How to build and launch a 50,000 m2 factory in China from scratch amid the crisis and sanctions

Let me start with a little background: I have been working with the Russian-international holding company for which we were building the plant for over 10 years. The holding includes several companies in different countries - industrial, financial, investment fund and production of various types, and so on.

Over all these years, I have helped to build relationships between the holding's subsidiaries and Chinese businesses inside China and attracted major investors to the projects. Plus I was engaged in so-called matchmaking - that is, looking for contractors in China for different client tasks.

In 2019, the owner of the holding company decided to build a home appliance factory in China, and I and my company ABH took on this task.

Our goal: to help the holding company make a name for itself in China and build a factory from scratch and without capital

📍Point А:

A large holding company, including several companies, but without production in the PRC
The holding company is practically unknown in China, which means that all the work must be done from scratch

📍Point B:

Launched a PR campaign that attracted $35+ million in bank financing
Obtained a loan and favorable terms for construction
Launched an appliance factory, which now has customers in the Middle East, Africa, Europe and India, and the U.S.

But first, let's get to know each other

My name is Ivan Melnikov, I am the owner of Asia Business Hub and I have been living in China since 2005. My company helps entrepreneurs with the procurement of equipment and raw materials from China, as well as with the realization of complex technical projects with the participation of Chinese manufacturers with full support at every stage.

Ivan Melnikov

entrepreneur, owner of Asia Business Hub

Speaks Chinese without an accent
Understands the mentality of Chinese business owners and know how to negotiate a discount and conclude a long-term contract
Helps to organize PR in China and establish relations with the Chinese government

How we did it:

Our work was built in stages. At the beginning, we launched a PR campaign to attract the attention of Chinese investors and the government.

1

Stage. My company organized the holding company's participation in a Chinese import EXPO exhibition. We fully prepared all the materials for the exhibition - a stand, a presentation and so on.

Two months before the exhibition, I arranged with a Shanghai media group for journalists to travel to the home country of an international holding company to make a movie about the holding company. We made a big documentary about the company to attract interest in it.

Closer to the exhibition, the owner of the corporation himself came to China and we had a series of TV interviews and meetings with investors. Organizing such meetings and interviews is a difficult task, but I know the ways ;)

2

Stage. We organized a personal meeting between the owner and the President of the People's Republic of China, Xi Jinping, as well as governors and owners of the world's largest corporations.

In this way, we warmed up the Chinese investors even before the exhibition started. Thanks to this, after the exhibition several districts of China literally fought for our plant to be located there.

At the same exhibition, we started building relationships with a partner and co-investor who already had similar plants in China.

3

Stage. In 2020, an investor suggested looking at a village where a plant could potentially be built. We went there and approved the site almost immediately.

At each stage, I made a video for the investor, showing our work. In the end, it turned out to be a whole series. And the investor himself has not been in China again since 2019

4

Stage. We registered the company in the area where we are going to build the factory. My partner Jason helped me with that.

5

Stage. We held negotiations with the government and agreed not only on construction, but also on favorable conditions. I will tell you about them a little later.

6

Stage. We prepared to participate in another exhibition: we again attracted the Chinese media and arranged several interviews on local television.

All this PR-campaign was necessary not only to attract investors, but also to get preferences and credit lines in the PRC

The thing is, getting a loan in China is not so easy: you need to have a collateral component or 100% equity. We had neither of these, so we “took” by PR, so to speak.

7

Stage. We participate in a land auction and win it. I should note that by that time both investors and the government were so warmed up that there was simply no doubt that we would win the auction.

8

Stage. We received a loan for several tens of millions of dollars, thanks to a PR campaign, and signed contracts for pre-sales. I emphasize that we were approved for the loan, although the company was absolutely zero.

9

Stage. In 2021 we started the construction process. We invited the media and the government to the opening of the construction works - the series continued :)

In that year, we had the project 80% built out.

And then 2022 came around. We ran into problems with financing because of the sanctions.

We have obligations: to the construction company, to the contractors. That means the problem had to be solved and the project had to be saved.

My partner and I found new investors, closed the gap in financing and literally lived on the project for six months. Thanks to the support of the government and the media, construction continued successfully. The PR campaign we launched played its role here as well.

10

Stage. We launched a factory that is already generating cash flow. We have customers all over the world, from Africa to India.

Important details about our work

Through thorns and sanctions

The construction of the plant coincided with many unfavorable factors at once: the lockdown, during which China was closed for 3 years, and sanctions imposed on businessmen and investors connected with Russia. But thanks to PR, a great reputation and the support of the Chinese government, we were able to solve all the problems and finish the construction.

Competent PR helps in almost any situation

The series that saved me from losing my investment

My investor videos played a big role. At some point, many of his businesses had slumped due to the lockdown, and he might well have abandoned our project. But my “series” with all the stages of construction ignited his excitement and gave him hope that everything would work out. And it did in the end.

Unconventional methods of work - the basis of our approach

Government perks

A significant advantage of our work was that the construction took place on favorable terms - when we built 30% of the object, we received a refund, on 40% - another refund, and so on.

By the finale, we had gotten back almost all of the money we had invested in buying the land

What's the result

The most important thing we have achieved in our work is that the plant is up and running. Through all the problems and force majeure, we went from buying an empty plot of land in a Chinese village to the first customers from all over the world.

Here are some numbers:
$ The equipment at the plant is valued at $7 million dollars
$ Total investment amounted to more than 35 million dollars
$ Already employs 50+ people at the plant

Now the plant is operating and our goal is to find customers in Russia and the CIS countries. This is fundamentally important to me, so that the technopark I built and attracted funding for would benefit Russian-speaking people.

Conclusion: all problems are solvable if you know what to do and how to build a competent comprehensive work with Chinese partners and the government

And if you want to build a business with China or get a ready-made solution for entering the Chinese market, start with a free consultation at my company.

At an online meeting, we will go over all the nuances and steps specifically for your project.

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