Different culture. Shanghai
Photo: Gil Sofer
Tal Reshef
Chinese money seeking Israeli technology
Israel has knowledge, technology; China has funds. Jay Young, an investor specializing in locating Israeli business opportunities for Chinese market, explains why two countries work together so well and how to overcome cultural barriers
Jay Young, who is currently visiting Israel, is a partner at a Chinese investment firm looking for business opportunities for High Net Worth Individuals.
Born in Shanghai, Jay earned a Bachelorette's Degree from a Chinese university and a Graduate degree from Oxford University. She has an extensive background managing pension funds and investing in the Chinese governmental market, but these days it seems what interests her most is the Israeli economy.
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Understanding her point of view helps shed light on the developing trends in China and has a large impact on Israeli entrepreneur looking eastwards for investments.
As Jay explains, Israel has the technology while China has the money – and lots of it. The accumulated Chinese wealth, which has increased with the growth of the local market, is increasingly seeking new investment avenues.
While many may know China is ranked second in the world in Gross National Product, few are aware that it is also climbing in terms of High Net Worth Individuals, currently ranking fourth in the world.
In this encounter between Israel and China, the former brings to the table the knowledge and technological innovation. Contrary to many Israelis' concerns, the Chinese are not interested in stealing the technology and ditching the company.
Bilateral interest
The Chinese realize that technology requires constant development and updates in order to be able to keep up with the competition in the market. Therefore, getting rid of the crew that developed the technology and the product equals slaughtering the goose that lays the golden eggs.The interest is bilateral – the Chinese side wants to invest in the technology, and this enables the Israeli side to keep developing more patents. The Chinese also want to bring the Israeli capabilities to their domestic market and make a large profit.
The Chinese market receives instructions from above, based on the Chinese model.
In accordance with the decisions of the latest party convention, the market is currently focusing on developing the fields of clean-tech and renewable energy such as desert farming and water purification, as well as developments in the field of education, health and advanced production technologies.
Jay Young
All these have been identified by the Chinese market at the opposite corner of Asia – in Israel.
Jay Young recognizes a need to broker between the Israeli technological firms and the Chinese market. From her experience, the main difficulty for Israeli companies in China stems from their lack of presence on the ground, and not enough recognition of the existing potential in China and unfamiliarity with the Chinese business and culture rules of conduct.
People like Jay, who can simultaneously drink Mai-Tai and eat Humus, can tie the two ends together in order to create long-lasting business relationships between the markets.
The mission she is here for is to locate technologies to cooperate with China. This cooperation is in fact triangular, with the Chinese High Net Worth Individuals on one corner, the entrepreneurs and Israeli technology at the second corner, and an investment firm that brokers and coordinates the project at the third corner of the triangle.
Seeking to reinvest
A number of phenomenons require prior understanding and acknowledgment. These aforementioned High Net Worth Individuals are usually senior managers and share holders at gigantic Chinese corporations. These people accumulated their wealth in the domestic market.They built factories, founded industrial centers, raised funds with the help of their contact with Chinese authorities, recruited employees, marketed and sold their products – and all this was done in the framework of the local market, while dealing with Chinese colleagues, clients and suppliers. Their contact with the West was limited to the investors and technology suppliers.
Now, after their Chinese firms succeeded and thrived, the High Net Worth Individuals have gained a substantial capital that they are seeking to reinvest. In order to do so, they are required to get to know and understand many details vis-à-vis the western countries. They are also required to overcome many inherent obstacles stemming from their Chinese cultural background.
The Chinese culture is mistrustful and isolationist in its nature. Behind this tendency is a long history of invasions by neighboring people (e.g. Genghis Khan) and hundreds of years of western superiority and aggression.
Tough China is developing a professional class that is closely familiar with the West and has successfully disseminated some of the mistrust; the High Net Worth Individuals don’t all belong to this class.
A High Net Worth Individual may for example be a former Red Army general that has turned to the business world with the help of the contacts he made in the barracks, or alternatively an administrator from a public company that operates according to rules of the state economy.
Inherently conservative culture
In addition to these individuals, many other High Net Worth Individuals have earned an education in the west and engaged intensively with the western markets.The High Net Worth sector in China divides into these two groups, while the former kind is what interests us in the present context.
Those who lack a familiarity with the west have difficulty understating its business world. As Jay Young describes it, they are accustomed to acting in the Chinese way – looking for personal contacts and governmental assistance, while disregarding the critical importance of a written contract in the West.
They feel helpless when operating in unfamiliar surroundings without the ability to lean on their regular social circles or party clerks.
The Chinese culture, which is inherently conservative, tends to look for the next activity in a field that has previously proven itself successful.
A Chinese man who has accumulated his wealth in the textile manufacturing business will have difficulty operating in the electronics field. He will not be able to communicate with the Israeli entrepreneur or understand the how to deal with the head scientist or recruit employees through placement agencies and the Israel way of "a friend bring a friend."
As such, it is clear that a significant number of Chinese High Net Worth Individuals lack the skills to identify business opportunities in Israel, or make contact, and above all – be involved in the long-term management of such project. The Chinese investment firm therefore takes upon itself a broader role than that of its western counterparts.
Tal Reshef is a consultant and lecturer on cultures and business in Asia, and prepares employees and managers ahead of relocation.
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