements that include the involvement of local companies or organizations. As a result service sector firms may find purchasing local “mom and pop” companies or strategic alliances the easiest way to enter this market,

China’s labor rates are increasing.  This makes manufacturing in China not the bargain it once was but higher salaries and desire for a broader array of products mean more opportunities for retail sales (Dezan Shira, 2012).  Standing on the Bund in downtown Shanghai is not much different than standing in the middle of any other large western, sophisticated city where one can purchase a luxury watch, shop for Prada clothes, drink gourmet coffee, and drive around in a Buick.  General Motors, for example, a participant in the Chinese car market for many years, finds this country to be their largest market for car sales (China Business Review, 2011).

Chinese industrial upgrading and green energy initiatives are a feature of the 12th Five Year Goal Plan the cornerstone of state central planning.  These initiatives have attracted US FDI from wind, solar, and lighting companies (Dezan Shira, 2012).

Also featured in the Five Year Goal Plan are technology incentives with the objective of increasing China’s technology impact from production to innovation.  This emphasis on growth offers partnership opportunities for technology, software, and IT firms to access a growing market (Dezan Shira, 2012).

Businesses currently operating in or expanding into China are funding expansion through some of the following foreign direct investment strategies:

Joint Venture

China Investment Financing

Chinese Government Funding

Capital Raise

Investing Revenue from Growth Operations

FDI into Traditional Entry Ports-Hong Kong/Singapore

Multiple Investment Strategies

Private Placement Funding

Examples are as follows:

Joint Ventures:

Joint ventures, partnering with a local Chinese firm for vertical or horizontal integration strategies, have two important advantages.  The first is the advantage of an immediate presence in country and the second, a partner familiar with the business landscape.  An established firm is also able to access government funding more easily than a foreign firm new to the market.  China Cord Blood Corporation, a life sciences company which stores umbilical blood stem cells is one example of a successful partnership which has benefited from Kholberg Kravis Roberts & Company’s capital investment of $65 million (China Cord Blood).

For these joint ventures a key component of success is managing expectations, costs, performance measures, and cultures.

Cessna and Aviation Industry Corporation of China, an aviation joint venture and Ascletis a joint venture between United States and Chinese entrepreneurs in specialty therapeutics for cancer and infectious diseases, are two other recent examples of successful joint ventures in this market.

Chinese Investment Financing:

In the future, funding for operations in China may increase as the government seeks to develop a more robust, freely traded internationalized Renminbi currency (RMB).  For example, from 2010 to 2011 there has been a quadruple rise in “dim sum bonds” or “Ronald McDonald Bonds.”   These bonds are money raised in RMB in China to support Chinese investment.  Companies such as McDonald’s, Tesco, BP Capital and L’Air Liquide have benefited significantly from this type of investment (Kriegler, 2011).

A recent conference with HSBC bank’s “Business Without Borders” group on May 16, 2012 in New York City, moderated by the Economist magazine’s Global Forecasting Director, Leo Abruzzesse, also discussed the rising attractiveness of RMB financed bonds particularly as the currency becomes more internationalized.

Chinese Government Funding:

Companies entering the Chinese market find two government funded programs.  The first is direct investment by the Chinese government and second the development of economic free trade zones and corresponding incentives for locating in a zone.  The Chinese government’s 12th Five-Year Plan has as one of its focuses R & D funding for emerging technologies.  China is raising R&D funding for emerging technologies by 159% to as it anticipates moving from manufacturing technology to innovating technology (Lux, 2012).

For example, Ascletis has received a record level research and development grant from Hangzhou National Hi-Tech Industrial Development Zone under that organization’s “5050 Plan.” The 10 million RMB grant (approximately US$1.6 million) is the largest startup company grant in the history of the 5050 Plan, whose goal is to incentivize and assist start-up, technology-based companies within HHTZ, Hangzhou, Zhejiang Province (Ascletis).

As China opened its markets to foreign direct investments economic development zones were established in cities like Shanghai and Beijing.  The economic development in these zones varies significantly and illustrates the role the state and local conditions play in successful investment (Yehua and Chi Kin, 2005).  For example, Coca Cola established bottling operations in Shanghai in the 1990’s which induced their suppliers such as the Mead Corporation to become established in the region to support their customer.

Capital Raise:

Metaps Inc. a Japanese firm is a company that specializes in increasing revenue for Smartphone apps, provides a one-stop shop service for Smartphone app developers, from boosting traffic through monetization. Metaps has arranged private placement financing to raise US$4.2 million from five venture capital firms. The proceeds from this capital raise are to be used to increase the company’s Asia-focused business platform (Metaps).

Multiple Investment Strategies-Public/Private/Investment:

Large organizations, such as Siemens, benefit from multiple investment strategies to finance their global operations, combining public, private investment, and revenue from growth operations (Katz, 2010).  Smaller firms can also use this concept to fund investments that may serve to hedge any concerns over disruption in elements of their strategy.

As mentioned, General Motors’s has done well with multiple strategies to establish a strong presence in the auto manufacturing market. Their efforts have been helped by Chinese subsidies and other incentives (China Business Review, 2011).

Growth Fund Investments:

Growth Fund Investments offer another way to enter the Chinese market.

Sino-Ocean Land Holdings Limited its subsidiary Gemini Investments Limited and KKR China Growth Fund, L.P., a China focused investment fund managed by Kohlberg Kravis Roberts & Co L.P. has established an investment process to capitalize on the long-term potential in China’s real estate market (Sino-Ocean Land Holdings Limited).

Revenue from Growth:

Entry into the China and Asian markets can be funded through revenue from growth operations as evidenced by the LED lighting industry.  The use of LED lighting to lower energy usage is increasing as the price declines for LED products.

Given the amount of infrastructure development business opportunities are being created for LED lighting systems and prices are expected to rise sharply after 2015 according to a recent report from Pike Research.  They project revenue from LED lighting in the Asia Pacific region to total $11 B USD through 2021 (Pike). This rising revenue growth can be transferred into building local strength and presence in this market.

Foreign Direct Investment into traditional entry ports such as Hong Kong:

Historically Hong Kong has been a gateway for foreign direct investment into the Chinese mainland.  Companies that wish to enter the Chinese mainland market but lack experience or business partners begin the process by entering into Hong Kong a special economic zone.  Hong Kong has a high per capita GDP but also some of the highest land and labor costs in Asia, much more expensive than the lower cost Chinese mainland.  Entering the Chinese market through Hong Kong, establishing a sales or subsidiary office on the island and production facilities on the mainland is a useful market entry strategy.

The duty free status for Hong Kong goods into mainland China, minimized restrictions on Chinese tourists visiting Hong Kong, and the aging population in Hong Kong offer business opportunities in manufacturing, retail, tourism, and health related businesses.

Private Placement Funding

Private placement funding is a fairly typical way to enter a foreign market and may involve multiple investors sharing the risk.  Metaps Inc. announced they have arranged private placement financing from five venture capitals. The proceeds from this private placement will secure human resources from the Singapore-based, wholly owned subsidiary “Metaps Pte. Ltd.”, and also to advance the company’s Asia-focused business platform.  

In conclusion, there is no one fixed methodology to entry the Chinese market.  The above illustrations provide a short summary and serve to illustrate the broad range of options firms have when considering foreign direct investment.  These options should be considered in light of future trends and opportunities as this market continues to evolve.

References

Ascletis, I. c. (0001, April). US-China Pharmaceutical Venture Ascletis Receives Record-Level Research and Development Grant from Hangzhou. Business Wire (English).

China Cord Blood, C. (0004, December). China Cord Blood Corporation Announces Investment by KKR. Business Wire (English).

Huang, D., 2012. Emerging Asia Comparison: China vs. India and Vietnam. Dezan Shira Publications, Bejing. 

General Motors Races Ahead in the China Market. (2011). China Business Review, 38(2), 54.

Katz, J. (2010). Siemens Puts Green on Fast Track. Industry Week/IW, 259(8), 34.

Lux, R. (2). Innovation China: The Middle Kingdom Boosts R&D Funding  on Emerging Technologies by 159% to $18 Billion. Business Wire

Kriegler, Y. (2011). Dim sum finance: tasty. Lawyer, 25(43), 10.

Lux R. Innovation China: The Middle Kingdom Boosts R&D Funding on Emerging Technologies by 159% to $18 Billion. Business Wire (English)  [serial online]. 2:Available from: Regional Business News, Ipswich, MA. Accessed May 30, 2012.

Ma, S. (2010). Affluence prompts more women in China to light up. CMAJ:  Canadian Medical Association Journal, 182(12), E557-E558. doi:10.1503/cmaj.109-3307

Maitland, E., & Sammartino, A. (2012). Flexible Footprints: RECONFIGURING MNCs FOR NEW VALUE OPPORTUNITIES. California Management Review, 54(2), 92-117. doi:10.1525/cmr.2012.54.2.92

Metaps, I. c. (12). Smartphone Monetization Platform “Metaps” Secures US$4.2  Million Funding, Accelerating Its Asian Expansion from Singapore. Business Wire (English).

Pike, R. (4). Revenue from LED Lighting in Asia Pacific Will Total $11 Billion Through 2021, Forecasts Pike Research. Business Wire (English). Regional Business News, Ipswich, MA. Accessed June 4, 2012.

Sino-Ocean Land Holdings Limited and, K. (0009, May). Sino-Ocean and KKR  Announce Real Estate Investment Platform in China. Business Wire (English). Regional Business News, Ipswich, MA. Accessed June 4, 2012.

SWOT Analysis. (2012). Hong Kong Commercial Banking Report, (2), 7-9. Retrieved from Business Source Complete, Ipswich, MA.  Accessed June 4, 2012.

United Nations. (2012). World Economic Situation and Prospects 2012. Retrievedfrom//www.un.org/en/development/desa/policy/wesp/wesp_current/2012wesp_pr_eastasia_en.pdf

Yehua Dennis, W., & Chi Kin, L. (2005). Development Zones, Foreign Investment, and Global City Formation in Shanghai. Growth & Change, 36(1), 16-40. doi:10.1111/j.1468-2257.2005.00265.x

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CIVETS, BRIC’S and FDI

By |2012-05-17T09:59:26-04:00May 17th, 2012|Categories: Asian Business, Birchtree News, Global Business News, Global Business Strategy, Global Finance, South American Business, Uncategorized|

           Birchtree Global, LLC New York based staff attended the Business Without Borders presentation hosted by HSBC bank in Manhattan on May 16.  An excellent program on the emerging CIVETS countries and their attractiveness to foreign direct investment.  The program was presented by Leo Abruzzesse Global Forecasting Director at the Economist Intelligence Unit.         

          Abruzzesse provided a compelling presentation on the emerging markets of Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa.  He concluded that from a political, economic, legal and business perspective these growing economies are attractive FDI targets.  His illustration of GDP growth patterns over the next several years showed the BRIC countries bracketing the CIVETS with the G7 countries at the bottom.  

          We asked him to compare the service sector investment opportunities in these countries.  He and the panelists he brought with him indicated that services were needed but had different regulations that would require a slightly different approach to FDI.   Acquiring an in country firm or merging with an in country firm was seen as the most expeditious approach.

          HSBC bank provided a summary of their financial products and services that were designed to get cash back to investors more quickly improving cash flow.  These were interesting and innovative, are worth considering and can be seen on their website.

          Entry into these markets is not without risk and is more complex than market entry into the BRIC countries.  We note that Birchtree Global has worked in all these locations over the past several years and can provide guidance to businesses wishing to establish company activities in these countries.

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Birchtree Global News

By |2012-04-12T14:49:55-04:00April 12th, 2012|Categories: Asian Business, Birchtree News, Global Business News, South American Business, Uncategorized, Webinars|Tags: , , , , , , |

Birchtree Global, LLC to showcase Dezan Shira’s research

Janet Walsh met with Chris Devonshire-Ellis, Principal & Founding Partner of Dezan Shira & Associates financial firm and publisher of, Asia Briefing Media Ltd. to discuss development opportunities in Asia and India.   Chris commented that opportunities for companies in the medical equipment, devices and manufacturing area were strong and prospects for growth were increasing largely due to the ageing Chinese population, and heavy long term medical needs (implications from smoking and industrial pollution).  He also noted that there was a strong demand for manufactured goods as the number of middle class consumers continue to grow and expand.

Birchtree Global and Dezan Shira will be partnering to provide our clients a series of updated webinars on foreign direct investment in Asia and India in the coming months.

Our first webinar will be on May 23, and presented by Daisy Huang.  Daisy is the head of Audit and Compliance for the Dezan Shira South China practice group.  Daisy’s program will highlight; Important changes in China and the ASEAN region-economic, demographic, compliance and cost issues; Daisy will also discuss, practical considerations in establishing a business in Asia.  This webinar is designed for C-Suite leaders and executives who need to have a clear understanding of the recent changes in Chinese legislation and how they will affect foreign direct investment-either established or proposed.  If you are interested in attending, please email info@birchtreeglobal.com for additional information.  This webinar is free to our clients and friends and will be HRCI Certified.

The Global 20© in Cuba

Janet Walsh recently returned from a fact finding trip to Cuba, focusing on potential foreign direct investment by US firms post embargo.  Some facts of interest include:  The US is Cuba’s sixth largest trading partner with over $350,000,000 in agricultural supplies, food and medicines sold to the country-cash payments in advance of sending product.  In the last year 500,000 US citizens have visited Cuba on family, trade, tourism activities.  In 2010 facing a shortage of funds, Cuba privatized ownership of small businesses, some property, cars and, at the same time, terminated 500,000 employees from public employment.  The average wage is $30 USD/Month and the literacy rate is 98%.  Havana is a 40 minute flight direct from Miami.

The model for growth in Cuba looks like the one used by China in the early 80’s-FDI used to develop infrastructure and technology in a country that lacks everything.   Cuba needs infrastructure, building products, IT and services, medical equipment and drugs, food, paint, and hospitality services

For companies interesting in reviewing more details from this trip contact info@birchtreeglobal to access the webinar. 

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Foreign Direct Investment Notes on China and Cuba

By |2012-04-12T14:47:57-04:00April 12th, 2012|Categories: Asian Business, Global Business News, Global Business Strategy, South American Business, Uncategorized|

Global Foreign Direct Investment Notes-China:

Many of our clients are establishing operations in Asia.  You may be interested in the remarks by Naoyuki Shinohara, International Monetary Fund Deputy Managing Director.  He supports the conclusions by Chris Devonshire-Ellis regarding targeted growth opportunities in China.  On March 27, 2012 he concluded:

1. Prospects for the global recovery have improved, but downside risks still loom large

2. Growth in Asia is set to gain momentum, but exposure to outside risks are significant

3. Key near-term challenges is to calibrate the insurance still needed to support stable, non-inflationary growth

4. Greater regional integration can support economic rebalancing and make Asia more resilient to external shocks

Director Shinohara’s full text comments can be found at: http://www.imf.org/external/np/speeches/2012/032712.htm

Global Foreign Direct Investment Notes-Cuba:

Cuba is known for medical services.  There is a concentrated effort by the Cuban government to establish Cuba as a leader in medical services.   This effort has resulted in medical services surpassing tourism as the largest foreign exchange activity1. Two areas medical tourism and exporting medical professionals are worth mentioning.

Medical tourism has increased in Cuba attracting foreign patients who are treated in hospitals and clinics that are part of Cuba’s National Health System.  As reported by A. Gabriele in Economics, Management & Financial Services (2010) 1, rehabilitation therapies for drugs and alcohol addicts, treatment of pigment rethinosis, vitiligo, psoriasis, alopecia (hair loss); surgical and clinical programs, including esthetical surgery and, neurological restoration; health checks and check-ups are among Cuba’s specialty treatments.

Cuba has a vigorous program to export medical knowledge workers.  It is estimated that over 100,000 Cuban health workers have worked outside of Cuba for extended assignments since the early 1960’s.1  A loosening of trade and travel restrictions may result in these workers remaining outside of Cuba, creating a financial and service “brain drain”.

1. GABRIELE, A. (2010). CUBA: THE SURGE OF EXPORT-ORIENTED SERVICES. Economics, Management & Financial Markets, 5(4), 151-175.

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