Thank you very much, and thank you for having me.
My name is Carl Breau, and I am the CEO of companies Nummax and Saimen, both active in electronics and the manufacturing of electromechanical products, both in Canada and China. Total revenue is about $20 million.
I am a Canadian citizen. I'm an engineer. I speak French and English and I can actually speak, read, and write in Chinese Mandarin, although my writing in Mandarin certainly looks like a five-year-old's. I live in Canada, but I also own a home in Shanghai, China, where I spend a lot of time.
I'm a business mentor for many entrepreneurs in Canada, U.S.A., and China. I'm actually an associate and mentor at the Creative Destruction Lab in Canada. I was also nominated as an MBA program learning mentor at the China Europe International Business School in Shanghai, which is generally recognized as the highest-rated MBA program in Asia.
Finally, I'm a certified board director and have board membership experience both in Canada and China. I hold patents and trademarks in China. I have received the Canadian Council of Professional Engineers medal for exceptional achievement by a young engineer. I am no longer young, so I guess that was some time ago.
The first topic I would like to address deals with supply chain traceability, transparency and best practices.
Overall, the business environment in China is actually very transparent. Accounting is based on Fapiao accounting, meaning that all transactions are recorded at the tax office at the time they occur. Most company information is public and readily accessible, including legal records, ownership structures, labour disputes, number of employees, credit ratings, etc.
Supply chain best practices in China, which I can also witness to, are actually the same pretty much as everywhere else. Language and distance can perhaps make things a bit more complex. The key is to do proper due diligence, do a mapping of your supply chain, sort of knowing whom you're buying from, but also knowing who you're buying from is buying from.
You need to do frequent audits of your suppliers or partners, which in some cases can be done remotely using recent technology, as it is done today.
Let's be reminded that we're buyers or investors in most of the examples here, so we can actually require all the transparency that we want. If we're not happy, we don't need to buy or invest in China. As buyers, we can set the traceability protocols and we can have any compliance requirements we need.
Having said that, I would also like to emphasize the importance of building enforceable, clear and detailed contracts with your business partners in China, or really anywhere around the world. All of these are common practices, so I like to tell my business friends, when they come to China, to please not leave your brain on the plane. Do things the way you think they should be done, no matter where you are.
Finally, regarding supply chain management, technology can help. There are blockchain tools now, which are more and more common, to help with traceability. Of course, remote auditing and online quality control tools have evolved considerably in the last few years, and access to live camera feeds in working areas is sometimes possible.
I would like to say a few words on corporate compliance and responsibility from our perspective.
In China, there's the notion of a company legal representative, which generally means a company director. The company legal representative, as the name implies, has significant personal legal responsibilities with regard to the operations of companies and compliance, so this is an important role to understand and manage properly.
The so-called registered capital gaps set the investor's financial responsibilities in case of default with employees or suppliers, so you need to understand that. Essentially, it's the difference between the amount set as a registered capital requirement and the actual capital invested in the company. That sets the remaining potential responsibility of investors in China, which can be significant.
A person cannot declare personal bankruptcy in China, so that creates that extra level of responsibility. Whatever personal debts or responsibilities, arise from some of the issues above, a person cannot actually escape from them in China.
I would like to say a few words about cascading or firewalling.
It's very common for Canadian companies investing in China to actually do that through another company in between, in a place, for example, like Singapore. That shields the Canadian company from most of its responsibilities for its investment in China, so it's considered good practice, because it protects investors. At the same time, it sort of disengages investors from their responsibilities in foreign countries, including China, so that can be a little bit of a dilemma.
Finally, on the topic of living in and doing business in China, I think China is a good place to do business in full compliance with international standards. It comes back to who is managing and making decisions. I feel totally safe when I am in China, both as a business owner and in my private life.
I do feel that there is considerable bias in how information about China is reported in the news and social media. I personally don’t rely very much on this often distorted information to make any decision.
I sure hope I can make a positive contribution to this committee. Thank you very much for having me and for your attention.