Recently, the Assets Supervision and Administration Commission of the State Council (SASAC) in China issued an interesting notice essentially calling state-owned businesses to coordinate, integrate, and digitalize their management systems to ensure both quality and security. It also encouraged them to accelerate their move to an ‘international standard’ while emphasizing the importance of integrated risk management systems. Indeed, all state-owned firms involved with commodity derivatives business are now required to deploy a risk management system in order to strengthen internal controls, compliance, financial management, and technology management, and enhance efficiencies. It’s essentially calling for state-owned business’ to deploy CTRM solutions where appropriate, says Pengcheng Zheng, General Manager of Enuit China.
Mr. Zheng told me that in the first half of 2020, COVID-19 had essentially frozen the CTRM Market with only 3-4 new projects moving forward in that period. Subsequently, things have begun to move again. However, he says that the Chinese market remains somewhat difficult as a result of tensions between China and the USA and that because of this, many state-owned businesses are looking to the domestic market for solutions. “Enuit has been in the Chinese market for some time,” he told me. “We are pretty much the only foreign vendor operating here. With a staff of around 40 and upwards of half a dozen customers which are all leaders in their business area, we are the market leader although recently, others have begun to try to enter the market from overseas.” Recently, Amphora also announced a significant deal in the Chinese market and is using that win as a springboard into the nation.
Another issue confronting vendors is cost expectations. He says that many local Chinese IT companies and CTRM vendors offer their solutions at very low cost. In some instances, they will provide their solution for nothing until such time as the systems ‘benefits the user’. He mentioned that he had even heard of bid prices in the range of 15,000 Euro per year and less but cautioned that these solutions are low on functionality and are certainly not to the ‘international standard’ demanded.
In terms of local competitors, he identified three for me including;
Raisethink – an internal developer for Chinaoil and Unipec that doesn’t yet have a mature suite solution,
Beijing Hua Rong Qi Ming Risk Management Technology who mainly focus on market risk and lack any physical scheduling experience, and provide limited functionality at a low cost, and,
Shanghai Qichen Technology who focus on the metals business, originating from a manufactory enterprise offering an ERP-based solution with some trading functionality and with formula pricing as well as futures trading capabilities.
Some SaaS providers have also emerged on the market since the middle of last year, such as OneCtrm, offering clients very low-cost solutions (as low as ten to twenty thousand Euros per year). Some other more traditional software solution providers who used to sell ERP, traditional trading solutions or futures trading and management solutions, are also entering this area too.
Enuit’s approach to the market has been to open a local office, hire a local team and work with local partners. “We already cooperate with Hundsun, a leading financial technology player in China,” he told me. “They will develop new clients and help build and deploy joint CTRM solutions for the Chinese market – a very strong and comprehensive solution suite to meet the needs of Chinese state-owned businesses to comply with Government instructions.” He told me that Enuit has also two partnerships with Chinese implementation consultancies as well. He fully expects to sign 2-3 new customers during the remainder of 2020.
In fact, The Vendor Perception study we recently completed shows that Enuit’s presence in China is significant. Enough to drive leading brand awareness and perceived market leadership in almost every category in our sample of the Asian-Pacific region which had numerous Chinese respondents. Enuit’s Chinese users and those who had heard of Enuit in China were numerous and enough for it to pass a consolidated Ion brand in almost every category in that region.
Although for me China remains a very opaque market, it does appear a little like the CEE region in Europe where top tier concerns have sought western CTRM solutions but the mid-tier and below have chosen local and cost-effective vendors or IT firms. Ever cost-conscious, as the CEE region becomes more ‘standard’, these local legacy solutions are under threat to be replaced with now cheaper, more functionally-rich, cloud or SaaS solutions from western vendors. Despite that, language and cultural issues often remain issues and the emergence of some stronger local brands looking to grow internationally adds to the market landscape of possible solutions.
Pengcheng said “The CTRM market in China is growing very rapidly, and even given the extenuating circumstances, trends and need to educate the market, there are many major trading firms that trade in both the international and domestic markets that understand the complexities and costs associated with CTRM implementations. Enuit has built successful partnerships with many of these firms as we are still the only firm in China that provides a world-class solution supported by a large local team that can communicate effectively with clients and understand their unique needs. This gives Enuit a great advantage over both international and local vendors”
Plainly, in China, the challenge for a US-owned Chinese subsidiary is now to manage the reluctance of Chinese state-owned firms to buy American as well as to manage price expectations. However, by educating the market that there is no ‘international standard’ solution available from a Chinese vendor and that the only competition in the near-term will be from other foreign vendors, Enuit’s local footprint, robust and comprehensive solution and partnerships appear to promise a good and competitive future in China.
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