The Road to China

Show time: Opening day
at CONEXPO Asia 2006,
held in Beijing and produced
by the Milwaukee-based
Association of Equipment Managers

There used to be little guesswork in producing a trade show in China. In the early 1980s, Beijing barely had one adequate convention center; Shanghai had a second. Only the China Council for the Promotion of International Trade (CCPIT) could approve of a show proposal. If the council granted a show license, it would collect the rental fee and inform the organizer how many attendees to expect; thanks to the controlling hand of the Communist Party of China, attendance was guaranteed.

“The golden days, of course,” says a chuckling Cherif Moujabber, who was vice president of Asia-Pacific for Cahners Exhibitions Group in the late 1980s and now is president of Walpole, Mass.-based Creative Expos and Conferences. “In the old days,” he recalls, “it was very simple.”

While veterans of the trade show industry harbor little true nostalgia for that restrictive era, launching a show in China no longer can be described as “simple.” In fact, most who have successfully entered the Chinese market would describe the process as extremely difficult.

With a booming economy and a massive population, China is considered by many to represent the future of the trade show industry. “It is clear that the China focus of the global event market is unstoppable,” asserts Marcus Ewals, managing director of Thailand-based exhibition organizer AsiaCongress.

At the moment, however, the industry in China is small and relatively immature. “It’s not much different than it was here [in the United States] 50 years ago,” says Steven Hacker, president of the Dallas-based International Association of Exhibitions and Events.

Having strong relationships with the right government contacts still can make or break a trade show. In addition, facilities vary dramatically in quality, and even cities with first-rate centers may lack “the infrastructure, access and software to support the venues and provide the full spectrum of services required to ensure a successful event,” says Warren Buckley, CEO of Suntec Singapore and former board member of AIPC, the International Association of Congress Centres.

The industry still is a fraction of the size of North America’s. Lacking comprehensive data, experts believe the number of annual exhibitions in China is in excess of 4,000, with Beijing, Guangzhou and Shanghai cornering the market. (Compare that with 13,000 shows held in the United States.) But the market is growing up fast. Licenses are getting easier to obtain -- Moujabber says securing one today is not an issue -- and professionalism is on the rise, too. Of the 162 people who earned Certified Exhibition Management designations from IAEE in 2006, 80 were from China. Modern facilities are popping up all over: In January Hacker traveled to Kunshan, about an hour’s drive from Shanghai, to witness construction on the mammoth China International Purchasing Center, which will have 19 million square feet of exhibition space.

With the country spending billions on facilities and infrastructure for the 2008 Winter Olympics in Beijing and the 2010 World Expo in Shanghai, China undoubtedly is becoming an increasingly viable market for trade shows. But those rushing to tap into the lucrative Chinese economy beware: Success requires a long-term vision, often years of preparation and a commitment to help industries develop in the East.

Research and analysis

The lengthy process to develop shows is unavoidable. “Things move slowly in China,” says John Stuttard, who helped to launch Interphex China last November in Qingdao as vice president of international brand development, Interphex brands, for U.K.-based Reed Exhibitions.

“You need to be real sure you’re in lockstep with your membership -- that they want this and want access to the Chinese marketplace,” adds Terry Friesenborg, who serves as vice president of international development for Fairfax, Va.-based InfoComm International, an A/V communications-industry association that has produced Integrated Systems China (IS China) since 2002.

Organizers should first identify if any similar shows already are established in the marketplace, because dislodging an existing show is difficult. Exploring the level of need and the right location typically requires a presence on the ground. Stuttard notes that Interphex spent three to four years planning its launch and sent a permanent business development team to China two years before the show. The Association of Equipment Manufacturers, based in Milwaukee, had an office in Beijing for nearly 10 years before CONEXPO Asia debuted there last May.

The art of guanxi

The single most important factor contributing to a successful trade show in China is having a reliable Chinese partner. “U.S.-based associations and organizations should seriously avoid holding their own events in Asian countries entirely on their own,” advises Edward Liu, managing director of Singapore-based Convention & Exhibition Management Services and chair of IAEE’s Asian Exhibition Council. “They should seek out relevant local partners and listen to their counsel on the ways exhibitions should be organized in the various countries.”

The best partners for foreign-based associations often are their Chinese counterparts, whose local expertise is invaluable when navigating the bureaucracy of China or making logistical decisions such as finding contractors, deal-ing with the venue, setting up pricing structures or promoting the event.

Petra Kaiser, director of CONEXPO Asia and director of international marketing, exhibitions, for Milwaukee’s AEM, says Chinese associations want to be collaborators with foreign associations, not hired hands, and prefer to partner with organizers who plan to become a presence in the community and a mentor for the industry.

A paramount concern for associations looking to expand to China, then, is the art of guanxi (relationships). “You have to have face-to-face meetings,” Kaiser says. Businesspeople in China “really want to know you,” she explains. “If they don’t trust you, they don’t do business with you.”

Defining the relationship

Partnerships can take different forms, with varying degrees of difficulty for foreign-based associations.

Endorsement or sponsorship. Associations new to the markets in China or Asia normally choose to endorse or support an existing event. By doing so, they circumvent the hurdles of launching a new event; they can largely rely on the existing show’s machinery to take care of logistics and promotion.

This is the route the Consumer Electronics Association took when it resolved to give its members access to Chinese consumers and businesses. In 2005, CEA became the sole overseas sponsor of the China International Consumer Electronics Show (SINOCES) in Qingdao. Elizabeth Hyman, vice president, international, for CEA, says the association developed a relationship with the China Electronic Chamber of Commerce through participation in the World Electronics Forum, which CEA helped to found.

As part of the sponsorship, CEA licensed its brand for use at the show, helped plan the show’s transformation from a consumer to a trade event, worked with the U.S. government to organize a U.S. pavilion for exhibitors and brought in international media. Partly thanks to CEA, SINOCES has grown to an event with 62,000 attendees and nearly 380,000 square feet of exhibit space.

“This was a really productive and efficient process for us,” Hyman reports. “We’re a relatively small organization. If you’re going into China to create your own show, you need a lot of manpower on the ground.”

Co-location. Reed Exhibitions wanted a louder launch for the Interphex brand. Luckily, as Reed was researching options, an established show called Active Pharmaceutical Ingredients, organized by a subsidiary of Sinopharm, the largest state-owned pharmaceutical group in China, was looking to expand. API’s attendees, mostly smaller drug companies, had been urging the show’s organizers to attract equipment and machinery exhibitors in addition to ingredient suppliers. Interphex took care of that. Reed created a 50/50 joint venture with Sinopharm that would produce and co-locate Interphex China with API in Qingdao.

Stuttard says Interphex was able to take advantage of API’s well-established brand and promotion techniques, as well as its built-in attendee base. At the same time, Interphex made API more attractive to attendees as a one-stop shop for the pharmaceutical industry. In 2006, the shows had 1,100 exhibitors combined; Interphex brought in 500.

Stuttard says the prospect of launching Interphex China as a stand-alone event would have been considerably more complicated, given the difficulties of marketing in China. “Starting from scratch is extremely difficult,” he says.

Creating a new show. Terry Friesenborg says he doesn’t regret the decision to launch IS China as a new independent show, but he agrees it’s the most difficult path to follow. “We decided to do a stand-alone for a lot of reasons, but mostly because we didn’t find anyone addressing our market space,” he says.

Friesenborg also wanted to create a truly Chinese show, and the number of native Chinese exhibitors has doubled in the five years since its launch, to roughly 20 percent.

InfoComm created a joint venture with MP Asia Pte. Ltd., an exhibition organizer based in Singapore, and recruited the Chinese Institute of Electronics as the local host organization. Friesenborg says getting endorsements from multiple Chinese entities is important for a new show, and IS China continues to lobby for new endorsements from government agencies and other organizations.

Kaiser’s CONEXPO Asia also was a new launch, and AEM hired E.J. Krause & Associates Inc., a Washington, D.C.-based exhibition management company that has been producing shows in China for more than 20 years, to organize the inaugural show. With one successful year under its belt, AEM is set to organize CONEXPO Asia 2007 on its own.

Common concerns

Upon first exposure, China’s business culture can be confounding for Americans, and trade show organizers might find themselves worrying about things that never were problems in the West.

Dual pricing structures. Exhibiting Chinese companies traditionally have paid lower space-rental fees than international companies, in some cases three to five times less. Today, dual pricing is less of an issue for international exhibitors than it has been, because international corporations with offices in China are able to qualify for the lower rates.

Stuttard had toyed with raising the local rates but met with a lot of resistance. “I realized there’s no point in trying to fight it,” he says.

To ease the indignation of some foreign-based exhibitors, Stuttard assumed “the role of the travel agent” and put together packages that included airport transportation, hotel accommodations, a translator and admission to networking events. In effect, he was obscuring higher space rental fees within the package price but also providing international exhibitors with extra value.

Intellectual property rights. Perhaps the most widespread concern among foreign-based exhibitors is the fear of having their ideas stolen or products counterfeited in China, where protection of intellectual property -- information, ideas or products that are commonly protected in the United States by copyrights, trademarks and patents -- had been notoriously lax in years past. Since China joined the World Trade Organization in 2001, however, that has improved. In March 2006, a new agreement negotiated by IAEE and CCPIT and approved by the Ministry of Commerce went into effect, holding show organizers responsible for violations. The agreement outlined protections for exhibitors and enforcement measures. Furthermore, a new round of restrictions went into effect last month.

However, Moujabber says enforcement thus far is “patchy” and tends to be less reliable in smaller cities.

Amy Xu, a partner at Minneapolis-based Dorsey & Whitney LLP who specializes in information technology and intellectual property law for U.S. and Asian clients, says even the new agreement won’t stop an attendee from taking a photo of a product at a booth and trying to copy or otherwise appropriate it after the show. But, she’s quick to add, such photos could be taken at any trade show anywhere in the world. Of more interest to Xu is what happens when violators are caught. She says victims are not likely to receive the amount of compensation common in the United States.

Still, Xu stresses it’s in China’s self-interest to curb violations. “A lot of the new regulatory activity is designed not only to attract foreign investment but to protect China’s own industry,” she notes.

Marketing. While show promotion is always a concern in the West, preferred channels used for marketing in North America might not work in China, warns John Gallagher, senior vice president of E.J. Krause & Associates. For example, direct marketing and e-mail promotion simply aren’t effective, but text messaging can be. Also, due to regional segmentation, shows need marketing agents in each area in order to attract a diverse attendee base.

Local partners are relied upon heavily for their knowledge of communications in China. Access to attendee databases and the ability to get the right information to them is key.

Time to go

In light of the lead time required to set up a show and the competition for local partners and market space, associations with designs on China can ill afford to wait before initiating the research process in earnest.

However, new opportunities continue to open up. Gallagher says so-called secondary markets can be cities the size of Chicago or larger. Places such as Ningbo, population of 5.4 million, or Dalian, which had a gross domestic product of US$29.3 billion in 2005, “may not be on the tip of your tongue,” he says, “but they are major cities not being served yet.”