Riga, June 17, 2011

1. Riga, June 17, 2011 A project funded by the European Union

2. Market potential A rapidly growing economy • an annual GDP growth rate of around 10% over the last five years • Key drivers: • a strong trade balance • increasing FDI: $105.7 billion in 2010 (+17.4%) • urbanisationof China’s population: 49.7% now live in cities, compared with just ~20% in 1982. From 2010 to 2025, 300 million Chinese now living in rural areas will move into cities (Ministry of Housing and Urban-Rural Development)

3. Challenges • Environmental • Heavy pollution • Lack of water • Energy • Reliance on coal • Increasing energy dependence • Massive electricity shortages • Social • Aging • Disparity of revenues

4. Air pollution • "Overall urban air quality is good with relatively heavy pollution in some cities. Among 471 cities, 3.6 percent met grade 1 air quality standard, 79.2 percent met grade 2, 15.5 percent met grade 3 and 1.7 percent failed to met grade 3." • Interpretation: Almost one in five cities still fails to meet the low passing grade set by the government on an annual basis. Photograph: Guang Niu/Getty Images

5. Water issue • Mainland China has only a per-capita share of 2700 cubic meters per annum, ¼ of the world's average. 2/3 of China's 660 largest cities face water deficits. Beijing is among the cities most affected. • "Surface water pollution across the country is still relatively grave … 59.9 percent of rivers were grade 3 or better, 23.7 percent of rivers were grade 4 or 5 and 16.4 percent failed to meet any grade standard. (China State of the Environment 2010)

6. Reliance on coal • China's coal consumption in 2010 was 3.2 billion metric tonnes (2.3 B in 2006) • Mainly for production of electricity (73%) • Also by some industries (Steel…)

7. Massive power shortage • Power shortages yearly since 2004: insufficient generating capacity, fuel shortages, blackout ordered to meet a year-end energy-efficiency target… • deficit of 30 million kilowatt hours this summer

8. Social • Aging: By 2020, over 23 percent of China’s citizenry is expected to be over age 65 (People aged 65 and older currently constitute 8.87% of the population) • Disparity of revenues: per-capita annual income in urban areas was about $2,500 in 2010, more than three times the $750 in rural areas

9. Challenges = market opportunities • Emissions control and measurement systems • Equipment for green building • Medical equipment • Pharmaceuticals • Energy efficient products • Electric equipment • Home decoration • Consumer goods (not only luxury) • Travel

10. Assess these market opportunities - Verify the reality of the market for your product: • Right to sell your product • Need to conform to standards • Pricing - Do a real market research: • China is not a market, but many markets • Visit a professional exhibition - Be cautious • Due diligence of the prospective partners • Do not sign any contract after just one meeting • Do not give any exclusivity • scams

11. Develop a strategy • Make sure you have the means to tackle the challenges • Select a limited geographical area and/or a specific sector • Take all the help you can get (EU SME Centre, Embassy, IPR Helpdesk, consultants, law firms…

12. STANDARDS

13. The Chinese Standardisationand Conformity Assessment System • Some Basics • China’s Standardization System • Conformity Assessment

14. Basic differences China • Restricted access to the Chinese market • Government permit is required for most products and services before being placed on market • For many consumer products CCC mark is required, along with other certificates EU • Free market access • Producer/ Importer must prove that product is safe: • Compliance with harmonized standards gives presumption of conformity • CE markingis a self-declaration by producer

15. Safe products? In China ... • Both government and producer • Proof of Conformity • Government permits • Market surveillance activity by provincial governments In Europe ... • Sole responsibility of producer / importer • Government controls very few high risk products • Market surveillance activities by Member States

16. Market Access in China For most goods, one or several pre-market approval schemes apply, for example: • CCC Scheme: catalogue published by CNCA, based on compulsory National Chinese Standards (GB) • Licensing Schemes controlled by various ministries, based on technical regulations, National, and Industry standards Goods not listed in the CCC catalogue and w/ out other specific licensing rules, market access is free Some goods require marks and labels on a self-declaration basis • China Compulsory Energy label • China RoHS declaration for electronic products

17. China’s regulatory system Formal legislation • Legislation, e.g. standardization law, consumer protection law, energy saving law, food safety law, IP law, etc. • Regulations, e.g. CCC market access scheme, regulations about indigenous innovation products, etc. • Instructions for implementation of regulations, e.g. CCC implementation rules Co-Regulations (soft regulation) • Compulsory standards (part of technical regulations, but adopted in informal process) • Voluntary Chinese standards

18. Snapshot on Standardization • China has a clearly defined standardization strategy, supported by the Government • Over 100.000 standards compared with 20.000 EN standards • Standardization Administration of China (SAC) main interlocutor– owns Chinese National Standards (GB Standards) • China is very active in international standardisationforums (ISO, IEC, ITU)

19. Standardization Policy • Standardization is a tool to disseminate scientific experience and accelerate technical innovation (“leapfrog technologies”) • Standardization is a tool to develop a strong domestic knowledge base and a related industry (“home-grown standards”) • National safety and security interests shall be reflected in the standardization system • Export of Chinese standards shall support Chinese trade policies, e.g. in the field of IPR in standards

20. Why are standards important? • To safeguard basic protection of Human Health, Personal Property and Safety • Standards describes the fundamental qualities for products allowed on the Chinese market • On-going efforts to harmonize with International Norms but Chinese deviations are common • Standards provide the legal basis for Conformity Assessment • International recognised test results are not accepted in China, with the exception of CB reports (for electronic and electro-technical goods) • Conformity assessment can only be carried out in China

21. 4 levels of standards Voluntary GB Stand. 22.931 Mandatory GB Stand. 3.111

22. National Standards • Sold by SAC, often in partnership with National Standards Authorities • Translated, at least into English • Easy to search, using SAC web portal

23. Professional Standards • Industry Standards or Sectorial Standards • Apply when no National GB Standard exists • Mandatory or Voluntary • Difficult to search, only available in Chinese • Mostly sold in China

24. Support GB Standards can easily be identified online through SAC search tool or with the help of national standards organisations. For the remaining 3 levels: • Through service providers • Through Industry Associations • EU-China Standards Information Platform • EU SME Centre

25. Conformity Assessment

26. Snapshot on Conformity Assessment • Opposite approach from EU’s ”Presumption of Compliance” • Proof of conformity falls on the testing body and Conformity Assessment is Mandatory • Products subject to mandatory Chinese standards must be tested • Compliance testing is required before the product is allowed to enter China

27. Market Access Schemes • Most common is the China Compulsory Certification (CCC) - 23 Broad Categories - 172 types of Products • A number of other Market Access Schemes exists - Radio Type Approval (SRRC) mobile phones, broadcasting equipment, RFID, etc - Network Access License (NAL) Phones, fax, modems, routers, etc - Information Security Certificate (CC-IS) - Special Equipment License Boilers, pressure vessels, elevators, etc - Industrial Product Manufacturing License - Heavy Polluting equipment - Phytosanitary Certificate

28. Sector Specific Market Access Schemes In addition, some sectors will have seperate requirements, in particular: • Medical / Healthcare Equipment • Cosmetics Products • Food and Beverage (not including SPS issues)

29. CCC at a glance • Needed in China mainland only • Compulsory market-access license • Focus on product safety, environmental performance, consumer protection applies to 23 categories of products and based on Chinese national standards (GB standards) 1. Electrical wires and cables ( total 5 categories ) 2. Switches for circuits, Installation protective and connection devices 3. Low-voltage Electrical Apparatus ( 9 categories ) 4. Small power motors ( 1 category) 5. Electric tools ( 16 categories ) 6. Welding machines ( 15 categories ) ... Etc.

30. CCC Exemptions There are few exemptions to the mandatory mark. In general, products not intended for sale or usage on the Chinese market can be exempted from testing requirement. Exemptions include: - Products used at exhibition - Special purpose products (eg. military use) - Personal belongings - Products imported for R&D or testing purposes - Products for re-export

31. Overview of the certification process The CCC testing procedure can generally be divided into a 5 step process. • Application – The required documentation in submitted to the competent authorities 2. Type Testing – A designated test laboratory in China will test the sample product. 3. Factory Inspection - CQC will send representatives to inspect the manufacturing facilities for your product. Each factory producing parts for the final exported product needs to be inspected. 4. Evaluation – decision is made if CCC certificate is granted or not. 5. Product Marking – marking of product and packaging 6. Follow-up Factory Inspection - Manufacturing facilities needs re-inspected by CQC every 12 to18 months

32. What does the CCC Mark cost? Application fees and superior costs Consulting and translation cost to service agent Test fees CCC Cost CNCA marking fee Inspection fees Travel fees and accommodation for testing staff

33. CCC Cost Expanded

34. Additional requirements • Some products will have additional requirement depending on product qualities and functionalities • Other common requirements includes: - Radio Type Approval (SRRC) License required for products using radio frequency spectrum resources, such as mobile phones, broadcasting equipment, RFID devises, etc. - Network Access License (NAL) License required for products needing network compatibility between equipment and network, such as phones, fax, modems, routers, etc.

35. Example of Product Enquiry • Product Qualities - Wireless Connection to internet - Remote Communication via GPRS - Energy Consuming - Interface with Boiler • Certification Requirements - CCC certification - SRRC License • NAL License • Possible Special Equipment License

36. Labelling Labelling requirements include: • RoHS Labelling – on self declaration basis (but mandatory) • Energy Label – on self declaration basis (but mandatory) • Labelling for F&B products – applying stickers on product offering information about exact content, levels, expiration date, etc.

37. General remarks • Chinese Standards and Conformity Assessment environment is frequently changing – it is key for manufacturers to stay informed - Industry associations can play an important role • First time applicants should get assistance from professional service providers - Gaining experience • Language is one of the main barriers to product certification - In-house language capabilities is an asset

38. Remarks • Standards in China are very important • There are ways to make them less difficult to handle • One of them is to use the specialists of the EU SME Centre

39. Overview of the Centre

40. Purpose and objectives • The core purpose of the Centre is to: • Support EU SMEs to establish, develop and maintain commercial activities in the Chinese market • In particular, support EU SMEs without access to national trade chamber services in China • The EU SME Centre helps EU SMEs overcome barriers and constraints they face in their efforts to export to the Chinese market.

41. Expertise • The EU SME Centre has a multi-cultural team of 15 full-time members of staff, including advisors and specialists on hand to offer free, confidential advice and a range of comprehensive support services • Market Access Advisors – experts specialised in the fields of Business Development, Legal issues, Standards, and HR & Training • External experts – a large pool of freelance experts on hand to offer specific sector-related advice

42. 4 main areas of expertise Business Development • Market information (projects, opportunities...) • Business Advice • Matchmaking • Business Centre (hotdesks, meeting rooms etc) Legal Issues • Transparency and Predictability in the legal system • Access to the legal information • IPR (in cooperation with the IPR SME Helpdesk) • referral to service provider (lawyer, tax advisor, etc.) Technical issues • Product Quality • Chinese Marks • Conformity Assessment • Labeling Human Resources Issues • Resources with specific skill sets, including languages • Advice on how to limit the turnover of the personnel • Referral to trainings sessions/expertise

43. Online Portal • The website aims to be a valuable source of practical information for professionals, companies and trade promotion agencies developing commercial activities in China. • Registration is free and allows users to access the • Knowledge Centre • Ask-the-expert service • Hot-desking service

44. Publications Radio Type Approval Guideline Network Access Licence Guideline CC-IS Guideline Medical Devices  Sector Guideline China Compulsory Certification  Guideline Industrial Products Manufacturing Licence Special Equipment Licence  General Guideline to Chinese Labelling requirements Energy Label Guideline RoHS Label Guideline Contract conclusion IIT Taxation of non-resident enterprise Processing trade ICT Sector Report F&B Sector Report Green Technology Report ICT Case study (2) F&B Case study (3) Green Tech case study (3) HR Recruitment Case Study

45. enquiries@eusmecentre.org.cn www.eusmecentre.org.cn