Locals take long-term view in unpredictable China

B.C. entrepreneurs’ tech-park plans outline the patience needed to capitalize in Asia

ETC3 owns a site in Langfang, China, that it wants to expand into a tech park that would act as a beachhead for Canadian tech startups in China | Submitted

Will Nygren doesn’t fit the profile of the typical Canadian business official working in China.

For one, Nygren – who lived in Toronto for most of his adult life – doesn’t speak Mandarin. The special representative of Vancouver-based Emerging Technologies Centre of Canada and China (ETC3 for short) admits that life has been tough at times since his move two years ago to the Far East.

“Well, I’ve learned ‘hello’ and ‘goodbye,’ ‘beer’ and ‘thank you,’ so maybe I have about 10 words in Mandarin,” he said.

“It is isolated. There is a loneliness to living in a linguistic bubble, because you can’t turn the TV on and see things like CNN…. WeChat has a translation app built into it, so 90% of my conversations are through this app. But Chinese doesn’t translate well into English, so there’s an enormous amount of guesswork.”

Making things even more difficult is the fact that Nygren is not located in a major, Tier 1 Chinese city like Beijing or Shanghai, where the expat communities are large enough for English speakers to avoid cultural isolation. Rather, he is in Langfang – a city of about 900,000 people within its urban area, which makes it a small town by Chinese standards – where practically no expats exist.

There’s a reason he is there, however. Will’s younger brother Robert Nygren is the president of ETC3 and is a veteran of both the B.C. tech industry and of the Chinese market.

After taking B.C.’s Epic Data into China eight years ago after seeing a fit between the company’s manufacturing tech expertise and China’s five-year plan for economic development, Robert Nygren shifted Epic towards the market there, expanding the company’s Chinese presence from zero to 180 employees within a few years.

That’s when he recognized the opportunity in Langfang, in Hebei province, directly between Beijng and the party city of Tianjin, seeing it as a rural area that wants to stake its claim as a tech centre within northern China. ETC3 currently owns a one-square-kilometre site in the city and has plans to eventually expand that to a 10-square-kilometre tech park that would act as a beachhead for Canadian tech startups in China.

“This is not a short-term play,” Robert Nygren said. “Langfang is not the best location today, but it may be in 20 years or 30 years. So landing in Shanghai, Beijing and Shenzhen is obvious, but Canada is small, and the companies that haven’t settled in China are the [small and medium-sized enterprises], and they need partners – and once our full model works out, that can be another way for them to access the market through an incubator.”

The Nygrens’ experience highlights not only the kinds of opportunities available to B.C. small businesses in China, but also the type of sacrifice and flexibility needed to make things work in what the brothers describe as “the most competitive market in the world.” Robert Nygren said a big part of the ETC3 opportunity was brought about by Epic Data’s move to China, where contacts with Chinese government, businesses and institutions are made first-hand on a face-to-face basis.

He said the move to Langfang three years ago has created more opportunities just by the personal connections it has generated with other business leaders in the region. One example can be seen right here in Vancouver – it was through the Nygrens’ work on ETC3 in Langfang that the company came into contact with a Chinese coal firm that owns the building at 3800 Wesbrook Mall at the University of British Columbia, on the former site of the Pulp and Paper Research Institute.

ETC3’s ideas for creating tech incubators aligned with the building owner’s vision, so they struck an agreement two years ago in which ETC3 took over the management of 3800 Wesbrook (now rebranded as ETC3 Vancouver) with the intent to transform it into a full incubator, Robert Nygren said. He added this type of unplanned opportunity is the norm in China, saying companies must be present in China – not to mention well connected and protected from the risks – to prosper.

“The difference with the China market is motivation, and most Canadians have a very, very hard time just figuring out what the motivation of the other party is – and that’s the key.

“In other countries, when you are flogging your products and services, there’s a natural assumption that when you are talking to somebody, they want to buy, and you negotiate like normal parties…. In China, there are financial and non-financial reasons why things are done. Are they doing business with you just so it helps them get a government subsidy? You have to know, and have the relationships and structure to protect your interests.”

One of the hardest things to adjust to for Canadian businesses in China – but one that has to be mastered, he said – is the top-down approach to decision-making, with the central government’s five-year plans (and subsequent annual plans) often changing the fortunes of Chinese companies overnight.

Robert Nygren said Epic Data was able to ride one wave in 2009 with manufacturing technology, but such trends can come and go in a hurry.

“ The hard part is that … you have an entire country of 1.3 billion people and their businesses suddenly all changing to say, ‘Now we do IoT [internet of things] or MES [manufacturing execution system] or satellite data.’ Everyone bandwagons onto the plan, and everyone hangs a sharp left immediately when a new message emerges from those plans. So you have to look at your own strategies. How are you going to benefit?”

Daniel Zipser, McKinsey & Co. Shanghai office senior partner, said the unpredictable nature of success or failure in China also depends on volatile consumer tastes. He noted Chinese citizens’ sudden enthusiasm for running – which translated to marathon organizations and apparel sales in the last year – as an example.

“Trends here don’t go from eight to 18; it goes more like zero, zero, zero, then 1,000,” he said. “It’s hard to pinpoint a time that a trend will take off, but it happens. And all our clients here want to know is, how do you predict that trend? And in North America and Europe, it’s easy to predict because these trends are there already, and they evolve. In China you can see trends that can take off, yes, but you don’t know if it’ll take off tomorrow, next year or [in] five years.”

So the Nygrens’ strategy is to simply spot the opportunity, then commit long-term. Such is the case in Langfang, where ETC3 originally planned to have the first building in the park completed by the end of the year, but the Chinese government suddenly shifted the quota for building in Hebei province to favour another city. It means that ETC3 will have to wait patiently for the quota to return to Langfang for ETC3 to move ahead – something the Nygrens said they are still committed to.

“In some ways, you can say that we are here five years too early,” said Will Nygren from Langfang. “But frankly, if we weren’t here five years too early, we would have never had the opportunity. So to a small degree, we are kind of waiting until there’s enough demand for Canadian companies to put up a physical presence here, but at the same time, being here means other opportunities keep arising.” 

This report is part of Business in Vancouver’s participation in the Canada China Business Council media fellowship, which includes flight, meal and accommodation costs in China.