The International Air Transport Association (IATA) Annual General Meeting (AGM) in 2012 included a panel on “Doing Business in China” that included some valuable insights from a few business practitioners with extensive experience in China, moderated by CNN’s Kristie Lu Stout. The panel included Tim Clissold, CEO of Peony Capital; Liu Shaoyang, President of China Eastern; Christian Murck, President of the American Chamber of Commerce in China; and Helen Wong, President & CEO of HSBC Bank (China). IATA posted the whole video for your viewing pleasure here:

If you have 45 minutes to spare (I hear you laughing) and doing aviation business in China interests you, you might want to watch this one start to finish. For those who are more like me and find 45 minutes of “free time” in any given day pretty hard to come by, you might want to just keep reading below to get my key takeaways that are relevant to doing aviation business in China and not necessarily well understood by the global aviation community (I even provided the time hacks!):

Long Term Strategy and Government Relations

Successful business is rooted in creating win-win situations, so it’s no surprise that Tim Clissold’s experience led to sharing this important wisdom:

4:30 — “The most important thing about doing business in China is first of all finding an area that will benefit the country the country long term…so that you’ve got some sort of tailwind behind you… In the end it all comes down to government. Everything comes down to how to actually deal with individual situations in China.”

Tim Clissold and Helen Wong mentioned a few other pointers about taking a long-term strategy in China and adding value to the China and achieving its goals that you can see at about 35:45 on the time hack.

So the natural question would be how do you know what would benefit China for the long-term? Or how would you find out what is important to the Chinese government? Christian Murck’s advice can help you get started:

5:40 — “I would go right to the World Bank website and download China 2030….Not just a World Bank report but it was also approved by the NDRC, Ministry of Finance…it represents a point of view of a number of Chinese officials as well as analysts in the World Bank and it charts an overarching/fundamental…changes in the Chinese Economy.”

Here is a link to that China 2030 document for your convenience. Keep in mind the fact that the China 2030 document was approved by the NDRC (National Development and Reform Commission) and that is a very significant endorsement. Dr Kenneth Lieberthal (one of my favorite China scholars) characterized the NDRC as “the most powerful force among all the ministries.” (For more on the NDRC, see this great article, China’s Economic Policy Factory: The NDRC in Bloomberg Businessweek.) So the China 2030 document certainly is worth a read as Christian suggests and offers valuable insight into what is important for China’s future and what the government will value. It’s not an end-all, but definitely a good starting point. Later in the panel discussion Christian also brought up another important point:

39:00 — “At the level of objectives, the Chinese gov’t is actually extremely transparent…the objectives are very clear. The execution is an issue. ..there is a level of regulatory or administrative risk.”

Airspace Reforms and Slotting Improvements Needed for Aviation Growth

In line with the general feeling across the global aviation community, both Christian Murck and Li Shaoyang commented very positively about the promise for aviation business growth in China, but admitted that airspace reforms and slotting improvements are key to achieving the kind of growth that will be needed to meet the rapidly increasing demands for aviation in China:

33:15 — “Medium and long-term investment piece is very strong…I’ve spent time in secondary cities in Yunan and Hunan Provinces, and when you get out into those areas you find that there is perhaps more growth momentum than you see in Beijing, Shanghai Guanzhou…and the reason for that is partly that they are beginning to see the benefits of the massive investments in transportation infrastructure, roads, highways, airports that have been made in the last 10 years and they suddenly find themselves addressing much larger markets. China’s 4^th largest airport by capacity will open in Kunming at the end of this month…they’re going to be able to take a lot more flights in and out of Kunming than they ever did before. So I would say that as you look at population that continues to urbanize at a rate of about 1% a year with that expected to go on for 20 years, that’s 14 million people moving to an urban area every year, so 1 and ½ times NYC being built every single year, I think if you look at these long-term trends you can see that the growth prospects are excellent. The question is, what are the growth prospects for me, in my sector, in my company? If you look at the airline industry, very clearly there will be enough airports, and Boeing and Airbus and COMAC are going to build enough airplanes. There might be an issue with training pilots and staff, but I think that can undoubtedly be addressed. The key is whether the airspace, currently heavily restricted by the military will gradually be liberalized and shifted to civilian availability. And my own view of that is it will happen because of the rising pressure of demand. China will become more like the rest of the world in this respect. And that means the airline industry and air transportation will grow very, very dramatically.”

And here are Li Shaoyang’s thoughts on growth and needed reforms:

[Interpreter] “Let’s take aviation for example. Last year, China provided services to over 300 million passengers, but 2 decades ago every year we flew only 2,000 or 3,000 passengers. For over 2 decades we have kept growth rate at over 10%. During the past 3 decades, the first decade was about clothing, Chinese people don’t want to lose face, so they want to have nice clothing. The 2^nd decade was about food. The 3^rd decade was about housing. Housing is a very big issue in China. But in the next 2 decades it will be about traveling. When Chinese people get richer they want to travel more, they want to fly to other parts of the world. In the future this will be a very good growth in consumption.”…

 

At about 23:00 he talked about a need for structural reform and opening up of airspace, and also discussed the following:

[Interpreter] “China has liberalized its airspace. Also if Chinese airlines want to come to the Chinese market they can do it. They can get slots in a quite fair manner. International airlines pay a lot of attention to the Chinese market. Of course there are some problems. For example in Beijing we don’t have enough slots. In Shanghai there is the same slot shortage. China’s air traffic has a short supply. Being with China Eastern Airlines I would like to apologize to the audience here for all the delays you suffer. It was not the airline’s problem. In China the delays can be quite serious… I think China is opening up to the outside world… China’s investment policies are quite familiar to foreign investors. For example Boeing airlines invested in domestic small airlines in Guangzhou…operations were not very good so they went bankrupt. So they have the exit mechanism. They can get out when they want. Our policies are opened up as much as developed countries. China is still a developing country anyway, it is not very rich, so the growth potential of the market is quite strong, so we welcome international airlines to come to China.”

The airspace topic has been a popular one and despite recent reforms that were made after this conference it still remains a major challenge to aviation interests in China. Slotting is in part influenced by the airspace issues since more effectively and efficiently run airspace permits smoother traffic and therefore increased capacity, but it is also influenced by numerous other factors such as infrastructure and air traffic controller training. Airspace reforms and slotting improvements are two key areas to continue paying attention to as aviation takes off in China.

Overall if you’re new to China and interested in both generalities of the Chinese economy and its trends, as well as how some of that relates to doing aviation business in China, this is a good panel discussion to get your mind thinking about a range of important issues. Experienced folks probably won’t find many big surprises here, but my hats off to IATA for addressing this very important issue at a time in the aviation world when so much attention has turned eastward towards China. Thank you IATA for posting the video!