Licences in China: The final decision rests with Beijing

For the first time licences have been refused to Deutsche Messe AG, Hanover. It was unable to carry out part of its programme in Shanghai as planned.

An organiser's dream: The venue is fully booked and tents have to be pitched to meet the demand for space. It is going so well that the first shipments are already on their way to the site because the events in question are to be held in Shanghai. But in August, this dream turned into a nightmare for Deutsche Messe AG: The company was refused a licence for the four trade fairs Metal Working China, Factory Automation Asia, Interkama Asia and Energy Asia for the schedule originally planned. As a consequence, the four trade fairs will now be held from November 1 to 5 in the Shanghai New International Expo Centre (SNIEC). According to the organiser's schedule they should have been staged at the same time as last year, that is, from October 10 to 13 in co-operation and concurrently with the trade fairs Cemat Asia and PTC Asia.
So now what? These trade fairs, for which licences were granted for a later date, will now be held at the beginning of the month under the umbrella of the China International Industry Fair (CIIF), which is also staged in the SNIEC. There, Metal Working China, Factory Automation Asia, Interkama Asia and Energy Asia will account for a third of the total presentation. Deutsche Messe AG is taking a demonstratively relaxed view of the matter and sees the - not entirely voluntary - co-operation as "reinforcement of the CIIF in terms of specialist competence and reinforcement of our own activities through German-Chinese partnership." The organiser informed the exhibitors affected in a letter to all exhibitors at the end of August.
Rolf Löffler of Balluff GmbH, Neuhausen, an exhibiter at Metal Working, seemed relatively unperturbed: "If you have been to China often enough, you are no longer surprised at such rescheduling or what the other partners do." Nils Passoter of Weidmüller, Detmold, does not feel pushed into CIIF either but the exhibitor at Factory Automation is nevertheless unhappy about the altered situation: "Admittedly, we were surprised to hear the news from Deutsche Messe AG. After all, it is very unusual to reschedule an established trade fair at such short notice. We are reserving judgement as to whether the CIIF is really an equivalent forum. With a view to our market activities in China, we will do all we can to make up for the changed situation for our customers."
"Rescheduling" sounds harmless but the way it was done was no joke. Even though Deutsche Messe AG remains the organiser of the four trade fairs under the umbrella of CIIF, it has been treated in a somewhat arbitrary manner. The Chinese authorities changed the licensing conditions for trade fairs at short notice without adequately informing the foreign organisers. In this case, the outcome was practical for the Chinese. After all, their industrial trade fair is not developing as much as its organisers would wish and is more like a market for anything and everything. Apparently, their CIIF is not interesting enough and attracts very few foreign exhibitors. Renaming the Shanghai International Industry Show to China International Industry Fair did little to help. Demand from foreign companies to exhibit there remained low and prospective exhibitors were and are still drawn more to the trade fairs staged by the organisers from Hanover. They had avoided the word "industry" in the tradeshow names from the outset, preferring to take individual trade fairs to China.
The licence refusal for Deutsche Messe AG was an elegant solution for the empty halls of the CIIF. It is also a way of obtaining technology transfer. After all, China is seeking a place in the international high-tech league table. Rolf Löffler does not feel manipulated. "It was the Chinese we were dealing with before. Our partner for German participation has not changed." His colleague Passoter is more critical: "We will see whether foreign companies will only be allowed to exhibit at CIIF or whether other forums will be open to them, too. And we have yet to see who will be handling the exhibitor data and how fastidiously it is used." Given the unexpected nature of the rescheduling, Deutsche Messe AG gave its clients a chance to opt out of the contract. However, few exhibitors took up the offer. The Chinese market is evidently too important. "The trade fair and the trade fair topics had top priority for us", confirms Rölf Löffler for Balluf. All the manoeuvring in the background is of no concern to us.
Rescheduling by licence refusal is just one aspect, the other is that splitting the six-fair combination into two dates has destroyed one of the Hanoverians biggest unique selling points. "Splitting is neither good for the organisers nor the companies - on the contrary. Experience has shown that the contents and quality suffer", says Nils Passoter. "As exhibitors, we have a basic interest in proficient and high-quality trade fairs and the merging of allied sectors not only to keep the budget down but also to achieve synergies for our customers. If we lose this kind of added-value, we have to respond as enterprises", the Weidmüller representative stresses and adds: "We have to be where our customers are because our first duty is to them. We will be watching future developments closely in this respect and act in the interests of our customers."
The licensing authority is under no obligation to grant licences quickly and German companies must state early on when they would like to hold their trade fairs. At national level, the regulations governing trade fairs are broad and not very specific but that is not so in Shanghai. The city has detailed rules on granting trade fair licences. These were quietly introduced in May last year. Trade fair organisers wishing to operate in the boomtown have to apply for all licences for a year's events by May 30 the previous year. If the applications are submitted late, there are consequences: Approval is delayed, if it is granted at all. Trade fair experts are noting a lower approval priority compared with trade fairs applied for in good time that have already been licensed in the past. New events have an especially tough time: The time available for planning is often very short. Outside Shanghai, the national rule applies that trade fair licences have to be applied for twelve months in advance. Shanghai is therefore a sort of test bed for other trade fair cities in the People's Republic. So far there is no comparable detailed catalogue of licensing criteria at national level or in other provinces or cities.
While the organisers have to rush to apply, the Chinese take their time about granting licenses. If there are no objections to an event it usually takes only a few weeks until the trade fair organiser has the licence in his pocket. If there are conflicts and overlaps of content with competing events planned soon before or after, the situation is completely different. In such cases, the approval procedure takes longer and may be drawn out over months. The procrastination has a purpose. The "lords of the licences" hope it will encourage competitors to agree amongst themselves to reschedule or join forces. The licensing authority supports the merging of trade fairs held with the same topic in the same year.
The new Shanghai rule also contains a list of ‘basic principles that Coftec must consider when granting a licence: For example, trades fairs with the same topic in the same year must be at least three months apart. Moreover, each trade fair organiser is permitted to stage only two trade fairs on the same topic per year in Shanghai. A China International Industry Fair that has not really taken off, a licensing authority that supports the merging of trade fairs with the same topic in the same year - this year the Hanoverians would seem to have had the misfortune to fall victim to Chinese economic policy. Normally trade fairs with a high level of professionalism and internationality (proportion of foreign exhibitors at least 20 %) enjoy special support. It may be the case that this support was withdrawn from the Hanover fairs this time because of their proximity to the CIIF. Or the Chinese authorities may see a trade fair exceeding 100,000 m2 as something worth interfering with or even getting hold of.
Despite licensing problems, no German organiser or more than a handful of exhibitors will withdraw because the market is just too tempting and the opportunities afforded by Asian growth outweigh any disadvantages. Growth means almost automatic profits. And trade fair organisers are well aware that there is no alternative to Chinese support. They depend on co-operative arrangements. Of course, that doesn't mean the one side cannot gain an advantage over the other. And German organisers stand to lose more than the exhibitors.
Nils Passoter sees no end to the uncertainty: "Asian markets are developing in leaps and bounds, especially in China. Of course, that is going to heat up the trade fair business and competition will get tougher." He therefore believes that "further co-operation models are highly likely to appear. We very much hope that quality and efficiency will be paramount considerations." Passoter: "In the end, the customers are the ones who decide which events will take off."

m+a report Nr.7 / 2006 vom 27.10.2006
m+a report vom 27. Oktober 2006