By Grant Titmus, originally published by GROW Magazine
It does not take much effort to find a litany of both domestic and international companies that have unsuccessfully tried to break into the Chinese market – often spending a considerable amount of time, resources and money in the process. Factors such as ChAFTA, China’s rapidly growing middle-class, rising income levels, as well as its proximity to Australia and the short time-zone difference have all aligned to make now the opportune time for a Chinese expansion.
To fill this void, entrepreneurs Michael Mai and Tom Ellis have been building a dynamic investment firm since 2014, with the goal of assisting such companies to create a genuine pathway to China.
“The market is pretty unique but with the right partner some of those hurdles can be mitigated,” says Ellis, who for the past 18 months has worked as the firm’s Investment Director.
For those companies that do manage to leap the hurdles, the potential rewards can be great.
Due to its aging population, China’s healthcare expenditure has been increasing year-on-year and private consumption has reached $US3.8 trillion, or the equivalent to Germany’s GDP, according to ANZ. These changes are symbolic of the greater shift in the Chinese economy, which is transitioning from the “made in China” model, to a consumption driven “sold in China” one, meaning that Chinese consumers are more eager than ever to do business with international companies.
These trends are already becoming visible, with ANZ reporting that China is now the world’s largest market for luxury cars, whilst Chinese tourists spent $US165 billion in 2014.
“We believe that Australian businesses are very well placed to gain access to China’s market and our goal is to help them do that via establishing strong, two-way connections,” Ellis says.
In fact, many Australian companies that establish successful operations in China also display a higher tendency to stay in Australia and expand their domestic workforce, according to the Australia China Business Council.
With the support of Michael Mai, who also works as founder and Managing Director of ICD Property, MAI Capital was established to utilise the contacts and trust that his company and family have established in China.
“We view our role in the market is to create a platform with the capability to fast-track a company’s entry into one of the biggest markets in the world, based on a set of strong fundamentals,” Ellis says. “We want to create partnerships where we can add both capital and strategic value, whether that be providing links to partners in China or serving as a mentor, to help de-risk and bridge the gap between domestic Australian companies and the incredible opportunities in China.
“Our goal is to inject funds, know-how and contacts to supercharge Australian businesses, and create long-term partnerships in the process, not opportunistic ones,” he said.
TOM ELLIS INVESTMENT DIRECTOR, MAI CAPITAL
“Whilst we do evaluate start-ups, we are also concentrating on companies that are established, particularly in the health and agriculture sectors, although we will also look at companies in the cleantech, education and logistics spaces.” The company’s first investment was in Sydney-based software logistics business Freight Exchange. Freight Exchange is an online marketplace where long-haul freight carriers can sell their excess capacity to businesses that need to ship goods.
It taps into the millions of trips annually whereby trucks, in particular on the eastern seaboard, are only part full or empty altogether and enables that capacity to be filled. Freight Exchange was founded in 2014 by Cate Hull and Martyn Hann. It is growing quickly with turnover increasing 20% month on month. The logistics business fitted nicely with MAI Capital’s capabilities. Mr Mai’s father and advisor, Boliang Mai, is the head of CIMC (China International Marine Containers), a diversified shipping giant on the world scale.
Regarding the companies that MAI Capital would ideally like to work with, Ellis says: “My favourite companies are those that have previously tried. They know how hard it is. They saw an opportunity but they realise it is difficult to expand into China without the help of a local partner – so hopefully we are the link that they were missing.” In addition to MAI Capital’s target investment sectors, Ellis says that it is also “important to know that they too are making an effort to learn about the Chinese market.
For example, we prefer partners who come to us having seriously planned out their Chinese expansion strategy, but ultimately fell short due to a lack of connections.” MAI Capital is constantly seeking to connect with new companies that are interested in expanding to China. Contact details can be found on the company’s website.