'Want to go to China as an entrepreneur? A good choice of location pays off'

According to Dennis van Opzeeland, director of VDL ETG in Suzhou, China is no longer the low-wage country it once was. "There are mainly opportunities for companies that produce for the local market. Knowledge of local laws and regulations is an absolute must," says Van Opzeeland.

VDL Groep, the international industrial family business from Eindhoven, was founded in 1953 by Pieter van der Leegte as a specialized metalworking company. Under his son Wim van der Leegte, the portfolio has been expanded with plastics processing, the development, production, and sale of buses, and high-tech supply for the semiconductor industry, among other things. VDL also has the only passenger car factory in the Netherlands where serial assembly for third parties takes place. In 2018, VDL achieved a turnover of almost €6 billion with approximately 17,000 employees spread over 20 countries.

The leap to China
VDL has been active in Suzhou since 2006 through the acquisition of Philips Enabling Technologies Group (ETG). ETG had already been established in the East Chinese city for ten years as a producer of mechatronic components for the high-tech industry. Since the acquisition by VDL, VDL ETG Suzhou has increasingly focused on the supply of fully integrated and tested systems such as medical equipment and machines for chip production. With this, the company aims to offer more added value to American and European customers who bring equipment to the Asian market.

Local for local
In recent decades, China was mainly seen as a low-wage country, but in recent years a clear shift has taken place. Although VDL ETG does not serve Chinese customers itself, Van Opzeeland sees opportunities in 2019 especially for companies that produce for the local market, local for local. "Wages are rising quickly, so the differences with the West have become much smaller. On top of that, there are the current trade conflicts and the associated import tariffs. At the same time, the domestic market has grown enormously, which offers many opportunities."

Choose the right location
Companies that want to take the leap to China should not take the choice of location lightly. The laws and regulations vary by area, and there are also large differences in terms of standard of living. Van Opzeeland: "I have felt at home in Suzhou since day 1. There has been a lot of investment here in facilities, restaurants, new buildings, and shopping malls. In that respect, Suzhou is very western. But that's not the case everywhere. If you only look at cheap labor, you could end up in a remote area where there is little else to do."

According to Van Opzeeland, it is also worthwhile to investigate whether there are areas where many peers are located. "Around Suzhou, for example, there is a lot of electronics and telecommunications. The government has chosen to let these industries take place there. This is accompanied by motivational policies, such as cheap housing and tax reductions. Moreover, the chances of encountering suppliers and potential partners there are much greater. So, take a good look at where you are going to settle. The BOM can undoubtedly offer added value in this."