Stanley Chu is China’s master of trade exhibitions. A former school teacher, he started Adsale in 1978 with four friends, selling international press advertising to Chinese firms. Today, he runs the largest trade fair company in China – Blue Skies China met Chu on the eve of the most successful Electric Power China show ever run.
2008 is a landmark year for China, marking 30 years since economic growth was pushed to the top of the government’s agenda. It was 1978 when China set aside the controversies and difficulties of the Cultural Revolution and embarked on a programme of sweeping reforms across industry, aiming at opening markets and boosting the economy.
Adsale chairman Stanley Chu is excited by the industry reforms. Indeed, he says his company was set up to link with China’s economic boom. “That was our focus, when we started, just five young chaps in Wan Chai with a 30sqm office,” he says. “We had no connections, no money – so what could we do? Well, China had started opening its doors – it was such a big market and people were so scared of it during the cultural revolution, so we thought, as a small company, we would do some trade promotion.”
The company began selling advertising, representing Financial Times and Wall Street Journal to Chinese advertisers. As Chu says, advertising sales is a great business for a start-up: “You don’t need any capital!” he says. By the end of its first year, Adsale had already begun producing a trade magazine, Nova, helping people promote their technology and products to China, and in 1980 it began developing small trade shows. “This whole business picked up very fast,” he says. “Because on the technology equipment side, people need to actually see the product in operation.”
To get a permit to run exhibitions in China, Adsale worked with some left-wing media in Hong Kong who had government connections, and ran its first Chinese show exhibiting machine tools. In 1981 it started a packaging show, and in 1983 launched plastics exhibition Chinaplas in Beijing.
“It was very small scale,” says Chu of the machine tools show. “I think that was one of the very first commercial exhibitions organized in China. Everything under the ‘open door policy’ began in the South, it is far away from Beijing, so we experimented there as a testing ground.”
The Electric Power show began in 1986, on a fairly small scale – around 2,000-3,000sqm, says Chu (it is 17,000sqm today). Nevertheless it was the first B2B electricity show in China.
Electric power development
So how has the electric power business changed since the EP China show was launched 22 years ago? While many sectors – such as lighting, textiles, toys, electrical appliances have developed rather quickly into private enterprises under China’s open door policy, those industries forming the “backbone” of the society are transforming at a relatively slower pace. “Electric power is still considered an ‘infrastructure’ sector,” says Chu, “and the government still plays a dominant role. If you look at the 11th five year plan, you can see the government still plans how many kW will be generated, they control the tariffs, they control the price of coal, so the industry is still quite strongly under the influence of the government.”
But change is in the wind. As Chu points out, the government made some positive steps towards price deregulation earlier this year, raising the price of crude oil, diesel and aviation fuel a few steps closer to international prices. “It was an artificial price,” he says. “Nobody wanted to produce anymore. We saw queues of cars and trucks in many parts of China because the oil companies didn’t want to sell oil because the international price is much higher than the price in China. Airlines were all coming to China with an empty tank and filling up – China was subsidizing the whole airline world! So the government wants to change that, and we see the industry going more towards a market economy.”
But complete deregulation will not happen overnight. Chu’s personal view is it may take 10 years before the market is completely free. He points to some of the issues California faced during its innovative and rapid deregulation, and says the government will obviously be keen to avoid the sorts of problems the free market inflicted on the state. “This couldn’t happen in China,” he says. “I think deregulation is the direction, but it takes time to get it right.”
According to Adsale’s Edward Tang, in charge of sales and marketing for the EP events, the government is adept at dialogue with related parties, and would not forge ahead with deregulation plans which would damage those listed companies. “The government will have policy conversation with them,” he says. “This happened in the telecom restructuring, they had a conversation – compensation was arranged. They will have a conversation whether the policy is good for them, for the industry.”
The make-up of the exhibition over the last 20 years shows how China is evolving from “the world’s factory” into a world leader in technology and innovation. “In China, to start with, the aim was serving domestic demand,” says Chu. “But nowadays, we are diverting part of our energy to include overseas buyers [and visitors], since China is starting to export its equipment and industrial products.” Indeed, China now exports over 50% of its electrical/mechanical products, following government investment in the sector.
According to Chu, China is moving up the value chain. “China is now producing 10 billion pairs of shoes a year,” he says, “exporting 7.8 billion pairs of shoes, 60% of the world market. For every 100 pairs of shoes in the US, 85 come from China.”
But these are low-cost, low value products, he says. As margins reach razor-thin levels, it is no longer economic to produce these products in China, where labour costs are rising. “The government would like the companies to go for the more higher end products, invest more in design, technology and innovation, go upmarket. The low end producer will fade out,” he says.
This will lead to an interesting situation of the low-end factories shifting producing to Vietnam and Cambodia, for example, particularly in textiles and light industrial products. “This is a very natural [cycle],” says Chu, pointing out a similar effect was seen in Japan as it grew.
In the landmark Chinaplas show, which is the third largest plastics exhibition in the world, Chu says 50% of the exhibition space is now occupied by Chinese firms. “We are seeing 20% of our buyers coming from overseas with the aim just to buy Chinese-made machinery. And I think this will happen in the energy and power sector, particularly in the T&D and low voltage side.”
The EP China 2008 show in Beijing was a tremendous success, with over 300 leading suppliers from 21 countries exhibiting. The show had the support of co-organiser China Electricity Council, which also developed a separate seminar of “China Power Technology – Sustainable Development of China Power Industry.”
To celebrate the theme of “30 years of Reform”, a special exhibition was added, at which 16 of the major Chinese power corporations demonstrated their achievements.
Looking forward, Chu believes the importance of green equipment will only become more important. “Green energy is a major area of expansion in the future,” he says. “Especially China, in the 11th five year plan, set its goal of cutting pollution.”. While green energy and environmental technology was not the main focus of EP China 2008, Chu does not rule out developing a separate energy conservation event to run alongside EP China in the future.