Entering the Chinese Market and Investing in Production Facilities

Aalborg Portland’s Experience Entering the Chinese Market

Claus Bech, vice president of Aalborg Portland’s Technical Center and Procurement, started out by introducing Aalborg Portland A/S and their products – white and grey cement. Mr. Bech then went on to tell about Aalborg Portland’s experiences in entering the Chinese market – the world’s largest market for cement - through investments in production entities. When it comes to the market for standard grey cement, it is a rule of thumb that the production site should not be located more than 300-400 kilometres away from the customers. The case may be slightly different for Aalborg Portland’s white cement, but locating production sites close to the local markets is still a key factor.

It is Aalborg Portland’s experience that the process of contracting and getting production started at a new production facility can be facilitated by teaming up with a local research institute. This constellation was chosen for the construction of Aalborg Portland’s new production unit in Anhui province. However, due to the fast pace of the work and the rigid Chinese contracting standards, it was hard for Aalborg Portland to influence the building process after the construction had been started, especially with regard to safety requirements on site and the quality of the installation. Claus Bech therefore advises companies that wish to establish their own production facility in China to be stricter and more detailed in their demands from the very beginning.

According to Claus Bech, it has cost Aalborg Portland 2/3 less to build the latest production entity in China than it would have cost in other countries, and the time of construction has been impressive.

New Anti-Trust Regime in China

Mogens Aarestrup Vind, partner at Eversheds Law Firm, continued the member meeting by telling the participants about the new anti-trust regime in China that came into force in 2008, but has not yet been enforced fully by the Chinese authorities. At the same time, there is a felt lack of guidance from the authorities on how the laws work and how they are carried out.

According to Mr. Vind, the key areas of the anti-trust regime are:

1. Preventing the abuse of a dominant market position.

2. Avoiding concentration of undertakings which may eliminate or restrict competition (“merger control”).

3. Prohibiting monopoly arrangements.

Danish companies should be aware of the Chinese authorities carrying out unannounced investigations in all three areas, and that applies to both registered and unregistered companies.

Mogens Aarestrup Vind’s advice to Danish businesses in China is thus to make sure to cooperate as much as possible with the Chinese authorities, to work by the rules and to be prepared to be forced to defend their companies’ activities in China.

Mogens Aarestrup Vind’s advice to Danish businesses in China is thus to make sure to cooperate as much as possible with the Chinese authorities, to work by the rules and to be prepared to be forced to defend their companies’ activities in China.

Mr. Vind’s presentation can be accessed from the Knowledge Base (in the folder Support Functions -> Anti-Trust / Competition Law).