Can Osborne’s British technology firms crack China?

Can Osborne’s British technology firms crack China?

Matt Warman travelled with the Chancellor on his trip to China this week. The business delegation on the same trip tell him it was invaluable.


George Osborne visited Huawei and met their founder while in China Photo: Rex

By Matt Warman, Head of Technology

7:00AM BST 20 Oct 2013

As George Osborne recovers from the jet lag following his whistlestop tour around China, the select band of businesses that joined the Chancellor’s trade delegation have a more complicated headache: how do they turn the new relationships and the kind Chinese words into real business deals? Or is trading in China simply so complex as to not be worthwhile?Among those travelling with Mr Osborne were Mike Lynch, the billionaire founder of software firm Autonomy; Ian Livingstone, video games pioneer and the man behind Tomb Raider’s Lara Croft; Jon Reynolds, the co-founder of Swiftkey, the world’s most popular paid Android app; and Lee Cameron, deputy chief executive of mobile banking firm Monitise, responsible for £30billion of payments, purchases and transfers.

But alongside these British success stories were also far smaller firms: young British games developers Fat Pebble; Kinosis, the company behind an app to help surgeons learn operating procedures; and Recite Me, an online system that seeks to make websites more accessible to dyslexic users.

For all those on the delegation, however, the purpose was the same: explore the real opportunities that are available to British firms in the vast Chinese market, and to make a start on getting in. For Mr Osborne, the stakes couldn’t be higher, and he told me that “frankly, we’re already playing a bit of catch-up with the Germans”. Overall, the aim is to seize an opportunity that is uniquely available to British technology firms thanks to the delegation: get a toe-hold in the vast Chinese technology market, where 1.2billion own a mobile phone.

For Swiftkey, a small company already dealing with global corporations, China is a place cheief executive Jon Reynolds knows they have to trade. But it is challenging: “This trip gave very senior access and insight,” he says, “which is hard to achieve alone as a small company. And being connected with high-profile visit like the Chancellor’s really helps in a country like China.” He adds that the increased role of UK Trade and Investment, who organised the companies on the trip, can act as a crucial bridge for those firms keen to get into a range of new markets, and are not simply available to the firms on the delegation.

“But the trip this doesn’t mean we’ll get a deal done,” he says. “It’s one helpful step in the process, introducing us to new contacts and building internal awareness at a senior level.” Perhaps the most suprising thing to come out of going on it is a simple sense: “I don’t think it’s particularly more difficult to do a deal with a big Chinese tech player than any other big tech player. It’s about cultural differences and Western companies not realising how different things are. This needs careful local advice and understanding. We have to support Chinese as part of our global technology anyhow, but this trip helps inform us about if we should enter the Chinese market directly – and what the potential options are.”

Ian Livingstone, meanwhile, takes a slightly different view. Now focusing on developing new apps, including Facebook hit Village Life and investing in new technologies, he is looking at how to make an inevitable Chinese venture work. “It’s a huge untapped market for UK games developers,” he says. “A staggering 84pc of the Chinese population play mobile games and the China app store is the largest in the world. But there are several barriers to market entry in high-tech industries: Facebook, Google and Twitter are blocked, necessitating the need to use local social networks to drive player acquisition and engagement. Without market data, it is very difficult to succeed in China, so getting distribution partners is vital. But how does a small UK social games company like Playdemic connect to the likes of Tencent – market cap $100 billion – Baidu, Sina and Huawei? Having The Chancellor leading the trade delegation was not only the best door-opener possible, but meant we met the senior executives and decision makers.” As a direct result, says Livingstone, there’s already considerable interest from China in one of his other interests, 3D rendering technology Recce.

But what about the smaller companies? Jean Nehme’s Touch Surgery app was already raising money in Shanghai, but as a direct result of the trip he says that there’s a real possibility of distributing his software, which trains and then tests surgeons on their knowledge of surgical procedures, via WeChat, an app that is developed by one of the companies the delegation met.

Similarly, Ross Linnett of accessibility software firm Recite Me, says that “From a Western perspective we’ve never got immersed in Chinese culture, and the only reason we hadn’t moved was we felt it was a hard nugget to crack. But now when we go back we have a real reference point – I do think we’ll partner, and I hope it will be with one of the major parties that we’ve met.” Jonathan Satchell, meanwhile, says his Epic educational games company is floating on Aim in large part to fund Chinese expansion.

Few of those on the trip raised concerns about the security of trading in China, which famously has a Confucian attitude to intellectual property: imitation is a compliment, rather than a crime. And the Chancellor himself also emphasised that Chinese businesses too had a serious vested interest in securing their own international patents. He takes the view that China is going to take an ever bigger global role, and that Britain will be “there or nowhere”. Whether it’s security or intellectual property, he views the Chinese threat as far outwieghed by the opportunity.

“Let us not let concerns on the security front, which I think can be addressed through the proper channels we have, in some way stop us from doing business with China,” he said. “That would be a massive mistake for our country.”

And he maintains that those fears over IP are outmoded: “That’s something where we need to change perceptions of a little. China still has issues with IP but the Chinese government went out of their way to tell me that that they are clamping down on that.”

So key to the success of his trip – and also to the success of the businesses he took to China is perhaps one simple thing: “We do have to jolt some pre-conceived ideas in Britain.”

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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