How to gain Chinese regulation compliance

I think that China is really no different than any other geography or territory that is remote from your office. Most of the time it's highly preferable to have people on the ground.

Q: When and how did you get involved in the Chinese battery market?

A: HEL first went into the China market in 2009. We established offices in-country, working through a representative agent there, and have had really good success in China.

As a result, during 2019, we started the process to actually establish our own wholly foreign-owned entity, which is essentially our own subsidiary in China. We completed early this year, in 2020, and hired a new general manager to support our new subsidiary.

General Manager, Steven Chen has a great amount of expertise in working in the scientific market in China and is somebody I’ve worked with in the past. He was a colleague of mine when I was based in Shanghai with PerkinElmer, and he joined HEL in March 2020. Since then, we've been expanding our capabilities in China so have hired some new commercial people. We continue to want to grow and develop that market.

With a little bit of hindsight, we were somewhat lucky with our plans. At the point when we had established our foreign entity and, when Steven joined us, the Chinese market really had got over their first wave of Covid and were bouncing back. We [the UK] were also in the process of coming back while the rest of the world was either going into lockdown or in the middle of the lockdown. This pushed us to really focus on the Chinese market during those months when it was quieter elsewhere in the world and this helped us to begin to solidify our position with our new subsidiary in China.

Q: What’s it like trying to work in China especially in times of travel restrictions and is it necessary to have a local office, or rep?

A: I think that China is really no different than any other geography or territory that is remote from your office. Most of the time it's highly preferable to have people on the ground.

I’m certainly a strong believer in the fact that if you’re not where your customers are, connecting with them is just really difficult. Even if it is as simple as the fact that your time zones are misaligned, it can have a huge, huge influence. For most of the year, China is eight hours behind the UK, and the west coast of the US is eight hours ahead. We've taken steps to make sure that we've got people in those territories so that we can connect better with our customers.

Certainly, coming from the UK, we don't have anyone in the office that speaks Mandarin. Nor do we have many people who are very familiar with the processes of doing business in China. Everything from the regulations and the legal status to some of the cultural aspects. I would say that's the same reason why, for instance, we have sales people based in Germany and Italy - because we want to understand the local environment there.

With travel restrictions I think the thing that hits us most is it's been tougher to do the training that we want to do for our team out in China because they can't come to the office. So obviously, like everybody at the moment, we're doing a lot more remote activity. If we do have a need for some of our head office base experts to connect with a Chinese customer, again we've got to use video conferencing at the moment. But that seems to be working out pretty well for us.

Other than that, I would absolutely say it really helps to have a local office. Not only to help you transact in-country. Getting the intelligence about what's going on and what's happening with the market… it really helps to have your own people on the ground, listen out for those things, finding that information out, and bringing it back to you.

Q: What are the differences and challenges presented by the Chinese regulatory system for battery testing equipment?

A: I think, when you look at what the Chinese authorities in terms of battery testing, you’ve really just got to applaud it. They’ve gone for very stringent, very rigid criteria in these testing regulations. For instance, they’re looking at very high data rates. They’re looking at a lot of stability in the testing equipment so that small changes in the behaviour the battery, especially in the thermal behaviour of a battery, are noticeable. That's good for consumers.

It doesn't really matter whether we talking about batteries that are going in your cell phone, your laptop, or in your electric vehicle, battery development is all focused around getting higher energy densities. This means, for a given size and weight of battery, you can get more electricity out of it.  We also look at usability. How quickly can it recharge? How long can it stay charged? All those developments essentially lead to the fact the batteries can become potentially more dangerous and, if something does go wrong, the outcome is likely to be worse. So, having a very rigid testing procedure to make sure batteries are as safe as humanly possible is really important.

I think we can think about examples where phasing batteries have caused immense problems. There was a certain brand of mobile phone, I think we can all remember a few years ago, when they suddenly started getting very hot, even catching fire and exploding! That was dangerous. People got injured. It’s bad reputationally for companies. We have also seen aircraft have issues because the battery is overheating. And if we think about this push towards electric vehicles – and the China market is probably the leading market in the world for electric vehicles – if you think about that; you've got very big batteries sitting literally underneath people as they’re driving around. If there's a car accident the chance for a battery to get badly damaged is high and damaged batteries can cause thermal events. So, if you're making a battery safe as possible with an increased usage of the batteries and increased prevalence, you're really protecting people as they go about their day-to-day life. So, I think really we must applaud the Chinese authorities for this. I'm thinking it's the right step in making sure that we're all safe, happy and healthy in going about our daily activities.

Q: What is the Chinese regulatory compliance process like in comparison to say the Western compliance model?

A: Just looking at what the Chinese authorities have done. They’ve published guidance. They gave everybody time to understand how they were going to respond to that and how they were going to do testing before it became law.

As I said, they have taken a very tough approach, with probably some of more stringent regulations that exist out there. I think that one of the things battery manufacturers, and companies using batteries in devices, outside of China are going to have to think about is how does that regulation apply to them? If I'm producing at mobile phone or laptop, or something outside of China and I'm looking to import it, or I'm looking to use a design and then manufacture it in China, how can I make sure I'm complying with those regulations, because it's entirely possible that what I've done to be compliant of regulations in my home country don't apply in China?

Q: Were there any specific difficulties or lessons learned and would you have done anything differently in hindsight?

A: When we started to think about this project and to investigate this, we were hearing a lot of rumours and different interpretations of these regulations. I think we probably wasted a little bit of effort talking around in circles relating to what we heard. For us, (and this may sound a bit straightforward) the biggest breakthrough we had was actually buying an English language translation of the regulation so that we could look and be very clear from objective source, at what the regulations were asking for. We were able to validate that translation with our team in China, asking them to compare it to the original Mandarin published version. That just allowed us to be very clear and say, “We need to be able to demonstrate XY and Z to these particular levels of quality and performance” and get on with that. So, I think for us, that was a lesson learned. Just going straight to the original information - the raw data - in the first place would possibly have saved us a little bit of time.

Specific difficulties? I wouldn't say there were any. Luckily for us, there was very little to do in terms of product modification. We did increase the data sampling rate that we were able to perform, but that was something that was already on our roadmap, so we actually just moved up the schedule a little bit and implemented that. In addition, it allowed us to tighten up a couple of our design and manufacturing processes. But, other than that, no major difficulties. It was then just really a question of running the experiments and showing the data to prove a compliance with the relevant levels of performance. And actually, that was something we were able to do late in 2019. We actually spoke about this in a battery conference at that point, but obviously just after that the coronavirus hit China so things went a little bit quiet. So, we had to re-introduce that later this year, in 2020.

Q: Did you have to change any of your working practices or communication habits when liaising with Chinese contacts?

A: I'm not really sure that there's anything specific we do when we're liaising with our team in China. Sometimes there are specific things that the Chinese government wants, especially around imports, and the whole shipment and customs process, but I can point to other countries in the world where that's true. Probably closest try doorstep is Switzerland, which is outside the EU and has been something we’ve had to work with. I am aware - very much personally - that I tend to talk quite quickly, and I sometimes use big words. So, to make sure the message gets across when talking to people for whom English isn't their first language, I found that just slowing down and using words that really get the point across has been very important. It has been a benefit for my career, working not only in China but with customers and colleagues around the world. Other than that, I wouldn't really pick up on anything. We work closely with our Chinese colleagues and that relationship is no different to that with my colleagues in mainland Europe, or in the US, or in India. Everybody's got their local customs and the right people, who are knowledgeable, know what's going on with the customers, and can feed that back, can help customers out. That's what we want and with that as a common framework I think things become quite straightforward.

Q: Have you experienced any characteristic Chinese behaviours that have been either expected or entirely unexpected?

A: I'm not entirely sure it's helpful, in any way, to pick on specific cultural or national stereotypes or behaviours. People today don't necessarily find that they’re born, grow up and then live, all within one country. We are very global community.

As I said previously, I think we have to interact with people all around the world, take individuals at face value, and to support our team in China so they are able to support their customers and that we are able to listen to the feedback that they give us. I will say that is exactly the same for my colleages in the UK, in mainland Europe, in the US, and India. Yes - my colleagues surprise me on a daily basis and I'm sure I surprise them. The same is true of our customers as well.

I will say one thing - and this goes back a little bit to my time actually living in China - I found the people I worked with there and customers, were - almost to a fault - were friendly and welcoming. Very clever people. The same as I finding in scientific environments all around the world.

Q: What do you seen in the future for this international trade relationship?

A: I think I alluded to this. HEL has been in China now, directly in one form or another, for over 10 years. We definitely see China as a growth market.

For some of our longest standing product lines that look at thermal safety and battery testing, the China market is it is absolutely the biggest growth market for at the moment. I have talked a lot about battery development, obviously, and battery in China is huge. And again… I think the drivers there are 1) in consumer electronics and 2) in electric vehicles.

I think after the year we've had with the growing green movement alongside what's happened with the Covid pandemic and recent announcements that we’ve seen in other parts of the world where petrol vehicles are going to be in a band, electric vehicle manufacturers are only going to increase and increase. Similarly, a growth area for us in total is in the bioprocess space.

The Chinese market for biopharmaceuticals, and other biotechnology approaches such as industrial biotechnology… there’s massive growth there. Part of that is the Chinese government’s desire to decarbonize their economy. They realize they are significant CO₂ emitters and are looking to decommission some of their CO₂ producing facilities, like coal power stations, and replaced them with facilities that don't produce CO₂ and don't have that environmental impact. Actually, not only the battery testing but some of the industry biotechnology approaches we're working with support that.

I only see is as important to the future and one of the things that we can't ignore as the UK leaves the EU. We are going to all be looking to trading partners more globally. So, again, I think that’s just more support for a strong relationship between UK and China in trade and for us in the markets we’re in. So, absolutely, we see it as a key market for us!

So then some final comments…

I think one of the comments that I have is that every company needs to know the regulatory framework that they operate in. There’s the general regulations and legal compliance with doing business but there's also the requirements that are being put on your end customer and I think getting good line of sight on that is really important. So, whether it's in battery testing or pharmaceutical manufacture, or outlawing the use of certain chemicals because they’re hazardous in some way, shape or form, it's really worth being aware of that. And, if you can, being ahead of the curve so that you know that when your customers need to fulfil a certain need, or they have a requirement that they need to comply with, that you're able to give them the systems that allow them to do that.

Going back to a point you made earlier… I think this one of the reasons why it's very important to have a good relationship with your operation within that region because, quite frankly, sitting back here in the UK how would we ever know these regulations were coming into force without those key assets? The people on the ground hearing that information and being able to report it back to you. Whether that's with your own sales organisation, or some form of a distributor, or a representative, you've got to make sure that you got those good, tight connections and that you listen closely to what they're telling you about regulations that are coming back because that could really trip you up.

Author: Dr Paul Orange is Chief Marketing Officer at H.E.L Group, helgroup.com