“To learn how to work in China you need to be patient. Deals cannot be closed here in two or three meetings as in the US or Israel,” says Liraz Geva, the CEO of the Guangzhou Economic Representative Office in Israel. “It takes time to realize that conducting six or seven meetings with the Chinese side is not a waste of time because building trust and relationships is the key element to a successful deal making.”
In the last two years Ms. Geva has learned, first-hand, the importance of being patient while doing business in China, but at the same time, also experienced the fast pace of deal making once a decision is made and all the necessary government approvals are obtained. In Guangzhou, the third largest city in China, with a population of about 20 million, enormous industrial infrastructure exists in every conceivable sector. The city lies on both banks of Pearl River, which for hundreds of years used to be the southern gate of trade between China and the West. In the XIXth century, the area suffered from The Opium Wars that caused the British Empire to establish Hong Kong as both a military base and an outpost of British empire, only a two-hour drive from Guangzhou.
Today, China is looking to create a paradigm shift in its massive economy by establishing state-of-the-art high-tech industries that will lead the next stage of China’s rapid growth. For inspiration, the Chinese are looking to two counties that, in their view, are the world leaders in technology and innovation, United States and Israel.
The establishment of the Guangzhou Economic Representative Office in Israel by the Guangzhou government is furtherance of this plan. The representative office was founded by Dr. Shuki Glietman, the former Director General and Chief Scientist of the Israeli Ministry of Industry and Trade and is managed by Ms. Geva. The investment group headed by Dr. Gleitman is also managing the Guangzhou-Israel Sino Bio-industry Investment Fund (GIBF), a 600 million RMB fund (approximately $100M) that is managed by Mr. Avner Lushi. The objective of the fund is to establish Chinese subsidiaries of Israeli companies active in the biomedical field. In addition, the group recently launched a unique technology incubator that will operate based on the Israeli incubation model. Both initiatives are funded by the Chinese government.
Ms. Geva (40), married and a mother of three, lives in Tel-Aviv. She returned to Israel after an extended period in New York. Ms. Geva, an attorney by profession, passed the New York bar exam and joined as a partner, the law firm of Amnon Shiboleth, a well-known attorney who established his New York law firm 30 years ago. She continued working with the New York firm after relocating back to Israel but felt that the geographical distance became a problem considering the interpersonal nature of the profession. Ms. Geva completed her Master’s degree in philosophy at Tel-Aviv University and considered starting her doctorate degree when an old friend, Professor Avi Karasik, a senior partner in GIBF and the Guangzhou-Israel investment group, offered her to join Gleitman’s Guangzhou project.
So far, So good
The launch is promising: Two companies, one Israeli and one Chinese, are already working in the new incubator in Guangzhou. The investment fund managed by the group has invested in five companies to date. But the Chinese have their own expectations and expect to have 200 companies operating in the incubator in the near future. For comparison, an average Israeli incubator has approximately 20 operating companies, so the Chinese expectations may be somewhat ambitious.
The Israeli companies that start operating as part of the Guangzhou incubator receive managerial support, an investment of hundreds of thousand US dollars and the big prize – the opportunity to penetrate the local Chinese market with its rapid growth rate and the enormous figures that are associated with it.
One of tasks of Ms. Geva and her team is making it easier for the Israeli companies to connect and communicate with the local government and businesses enterprises. The goal is to have the Israeli entrepreneurs work with Ms. Geva’s team so that they would not have to pay the “tuition” for the lesson of how to navigate the first contact with the Chinese system. “The gaps are much smaller than they appear at first,” promises Ms. Geva.
The moment there is a green light for a given deal, the Chinese push forward without barriers: people are available 24 hours a day, seven days a week. Even the responses from the Chinese government, that could take weeks in Israel, are received immediately. “It is true that it can take a month or even three months for final approval of the final versions of agreements after the negotiation phase,” says Ms. Geva, “but this does not mean that the deal is not moving forward. We always work on a few big projects simultaneously so, at any given moment, we have something that is happening as we wait for the approvals.”
The Cultural Connection
“The business culture here is different,” explains Ms. Geva. For example, the Chinese are not eager to respond in the negative even when they are not interested in that which is proposed. This is not a problem with people that you work with closely. However, it starts being an issue when the relationship is not a personal and close one. When the Chinese side is not interested in the deal, the deal is not moving along and it is on the other party to understand the hint. “The people we work with are extremely talented, usually young and open, speak excellent English and when you get to know them, the culture differences vanish. I have no problem to stop the conversation and say: “wait a moment, you just said no, didn’t you? And they always laugh.”
Sometimes the internal politics of a deal are complicated and hard for Israelis to crack. The negotiations can be complex and the demands are surprising at times.
“We have true culture differences in the way business is conducted, and we need to learn these in order to do business in China. The best way to close a deal starts with understanding the distinction between the core and non-core issues. One must differentiate between the important issues and the “background noise” that could cause delays and, often times, such background noise issues are not obligatory to the deal and one can move along without dealing with them.”
The feeling is that similarly to Turkey, the good relationship with China is reduced to business dealings only.
“There is a lot of interest in developing relationships between Israeli and Chinese associations and other organizations along with developing cultural ties between the two countries. We promote cooperation in areas such as culture and education and recently established formal relationship by signing a friendship agreement between Tel-Aviv and Guangzhou. We work on students exchange and football clubs programs and connected Shenkar, the Israeli design school, with industrial companies in Guangzhou. China reckons that there is a lot to learn from us, and we, most certainly, have a lot to learn from China as well.”
The writer was a guest of the innovation office in Guangzhou and Heinan Airlines.