David Li, FCCA
David Li is already a veteran of the Belt and Road Initiative (BRI). An FCCA he is a co-founder of a Guangdong-based investment company which is investing in Africa.
David set up a company which designs factories and trades equipment. He also works in a consultancy capacity for a Chinese company which constructed an industrial zone in Ethiopia. So he has deep and wide experience.
David sees BRI as one of China's key foreign initiatives and one that is evolving and updating over the years. From his perspective of running 'a relatively small private business' he describes BRI as an opportunity and a challenge.
The Chinese government is providing financial support – both through commercial banks and the state-owned banks – for companies taking advantage of BRI. The government is also helping companies do business along the BRI through collaboration with many countries along the belt which is helping Chinese companies exporting and setting up businesses.
He says: "As BRI is such an important policy for China businesses are being paid attention. The government says if you have a problem come and talk to us and ask for help. The BRI has helped Chinese companies with their understanding of unfamiliar markets like Africa."
"As BRI is such an important policy for China businesses are being paid attention. The government says if you have a problem come and talk to us and ask for help. The BRI has helped Chinese companies with their understanding of unfamiliar markets like Africa."
East Africa was the natural choice for David because his business was already exporting to Ethiopia so opening a branch office and a factory was part of a strategic development. A key incentive for him was to increase turnover. He says: "We had challenges selling in China because of the competition, so it was important for us to find markets outside our home country."
While BRI is providing opportunities David warns that opening in another country is not without difficulty. He says in order to succeed opening up along BRI Chinese companies need to be aware of how to overcome language, cultural and compliance challenges.
He says: "A business needs to start again in terms of understanding and following the policies in force in another country."
David's business hired local staff and he said he became aware of differences such as the food in Ethiopia compared to China, the working hours, the level of overtime that was expected, even the culture of how colleagues interact with one another.
Some countries cement a business deal over a drink, in other countries drinking alcohol is not common. From his experience David is clear: "We need to respect the culture."
The business opened in 2015 and David is honest about the challenges it has faced: "While the business is profitable it has not met my expectations." He particularly points to the currency risk of an overseas branch: in autumn 2017 Ethiopia’s central bank devalued the Ethiopian birr by 15 %, its first such move in seven years to boost lagging exports. As David notes: "Devaluation eats profit, it is such a risk."
But he also paints the bigger picture: "BRI is about the long term and it is about multiple countries. It should be seen as an economic incentive for the whole of the continent of Africa."
He is equally clear that the accountancy profession has a crucial part to play: partly because the profession's ethical code is a good introduction to any sort of compliance or legislative regime in different countries.
Finance professionals have a leading role explaining to colleagues the financial risk – such as with currency – and can help with work such as forecasting and budgeting to see how the long-term may work out.
But the advantages are also considerable. He says: "Manufacturing in Africa means that you put your brand in the front line and it is much easier to meet customers and potential customers"
He recognises that in working out the early stages of BRI he and others are doing something that has not been done before. He says: "We believe we are leaving a legacy for generations to come."
"We believe we are leaving a legacy for generations to come."David Li
Business success along BRI
To succeed in opening up along BRI, Chinese companies need to be aware of how to overcome:
- language barriers
- cultural challenges
- compliance challenges
'A business needs to start again in terms of understanding and following the policies in force in another country.'