How UK Startups Can Expand into China
By Scott Haughton, Envestors
As the world economy deals with a pandemic-induced recession, angel investment has slowed down and companies are left reeling. Throughout these unprecedented times, however, there’s one market that’s worth investing time in conquering — China.
However, there is still a widespread assumption that the Chinese market is difficult, if not impossible to enter. While cultural attitudes and government roadblocks are not to be ignored, new sectors and opportunities are opening up in China every day. China now provides the opportunity for investment, strategic partnerships, as well as one of the world’s largest rollout markets.
With a growing middle class and a population of over 1.4B, China’s economy is currently the second largest in the world. Many technology companies are taking advantage of the country’s new-found appetite for investing in foreign companies, and they’re finding it increasingly easier to break into the market.
Biotech in high demand.
With cleantech, biotech and medtech startups piquing investors’ interest, one UK company has taken advantage of the opportunity.
ANCON Technologies has built an AI application that, along with the use of biomarkers, can identify VOCs (volatile organic compounds).
They’re using VOC identification to detect air pollution, provide anti-terrorism services and test for viruses and diseases. Since the start of the pandemic, they’ve been using their technology to develop Covid fast-testing through non-invasive breath tests.
“There are many VOCs, or what we call volatile organic compounds in your breath, so each of your health conditions has a signature or a combination of VOCs, which we call biomarkers. Our research shows there are over 400 diseases that have their own unique biomarkers. And it's definitely an easier detection tool for the patient since it’s non-invasive,” Bing Tian, Director of Far East Development for ANCON Technologies said.
Noting increased interest in biotech in the Chinese market, they’ve been able to find strategic partners, and secure a rollout of their tests in local medical facilities.
Before lockdown, they were using their technology to detect lung cancer. At the onset of the pandemic ANCON recognised the potential for their technology to be used to develop tests for COVID-19. One of the challenges the business faced was getting a large enough pool for testing. China provided the answer.
“We could potentially target over 400 diseases. For each one we need to get the correct amount of data. China's always your first target because it’s the biggest population and, as the health care system in China is getting better and better, it’s getting easier to track specific patients’ data,” Bing notes.
Getting started isn’t easy, but, since participating in the Envestors China programme, ANCON have been able to secure strategic distribution partners.
They set off on the Envestors One Belt, One Roadshow in 2017, through which they were able to take a number of exploratory trips to China. The programme facilitates entry into tech competitions in China, and ANCON credit their success to the programme.
ANCON won the China-UK Innovation and Entrepreneurship Competition in Chengdu, in 2017, and placed second in 2020’s Straight to Wuzhen Global Internet Competition. The competition put them in front of authorities and investors and opened the doors to lucrative partnerships.
“The biggest help you can get from participating in competitions in China is getting the right introductions. Whatever your product is, you’ll get a chance to be introduced to local experts to help you set up in China,” Bing explains.
Cultural and governmental roadblocks.
The Chinese government is making efforts to attract foreign companies through grants and tax schemes. Rivalry amongst local municipalities, like Shanghai and Guangzhou has led to an increased number of programmes that foreign companies can take part in.
“What I see is really just the amount of opportunities there. And you can see how the local government is willing to get foreign high-tech companies like us involved. They’re offering grants, funds and tax relief,” Bing describes.
However, a number of roadblocks remain. While navigating business opportunities in China is easier than it was 10 years ago, it’s still not without its challenges.
China is a complex and dynamic market with many local players and governmental forces involved. The government still faces transparency issues and companies that wish to operate on the market will have to battle a number of cultural and legal roadblocks.
In order to rollout products on the Chinese market, UK companies should find reliable partners with knowledge of regional distribution channels, cultural attitudes and provincial government organisations.
The right partner will be able to support you in securing strategic investment, grants, incentives and distribution channels, as well as M&A partners.
With knowledge of the market and the right introductions, “scaling the wall of opportunity” is very much attainable for UK startups and growth businesses.