1. WHY CHINA Small Han… · SMART SOURCING IN CHINA ..... 20 Made-in-China.com: Connecting Buyers...

October, 2012

Published by Focus Vision Magazine, Made-in-China.com

1. WHY CHINA .......................................................................................1

China’s Economy: Present and Future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

China's Growing Role in the World . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

The China Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Innovation and IPR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

OEM Agreements and Negotiation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

2. SMART SOURCING IN CHINA .................................................. 20

Made-in-China.com: Connecting Buyers with China Suppliers . . . . . . . . . . . . . . . . . . 22

Audited Suppliers: Help Buyers to Be Sure in Product Sourcing . . . . . . . . . . . . . . . . . . . . 24

Buyer Service: Buyers’ Sourcing Helper in China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

A Factory or A Trading Company? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

3. DOING BUSINESS IN CHINA .................................................... 36

Chinese Culture and People . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Mr. China to Be . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Making the Best of A Canton Fair Visit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

How They Understand China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

Doing Business in China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

CONTENTS

WHY CHINALong history and sophisticated cultureA manufacturing havenThe second largest economy in the worldIncreasing innovationInvestment paradise for SMEs…

For many people, something about China is so intense and exciting. For business people, they are always dreaming of success in China. In this chapter, you will find some basics of doing business in China.

CHINA’SECONOMY: PRESENT ANDFUTURE

China is forging a new identity for itself beyond that of a manufacturing haven. With wage rates rising rapidly, other Southeast Asian countries are stepping up to � ll the shoes of “world factory,” while China actively shapes its economic growth in a dif-ferent direction.

The strategic economic goal-setting of the current 12th Five Year Plan (2011 through 2015) outlines several economic development initiatives, includ-ing:

• 51.5 percent urbanization by 2015

• Emerging strategic industries to reach value-added production of 8 percent of GDP

• More foreign investment in agriculture, high-tech and green industries

• Transition of coastal regions from manufacturing hubs to R&D, high-end manufacturing and services hubs

For foreign investors, these changes present great opportunities. With little to no growth in many western nations and the pull of Chinese domestic consumption, the pro� le of companies investing in China is indeed expanding. China is now experienc-ing a “second wave” of foreign investment – while the � rst wave was primarily from big multinationals, the second wave brings with it greater quantities of foreign investment from SMEs.

To accelerate the development of the country’s strategic emerging industries, China’s State Council issued the “12th Five-Year Development Plan for National Strategic Emerging Industries” in July 2012.

The plan lays out 7 strategic emerging industries as follows:

1. New energy auto industry

2. Energy-saving and environmental protection in-dustry (includes resource recycling industry)

3. New generation information technology industry

4. Biology industry (includes bio-pharmaceutical, bio-medical engineering, bio-breeding and bio-manufacturing industries)

5. High-end equipment manufacturing industry (includes aviation, satellite, rail transportation, and marine engineering equipment industries)

6. New energy industry (includes nuclear energy technology, wind energy, solar energy and biomass industries)

7. New material industry (includes new functional material, advanced structural material and high-performance composite material industries)

Guangzhou, at Pearl River Delta, the economic center in Southern China Shanghai, at Yangzi River Delta, the economic center in Eastern China

WHY CHINA WHY CHINA 5A SMALL HANDBOOK OF DOING BUSINESS IN CHINA / 10 / 20124 A SMALL HANDBOOK OF DOING BUSINESS IN CHINA / 10 / 2012

China is no longer simply “an emerging power”. It is true that China’s GDP per capita remains very low (US $5,414) relative to developed countries, and well over 700 million of its estimated 1.3 billion people still live in poor rural areas. Yet China is now the sec-ond largest economy in the world, trailing only the United States. China continues to see enormous growth.

China is already a major world purchaser. The coun-try currently consumes more than half of the world's pork and cement, a third of its steel, over a quarter of its aluminum and is now the biggest market for car sales. From a macroeconomic perspective, China's actions now have global rami� cations, while in the global political arena, China's influence and soft power over regional and worldwide geopolitical dynamics is rapidly increasingly.

Currently, China's GDP annual growth rate remains at a healthy seven to nine percent, far outpacing the developed world. The bottom line is that as China becomes an increasingly important global power, it will have increasingly greater in� uence over all busi-nesses. Rather than an emerging power, China has already emerged as a serious player.

CHINA'SGROWING ROLEIN THE WORLD

THE CHINA PRICEThe flip side to China's large population is its vast labor supply. China's emergence as the manufactur-ing hub of the world over the past three decades has created significant downward pressure on pricing of many of the world's goods. Outsourcing manufacturing to China has become a standard practice for many labor-intensive products, such as machine tools, leather products, toys, furniture and textiles, among others.

While many have characterized China's labor pool as unlimited, that has proven not to be the case. In a number of areas on both the low and high end of the production value chain, Chinese manufac-turers have had to deal with shortages of suitable labor, particularly in certain geographical regions. Coupled with an increasing focus on environmental protection and labor rights reform, China's low-cost advantage has decreased a bit over the years.

Nevertheless, much like other developing countries,

China has changed the global pricing landscape, often with deleterious effects on manufacturing companies elsewhere around the world. As a result, many companies have been faced with the harsh reality that they must compete on quality and de-sign or else determine a low-cost production strat-egy to compete and survive. Often, this low-cost strategy entails outsourcing some part of the supply chain to China.

Importantly, China's competitive advantage in manufacturing is no longer driven solely by low-cost labor. Many Chinese factories have become very e� cient and are able to deliver a high-quality product compared to counterparts in other low-cost geographies. Furthermore, China is in the pro-cess of moving up the production value chain and is making a major push to develop its service sector. Foreign companies should view this trend as both a threat and an opportunity, but it should be man-aged appropriately either way.

China’s labor worker minimum wage increases dramatically

WHY CHINA WHY CHINA 76 A SMALL HANDBOOK OF DOING BUSINESS IN CHINA / 10 / 2012 A SMALL HANDBOOK OF DOING BUSINESS IN CHINA / 10 / 2012

A common assessment of China's labor force is that its strength lies in highly repeti-tive manufacturing processes that require large amounts of manual human labor. As for more service-oriented knowledge tasks, the reign-ing perception is that, on the whole, China’s workforce is not innovative, creative or � ex-ible enough in its thinking to compete. China's top-down approach to government, policymaking and social con-structs, combined with a rote learning system that is heavily focused on test-taking rather than teamwork and problem solving are regularly cited as reasons for this deficiency. In addition, rampant disregard for intellectual property rights may dampen incentives for innovation.

Even today, many Chinese companies � nd it far easier to copy or reverse engineering existing technologies. Times are changing, though. With approximately four million engineers graduating each year from Chinese universities

INCREASE ININNOVATIONAbacus, one of the greatest inventions in ancient China

Movable type printing, the glory of Chinese printing

4 million engineers graduating each year from Chinese universities and technical institutes

and technical institutes. And increasing numbers of multinational corporations moving their research and development (R&D) centers to China. The pace of innovation in China is picking up rapidly.

China was historically a center of innovation with gunpowder, the abacus, porcelain and countless other inventions originating from ancient China. Now that the country is breaking free from its Soviet-style production processes, a new dawn of innova-tion may be just around the corner.

Today, China benefits from a highly-educated, low-cost work force that can experiment on an enormous scale because of the size of their home market and strong government support. Moreover, given the dynamic and highly competitive nature of the China's increasingly market-based economy, companies are being forced to innovate in order to survive.


HUAWEI, one of the best innovation companies in China

INNOVATION& IPRThe Chinese government openly pursues the stra-tegic aim of building up self-innovation capabilities and to become an innovative country by 2020. The “Outline of the National Intellectual Property Strategy” issued by the State Council in June 2008 clearly states the importance of IPR from the Chi-nese perspective. “In the world today, with the de-velopment of the knowledge-based economy and economic globalization, intellectual property is in-creasingly becoming a strategic resource in national development and a core element in international competitiveness, an important force in building an innovative country and the key to hold the initiative in development.”

Both Chinese and foreign entity applications in China have grown substantially during the last years, with domestic applications growing at a more rapid pace and outnumbered foreign applications by 2003. However, there was a clear di� erence in the quality of the patents, as the Chinese applicants of-ten resort to the less strictly examined utility model or design patents for their products. The use of utility model patents, which are less rigorous, more a� ord-able forms of patents that provide 10 year of protec-tion (versus 20 years for invention patents) in China has grown at a rate of 18 percent per annum since 2001. Utility models are also a potentially valuable strategy for foreign � lings in China.

The Chinese government will continue to encour-age as many patent applications as possible among Chinese enterprises. Furthermore, the Chinese gov-ernment is well aware that future competitiveness is not only a question of innovation but also of inter-

national standards. According to the new IP strategy, the State Council seeks to “formulate and improve policies related to standards,” and “regulate the pro-cess of turning a patent into a standard. Enterprises and industry organizations should be supported in actively participating in the formulation of interna-tional standards.”

The patent offices of the US, Japan, Europe (EPO), South Korea and China account for 75% of all pat-ents filed and 74% of patents granted worldwide. Especially in the areas of telecommunications, semiconductors, pharmaceuticals and computers, Western countries hold between 70 to 90 percent of all patents. An analysis of patent volumes over the last five years from these five major offices shows that inventions from China have been growing at a faster rate than any other region.

Comparatively, more than 90 percent of all Chinese companies have no patent rights at all; about 60 percent do not even have a trademark. In realizing that the high costs of licenses are impeding com-petitiveness, the Chinese government is pursuing a policy of technology import. This policy often leads to a certain pressure on foreign companies to allow technology transfers, and thus transfers of valuable knowledge.

The most common ways these involuntary tech-nology transfers take place are through obligatory co-operations in the form of joint ventures or with design institutes, patent registration procedures for pharmaceutical products, the de� nition of local content, or procedures and obligations in public tenders.

In this competitive environment it is more impor-tant than ever for foreign companies to actively manage their intellectual assets and have their intel-lectual property rights adequately protected, before they enter the Chinese market.

China’s e� ort to encourage innovation by strength-ening its IP protection is reflected in its recent re-lease of the “Draft Revision of the Patent Law of the People’s Republic of China (Draft for Comments)” in August 2012. The key revisions are as follows:

Authority to investigate and collect evidence

In order to resolve the diffi culties in collecting evi-dence in patent infringement cases, the Draft grants the People’s Court the authority to investigate and collect evidence. Moreover, the Draft imposes liabil-ity on any party being investigated who obstructs the evidence collection procedure.

Discretion to determine the amount of damages

Under the current Patent Law, only the People’s Court has the right to determine the amount of damages for patent infringement. As such, while the Department of Patent Administration (DPA) has the right to handle and mediate patent infringement disputes, it does not have the authority to enforce the damage amount, and the infringed party will have to file a separate action regarding the dam-ages. In order to safeguard the legitimate rights of patent holders, the Draft grants the DPA the discre-tion to determine the amount of damages in patent

infringement cases.

Introduction of punitive damages

The Draft acknowledges that compensating losses actually incurred by the infringed is not su� cient to deter infringers. As such, the Draft introduces puni-tive compensation for intentional infringement, where the highest amount of compensation could triple the figure determined according to the rel-evant provisions under the current Patent Law.

Dispute handling in a timely manner

The current Patent Law does not specify when the decision by the Patent Reexamination Board declar-ing a patent right invalid or upholding the patent right comes into e� ect. As a result, many patent dis-putes are prolonged. This occurs where, after a deci-sion upholding a patent right is made, the infringer subsequently � les an administrative action. During the administrative litigation period, which can last from six months to two years, the People’s Court or the DPA will frequently suspend the case, and many patent infringement cases remain unresolved as a result. To improve the e� ciency of dispute handling, the Draft stipulates that, after the decision declaring the patent right invalid or upholding the patent right is made, the patent administrative depart-ment under the State Council should register and announce the decision in a timely manner, and the decision should come into e� ect on the date of the announcement.


COMMON ISSUES CONCERNING OEM AGREEMENTSHandling original equipment manufacturing (OEM) contracts in China can be a bit of a minefi eld, especially for the new-to-China business. Stories of molds and design IP being ripped off and then sold by your own supplier are legendary. Here we provide a basic list of contractual issues to consider when entering into OEM agreements:

1. Exclusive or non-exclusive. You will need to de-termine whether the agreement with your manu-facturing supplier will be exclusive or non-exclusive. If you want to grant an exclusive right to manufac-ture either totally or a subset of your products, you will need to word the agreement accordingly and cater for these di� erent scenarios.

2. Obligations. You will also need to determine the China supplier’s obligation to sell to you. There are essentially two alternatives.

Alternative 1: The China supplier is obligated to pro-duce product under any purchase order you submit and its failure to produce at the agreed price would be a default. However, to demand such a clause would almost certainly require an agreement to purchase a minimum amount of product during a speci� ed pe-riod. This approach is appropriate if you want to guar-antee supplies and if you want to hold the supplier to their commitment on price and delivery time frames.

Alternative 2: The China supplier is obligated to pro-duce product only for those purchase orders it accepts. This means that the supplier has the right not to accept purchase orders, at its discretion. The advantage of

this to you is that it will not require you to purchase any speci� c amount of product. The disadvantage is that there is no guarantee of supply and there is no way to hold the supplier to any price commitment.

3. Delivery specifications. Typically, OEM agree-ments provide for a speci� c port of delivery. Howev-er, if you have or are likely to have multiple ports and delivery locations, the agreement should provide that the port or delivery location will be speci� ed in the purchase orders.

4. Domestic and export pricing. If you are dealing with delivery in both China and overseas, it should be noted that domestic product purchasing has di� erent shipping and title transfer rules and is also aff ected by the lack of VAT rebate. Accordingly, OEM agreements should be structured to have the pric-ing system set out in a separate addendum. For this, be aware you will probably need to have separate pricing systems for domestic purchase and export products. If the buyer has no presence in China yet requires a China delivery, the OEM agreement will need to provide for how a non-export sale could be a� ected.

5. Payment terms. Payment terms are advised to be for payment (typically 30 days) after inspection, and not 30 days after shipment. If you will provide for payment 30 days after shipment, you will need to determine when you will inspect the product. It is best to have inspection before payment, but this is not always practical.

6. Warranty periods. The normal contractual term is two years from the date of shipment. One year from the date of sale is not normally used, as there is no way for the China supplier to know when a sale is made. Two year warranties are common because the assumption is that the product will be sold sometime in the � rst year after shipment from China.

7. Trade secrets and IP protection. We would normally advise for a monetary penalty for breach. It is typical to provide for US$10,000 for a lump sum penalty and 12 percent for the percentage of sales penalty. The penalty is intended to be large enough to cause concern for the manufacturer but not so large as to scare them away.

8. Tooling provisions. It is advisable for tooling provisions to provide for a series of lump sum penal-ties. Such disputes are amongst the most common in manufacturing agreements and we have found such provisions e� ective in dealing with this matter. Manufacturing suppliers commonly refuse to return tooling and the most e� ective way to control this is to provide for a signi� cant lump sum penalty for such a refusal.

9. Bill of materials. This is important to ensure the desired quality of component materials to be used in the product and should form part of the agreement. The bill of materials is simply a list of the components to be used in fabricating the proposed product. A good bill of materials, inserted either as

an appendix or addendum to an OEM agreement, should specify in precise detail exactly what the Chinese manufacturer must use in manufacturing the product. A well drafted and precise bill of materi-als minimizes the likelihood of confusion and future mistakes, and can help minimize product defects and recalls.

OEM agreements should also cater for the following to provide for the variable and technical provisions of the manufacturing arrangement:

• List of products

• Performance criteria (specifi cations)

• Product pricing methods

• Quality control and inspection procedures

• A “no contact customer” list

• Tooling List

• Purchase Order

Professional advice should be sought when enter-ing into such contracts.

OEM processing at a trade fair in Ningbo, Zhejiang, China OEM companies, including Lenovo


NEGOTIATINGIN CHINA

eign businesses are accustomed to. It can involve attending long, drawn-out expensive banquets, at-tending sporting events, home visits, and more, dur-ing which everything but business is discussed. Very often these events include rounds of heavy drink-ing. It may be regarded as rude to turn down the of-fer of a drink, so one must be prepared to deal with the consequences of drinking large quantities of liquor. Those who are particularly averse to the con-sumption of alcohol may want to prepare a medical excuse to avoid drinking, as this is an acceptable rea-son not to drink. However, it is important that non-drinkers still participate in the myriad of toasts that will occur over the meal; it’s perfectly acceptable to toast with a soft drink, glass of juice, or mineral water.

Under Chinese culture this preliminary stage is essential. This arises largely from importance that Chinese attach to interpersonal harmony as well as their reliance on good faith rather than on tightly drafted deals when doing business.

• Not showing their cards until they’ve seen yours

Chinese negotiators will often feign disinterest in

foreign enterprises’ o� ers, which can be disconcert-ing to foreign enterprises who assumed they were arriving in China to negotiate an imminent deal. The Chinese will often use silence as a negotiating tactic, which their Western counterparts will misinterpret as a breakdown in the negotiating process, thus making hasty concessions. Chinese enterprises will also often claim they are in negotiations with competing interested parties, further reinforcing the idea that your business is not as important to them as theirs is to you. All of this is enough to make many foreign businessmen either throw their hands up in frustration and walk away from the deal or reveal their bottom line too soon in hopes of pushing the deal through in a more timely fashion. It’s essential that the foreign � rm gathers as much information about the local company prior to arrival in China, so it can have as clear a picture as possible of what will motivate the other side.

Negotiation

• Chinese strategic use of time

Most companies that do not have extensive experi-ence negotiating in China tend to follow the same negotiation strategy as they would in their home country, mistakenly believing that applying a few Chinese customs to their set negotiation practices will su� ce.

Businessmen traveling to China to negotiate for the � rst time must do their homework; it is important to have a basic understanding of the Chinese cul-ture, as 2,000 years of cultural developments have understandably shaped the Chinese mindset, thus in� uencing their approach to negotiation strategy.

The two major philosophical in� uences on Chinese culture are:

• Confucianism – this philosophy, founded by Con-fucius over 2,500 years ago, revolves around di� erent hierarchical relationships in society, emphasizing obe-dience, loyalty and benevolence as admirable qualities

• Taoism – Taoism emphasizes on harmony with na-ture and the universe. It revolves around opposites (yin and yang) and stresses fi nding the way between the two

Both philosophies are concerned with the means rather than the end, the process rather than the goal. This concept is often played out in Chinese negotiations, as the Chinese feel that back and forth haggling helps to create an ideal compromise.

Additionally, the current surrounding sociopolitical and economic environment in China continues to influence the negotiating style. Imperialistic exploitation of China has left an intrinsic wariness of foreigners, as well as a general cynicism towards the rule of law in general. At the same time, in China there exists a high degree of bureaucratic complex-ity, meaning decision making requires authorization at many levels often resulting in competing inter-ests. Thus both current and historical developments in China have signi� cant impacts on Chinese nego-tiating practices.

Pre-negotiation

• The long “getting to know you” stage

This stage in China can last much longer than for-

Weiqi,the game of go Chinese chest

WHY CHINA WHY CHINA14 A SMALL HANDBOOK OF DOING BUSINESS IN CHINA / 10 / 2012 15A SMALL HANDBOOK OF DOING BUSINESS IN CHINA / 10 / 2012

It should also be noted that it is important that the foreign country send a negotiator of the appropriate status within the company. Sending a negotiator that is deemed to be inexperienced or of a low position is seen as an insult by the Chinese, and the deal may be doomed before negotiations even start. Eventually there may be a need for higher level members of each organization to meet. However, top-level Chinese executives will not be prepared to bargain, and will not be persuaded. It’s simply not their role. As mentioned above, they are there to consult with lower-level negotiators, who in turn play the role of bargainer.

Post-negotiation

Changing elements of the contract that have al-ready been agreed upon

Once negotiations are concluded, Western ne-gotiators may mistakenly believe that a deal has been arrived upon. They are then frustrated and

confused by a sudden and unexpected request by the Chinese side to make a change in the contract regarding an issue that had already been discussed in depth and agreed upon. It is also possible that the Chinese will make no indication that they want to make a change, and will present a contract that is ostensibly the same as what had been discussed in negotiations, but in fact represents a changed agreement. Though at times infuriating, the foreign negotiator must expect such requests, and be pre-pared.

Foreign negotiators must be prepared to re-negoti-ate after deals have been arrived upon. However, it is also important for the foreign negotiator to under-stand that it is better to walk away from the business than to carry it out under unfavorable terms. Such a stance can result in a reputation of tenacity and persistence for the foreign negotiator that is valued by Chinese. The foreign negotiator must keep sight of their bottom line on core issues of the contract and be prepared to refuse to budge beyond that bottom line.

Bargaining sessions are long, and changes are fre-quent. Chinese negotiators will also strive to control the pace and use of time in negotiations in several ways:

o They will often seemingly delay proposals until the last available minute, forcing the foreign enter-prise to make on-the-spot decisions or return home empty handed

o They will also delay making commitments and request last minute changes or concessions, putting the foreign negotiator in a di� cult situation

o The Chinese will also seemingly jump from topic to topic in negotiations, never arriving at any agree-ment on any one point, thus drawing out the nego-tiation process

This behavior by Chinese negotiators stems from a few di� erent cultural factors. As mentioned above, the Chinese have a deep-seated distrust of foreign-ers and a fear of being taking advantage of. Length-ening the negotiation process and forcing foreign-ers to make on-the-spot decisions is one way they can be more sure they are getting a fair deal.

The foreign negotiator must be prepared to return home without having signed a contract, and more importantly, the home office must fully back the negotiator in this.

Exhibiting diligence and commitment will not go unnoticed by Chinese business, and will improve the chances of concluding a successful deal.

• Creative use of information

Chinese negotiators have often been accused of being dishonest in their presentation of informa-tion. They may refer to real or � ctional regulations, policies, or budget limitations in order to extract concessions from the other side. They may misrep-resent their capabilities or willingness to commit to a particular aspect of a deal, only revealing the true situation at a later date, much to the dismay of their foreign counterparts. To the Chinese, the creative

use of information in negotiations is an acceptable strategy.

Foreign negotiators must be aware of this tendency, and be prepared to combat the tactic accordingly. Should the Chinese apply pressure to negotiate quickly using local policies and regulations, foreign negotiators should likewise use the policies and reg-ulations of their own company to counterbalance this pressure. Most importantly, the foreign negotia-tor should rely on an intermediary to clarify points of contention. It is foolish to assume that foreign nego-tiators will be able to identify every situation under which Chinese negotiators are misrepresenting information – a Chinese intermediary is much more apt and well suited for such a task.

• Referral of decision making to higher authorities

Chinese negotiators will frequently reference a need to consult with their superiors on important deci-sions. This requires frequent breaks from the negoti-ating process so that the negotiator can confer with his or her superior, and maintain their input. This can cause foreign negotiators to feel discomfort, as they typically operate on the assumption that time is money and frequently misinterpret the Chinese breaks as signs of confusion or insincerity.

Furthermore, the Chinese social system itself is set up as a complex bureaucracy – even something as simple as purchasing a television in a department store requires interaction with a minimum of three di� erent employees with di� erent functions. Hence, many Chinese are risk averse. They frequently confer with superiors so that they can remain under the radar and avoid making decisions that later might leave them vulnerable to criticism.

Foreign negotiators should accordingly plan for ne-gotiations with frequent breaks to give their Chinese counterparts the time necessary to make such con-sultations. Foreign negotiators can likewise use this tactic to their advantage, claiming a need to consult with superiors when they are unwilling to immedi-ately make concessions.

WHY CHINA WHY CHINA

Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compli-ance, accounting, payroll, due diligence and � nancial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the fi rm has grown into one of Asia’s most versatile full-service consultancies with operational offi ces across China, Hong Kong, India, Singapore and Vietnam as well as liaison offi ces in Italy and the United States. The fi rm has offi ces across including in Guangzhou, Shenzhen and Zhongshan. For further details or to contact the � rm, please email [email protected], visit www.dezshira.com, or download the company brochure.

Stay up to date with the latest business and investment trends across emerging Asia by subscribing to the Asia Brie� ng weekly newsletter or visiting www.asiabrie� ngmedia.com.

Contact: (Shenzhen) +86-755-8366 4120 [email protected] (Guangzhou) +86 20 3825 1725 [email protected]

China’s Economy: Present and Future, Innovation and IPR, Common Issues Concerning OEM Agreements, Negotiating in Chinacontent provided by Dezan Shira & Associates.

1716 A SMALL HANDBOOK OF DOING BUSINESS IN CHINA / 10 / 2012 A SMALL HANDBOOK OF DOING BUSINESS IN CHINA / 10 / 2012

SMART SOURCING IN CHINAFinding suppliers in China is relatively easy. Finding good suppliers isn’t! In this chapter, we are helping you to succeed in sourcing in China.

SMART SOURCING IN CHINA SMART SOURCING IN CHINA

Made-in-China.comCONNECTING BUYERSWITH CHINA SUPPLIERS

A few ways to connect with suppliers

• Ask for referrals. Hands down, the best way to fi nd suppliers is to receive referrals from people you trust.

• Check trade magazines for your industry.

• Attend trade shows (the Canton Fair is called the No. 1 trade show in China). China has numerous in-dustry trade shows, and odds are that your industry has at least one trade show per year there.

• Surf Web sites that have a good deal of suppliers from China. www.Made-in-China.com is one of the better-known sites.

About Made-in-China.com

Made-in-China.com is a world leading B2B portal, providing the most complete, accurate and up-to-date information on Chinese products and Chinese suppliers.

• Over 14 years experience in B2B industry

• Global buyers from over 240 countries and regions

• Over 3,000,000 quality China suppliers

• More than 10,000,000 varieties from 27 industry categories

• Around 10,000 Audited Suppliers audited by SGS

Our Mission

• To facilitate global trade between worldwide buy-ers and Chinese suppliers.

• To provide accurate and dependable information on Chinese products and suppliers to global buyers.

• To help buyers and suppliers communicate and do business with each other e� ectively and e� ciently.

For China Suppliers

• A world-known platform to promote their prod-ucts worldwide.

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Made-in-China.com connecting buyers with China suppliers: online product direction

Made-in-China.com

connecting buyers with China suppliers:

o� ine matching events


Audited Suppliers

Audited Suppliers (AS) is the service provided by Made-in-China.com and SGS, the world's leading in-spection, veri� cation, testing and certi� cation com-pany. AS helps buyer reduce trading risk, increase con� dence and save money and time.

An Audited Supplier is:

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• On-site audited by SGS

• Annually reviewed by SGS

On Made-in-China.com, Chinese suppliers that ob-tain SGS certi� cation will be rewarded with a unique icon that will be displayed next to their company-name and products in search results, and in their showrooms.

Audited Suppliers HELP BUYERSTO BE SURE INPRODUCT SOURCING

Audit Reports

Audit Reports provide overall business information of an Audited Supplier such as business licenses, production capabilities, management, certi� cation, quality control, etc., giving more credits to the sup-plier.

An SGS Audit Reports contains the following informa-tion of an Audited Supplier:

• General Information

• Foreign Trade Capacity

• Product Research & Development Capacity

• Management System and Product Certi� cation

• Production Capacity & Quality Control

• Financial Position

• Working Environment


• Energy Saving & Emission Reduction

• Industry Information

• Photos

Each Audited Supplier will receive an Audit Report issued by SGS. Buyers can download the report in the showroom of the Audited Supplier.

About SGS Group

SGS is the world’s leading inspection, veri� cation, testing and certi� cation company. SGS are recognized as the global benchmark for quality and integrity. With more than 70,000 employees, SGS operate a network of more than 1,350 o� ces and laboratories around the world.

Audit Reports Sample


Dates Venue Exhibition

Jan10 - 13

Sends Expo & Con-vention Center

Consumer Electronics Show 2012 (CES)

Mar10 - 13

McCormick Place International Home + House-wares Show (IHA)

Mar28 - 31

Shenzhen Exhibition Center

SIMM

Apr09 - 12

Shanghai New Inter-national Expo Center

Expo Build China 2012

Apr23 - 27

Hannover Interna-tional Exhibit ion Center

Hannover Messe 2012

May01 - 03

Las Vegas Conven-tion Center

National Hardware Show (NHS)

Jun09 - 12

China Import and Export Fair Complex

17th Guangzhou International Lighting Exhibition

Jun13 - 15

New Munich Trade Fair Center

Intersolar Europe 2012

Aug12 - 15

Las Vegas Conven-tion Center

ASD Las Vegas

Sep02 - 04

Cologne Internation-al Exhibition Center

The Garden Trade Fair, Cologne

Nov05-08

The United Arab E m i r a t e s D u b a i World Trade Center

Middle East Dubai Five Industry Exhibition

Audited Suppliers Corner

What is Audited Suppliers Corner?

Audited Suppliers Corner (AS Corner) is a free sourcing service for international buyers.

Made-in-China.com presents its Audited Suppliers’ information at most important international trade fairs. At AS Corner, purchasers will:

• Get one-stop service to � nd reliable suppliers

• Get accurate third party information on the suppliers

AS Corner in 2012. Meet us and see Audited Suppliers’ products at:

About Buyer Service Team

Established in 2004, Made-in-China.com’s Buyer Service Team has dedicated itself to offering pro-fessional support and assistance to global buyers for almost ten years. The team aims at providing one-stop services for global buyers in international business, such as product sourcing, supplier recom-mendation, etc. All the sta� in Buyer Service Team own international trade knowledge, or have over-seas studying & working experience, so that we can understand the buyer's exact needs.

Buyer Service BUYERS’ SOURCING HELPER IN CHINA

Our Main Buyer Services are as below:

1. VIP Buyer Program

Buyer Service Team offers VIP Buyers services like quality supplier recommendation, professional industry report, face-to-face meeting, etc. So far, we have been cooperating with DAISO JAPAN, Auchan, Wesfarmer, etc and gained satisfaction from all these buyers.

Easy sourcing with Made-in-China.com’s Buyer Services

Buyer Service Team is always ready to help you source in China

Who are our target VIP Buyers?

• The world's top 1,000 companies

• Leading companies in its industry

• Companies with large purchase volumes

Want to get one-stop support in international business? Welcome to contact our VIP Team at [email protected].

2. Business Sourcing Event

Every April and October, Made-in-China.com holds Business Sourcing Event in Guangzhou. We highly welcome more international sourcing groups co-operate with us. To know more, please contact us at [email protected].

SMART SOURCING IN CHINA SMART SOURCING IN CHINA 2928 A SMALL HANDBOOK OF DOING BUSINESS IN CHINA / 10 / 2012 A SMALL HANDBOOK OF DOING BUSINESS IN CHINA / 10 / 2012

3. Tailored Match Meeting

Smart sourcing in China? Tailored Match Meeting makes your sourcing easier and more e� cient. We o� er each buyer 1 o� ce, 2 sourcing assistants, 3 or more candidate suppliers. Buyers could see samples and have business negotiations with Chinese suppliers. Bigger surprise is waiting for you! To know more, please email us at [email protected].

4. Made-in-China.com official Facebook welcomes you!

• Like Made-in-China? Now you could really “LIKE” us at Facebook.

• Play with us on Facebook, get to know China everyday.

Buyers' O� ine Events in 2012

Date Location Theme

10-Feb-12 Qingdao Chinese-American Business Sourcing Event

22-Mar-12 Nanjing The Nordic - Jiangsu enterprises approached event, business sourcing event

29-Mar-12 Kunshan Environmental Protection Industry New Technology Seminar

13-Apr-12 Beijing Brazil-China Sourcing Event

18-Apr-12 Shenzhen China & UK Medical Innovation Forum

18-Apr-12 Guangzhou 7th Business Sourcing Event of Made-in-China.com

10-May-12 Nanjing The Seventh International Retailers' Sourcing Fair

4-Jun-12 Shanghai Roadshow Yangtze River Delta region

8-Jun-12 Ningbo Roadshow Yangtze River Delta region

16-Oct-12 Guangzhou 8th Business Sourcing Event of Made-in-China.com

ADD: 8-12F, Block A, Software BLDG., Xinghuo Road, New & Hi-Tech Development Zone, Nanjing, China, 210061

TEL: +86-25-66677777 FAX: +86-25-66670000 E-mail: [email protected]

SMART SOURCING IN CHINA30 A SMALL HANDBOOK OF DOING BUSINESS IN CHINA / 10 / 2012


A FACTORY ORA TRADINGCOMPANY? Trading company

Trading companies are middlemen between you and factories. Good trading companies can add a lot of value. A good trading company often knows the right supplier for your product, manages the supplier, does quality control (QC), and passes along volume discounts. Trading companies may not o� er very low price, have people who speak better Eng-lish than factories do, and they’re most accustomed to dealing with foreign customers.

Stay away from a trading company that � rst tries to pass itself o� as a factory. A number of trading com-panies impersonate factories because they want you to think they control the production process. These companies are usually amateurish and lack the honesty to make you whole in event of a prob-lem.

If you’re considering dealing with a trading com-pany, you want to ensure three things:

• It has the fi nancial strength to compensate you for problems.

• It’s well run.

• It’s not on your home government’s “restricted” list.

• Do due diligence (DD): View their business license for their registered capital; the more registered capital, the likelier the company is to be � nancially strong. Visit the trading company’s o� ces and ap-

ply a common-sense test. Stay away from indecent looking company because the Chinese are very much into appearances. Those fail to make the company look decent, you have little hope that it actually is. You should also ask for a customer list and do some cross-checking.

A recommended trading company

Rider Glass Co., Ltd.

http://riderglass-qd.en.made-in-china.com

Factory

Factories may be able to give lower prices than many trading companies. Also, starting a factory takes more money than starting a trading company, so the factory you work with is less likely to fold un-expectedly.

In most cases, factory inspection isn’t rocket science. Here’s a basic checklist of items to focus on when you tour a factory:

• Cleanliness: Appearances count for a lot. If the workers, managers, or the factory appears sloppy, assume that attitude carries over into their products — especially with electronics.

• Organization: See the entire process — from where materials come in to how they’re processed into products to how and where they’re stored. Think about whether the workflow makes sense and is effi cient. If some things don’t make sense, ask questions. If you still can’t fi gure out why the factory is doing something a certain way, that’s a red � ag. Pay particular attention to where � nished goods are stored and shipped from. You certainly don’t want any of your order to go missing or be placed on the wrong container!

• Machinery: Ask the factory people questions as below:

o What exactly do they do?

o How old are they? What are the brands?

o Where did they come from?

o How much maintenance is required?

o Does the factory have the equipment to cover all stages of the production process? The answers may mean little in and of themselves, but you may understand some important points if you compare factories (which you usually should). Plus, asking questions sends the message that you pay attention to details.

RiderGlass at trade fair

RiderGlass’s o� ce

RiderGlass’s product showroom

RiderGlass’s professional Sales Team


• Quality control (QC): Ask to see the data on the QC inspections on incoming materials. You may also want to inspect the factory’s suppliers, depend-ing on the type of inputs. Factories can also have QC inspections at various points throughout the production process. Finished goods should always undergo at least some inspection.

Regardless of how many QC checkpoints the fac-tory uses, the location of the checkpoints and where and how the failed parts are handled should be clear. If that information isn’t clear to you on a walk-through, it likely isn’t clear to the workers, either!

Some factories may have received certain process certifications, such as ISO9000 and 9001. If you’re interested in the factory’s certi� cations, make sure they actually follow the certi� cation requirements in everyday production.

• Employee conditions: Make sure the factory isn’t using prison or child labor. Ask to see the employees’ cafeteria and dormitories. You shouldn’t expect the Four Seasons, but the dorms should be clean and orderly. Find out how long the employees have for lunch and how long their shifts are. Ask about what training the employees receive. See whether the factory o� ers much of a career path for them. Happy employees do their jobs better and are less likely to cause production delays and quality issues through turnover.

• Location: You want to understand and evaluate the factory’s location for three reasons:

o Utility quotas: Limits on electricity can be espe-cially problematic — particularly for factories in and around big cities. You want to assess the area’s utility reliability and whether the factory has back-up facilities. Water may also be rationed in certain areas.

o Closeness to suppliers: If the factory’s suppliers aren’t that close, really pay attention to the inven-tory — try to figure out whether supply bottle-neck.

Zhejiang Demark Blow Molding Machine & Preform Mould Co., Ltd.

http://blowmolding-machine.en.made-in-china.com

Well-organized storage

Clean and well-organized workshops

A recommended factory

o Proximity to a port from which they can ship you the goods: You obviously don’t want a backup on the way out of the factory, either.

o In case of your orders get outsourced, you should focus on whether the factory has ma-chines that can produce your product when do-ing DD on a factory.

SMART SOURCING IN CHINA34 A SMALL HANDBOOK OF DOING BUSINESS IN CHINA / 10 / 2012

DOING BUSINESS IN CHINAChinese culture is so substantive in content, so comprehensive in varieties and has had so long history, that to its outsiders, it is so difficult to grasp a complete and accurate picture of China. In this chapter, insiders and outsiders of Chinese culture share their experiences and business stories with you.

CHINESE CULTURE AND CHINESE PEOPLE

Guanxi Mianzi Keqi Yuanfen

What’s “Guanxi”?

Guanxi is regarded as the central idea in Chinese society with long historical and cultural roots. It is understood and utilized by virtually every Chinese person in greater or lesser measure.

Understanding how the Chinese view Guanxi is crucial to understanding Chinese people. It is too simple to call Guanxi “relationships”, “networking”, or “connections”, because all of these things are basic � bers of the Chinese culture.

Guanxi can take on many forms. It does not have to be based on money. Developing and nurturing Guanxi requires time and resources. People rely on it not only for getting things done, but also for protec-tion, security and support.

In the West, relationships grow out of deals. In China, deals grow out of relationships. Chinese prefer to

work with persons they know and trust. This rela-tionship extends between companies and also between individuals at an ongoing personal level. With manners, diligence, courtesy and goodwill, one establishes his/her own Guanxi.

For foreigners, no matter how much experience you have in western business management, the right “Guanxi” in China will make all the di� erence in ensuring success. The inevitable risks, barriers, and set-ups you’ll encounter in China will be minimized when you have the right “Guanxi” network work-ing for you. (You will see more explanations about “Guanxi” in the following experiences sharing by CEOs doing business in China. )

Tips: Repaying favors can be a very e� ective way of building Guanxi.

Even small favors, such as editing some English for a person’s business

or advising him on a trip to your country, are appreciated and can help

to build your guan xi.Chinese people are feeling people. Like Peking Opera, every subtle movement of the � ngers indicates complex meanings

DOING BUSINESS IN CHINA DOING BUSINESS IN CHINA 3938 A SMALL HANDBOOK OF DOING BUSINESS IN CHINA / 10 / 2012 A SMALL HANDBOOK OF DOING BUSINESS IN CHINA / 10 / 2012

dictates a person's relationships and encounters, usually positive, such as the a� nity among friends or lovers. In common usage the term can be de-� ned as the "binding force" that links two persons together in any relationship. The concept of synchronicity from the Swiss psy-chologist Carl Jung can be seen as similar to Yuanfen, which Chinese people also believe to be a uni-versal force governing the hap-pening of things to some people at some places. Yuanfen belongs to the family of concepts known in theology as determinism.

Unlike other Chinese social relations, which describe abstract, but easily noticeable, connections between people, nowadays, Chinese merely use this word poetically or to emphasize a meant-to-be relationship, and almost never in a seri-ous business or legal situation.

What’s “Keqi”?

Chinese people normally say “bukeqi” instead of “you’re welcome”. Ke means guest and qi means be-

havior. As used to describe behavior, keqi means politeness, courtesy, modesty, humility,

understanding, and well-mannered behavior and so on. All of these de� ni-

tions are natural in the Chinese cul-tural context.

The importance of keqi also indicates how sensitive Chinese are to any sign

of arrogance or haughtiness. Chinese are expected to demonstrate keqi in

all of their actions and especially toward foreign guests. As social conditions continue

to change, the force of keqi is diminishing, but it is still discernible in the behavior of all Chinese, including overseas Chinese.

What’s “Mianzi”?

Mianzi, which means “face” in English, is a funda-mental concept in the � elds of sociology, sociolin-guistics, semantics, politeness theory, psychology, political science, communication, and Face Nego-tiation Theory. It is a combination of dignity, pride and public reputation, particularly through the eyes of one's close connections.

As a famous Chinese saying goes, "Men live for face as trees grow for bark." Managing Mianzi is an integral part of Chinese etiquette. Surface harmony is the art of maintaining composure and remaining polite and courteous. It can be so im-portant that Chinese may sweep aside business to keep it.

What’s “Geimianzi”?

It means giving face, showing respect for a per-son's feelings.

The Chinese are acutely sensitive to gaining and maintaining face in all aspects of social and busi-ness life. Simple ways of "giving face" could be sitting in the correct place at a meeting or dinner, offering an appropriate gift to a person, or giving praise and compliments.

Giving face earns respect and loyalty, but praise should be used sparingly. Over-use suggests insincer-ity on the part of the giver.

What’s “Meimianzi”?

I t means losing face. Causing someone to lose face could ruin busi-ness prospects or even invite recrimination. The easiest way to cause someone to lose face is to insult an individual or criticize him / her in front of others. It is not really the act that causes a loss of face but the fact that the act is public, and there is public humiliation or loss of prestige involved. Westerners can unintentionally offend Chinese by making fun of them in a good-natured way.

Another error can be to treat someone as a subordinate when their status

in an organization is high.

What’s “Liumianzi”?

It means giving someone a chance to regain lost honor.

It can be very important in building long-term business

relationships and friendships. For example, the Chinese feel it is

rude to directly deny a request, and will either fail to give any response at all or

will indirectly say "no" with a quali� cation such as, "Well, that might not be very convenient."

What’s “Yuanfen”?

Yuan or Yuanfen is a Buddhist-related Chinese con-cept that means the predetermined principle that


MR. CHINA TO BEBy Emma Chow (Hong Kong, China)

China is huge and China is of potential. That is what I have been told every time when I chat with my friends from all over the world, no matter where I stand, during a journey to Egypt, or sitting in a meet-ing in George Town.

It should be triumph to win commercial success. There are a lot of exciting stories ahead, from Marco Polo in old times, to Tim Clissold not long ago. But it is not easy to become a successful Mr. China. For the past few years, I have heard about good stories and bad stories. Good stories always end up with happy endings. However in most of the cases, the stories I heard was like some landed in this country with a full head of beautiful dreams, but strived till badly beaten in real world. They wish to win big fortune, but they lose their fortune in big.

They should know China, at least they thought they know. However China is growing so rapidly that even the Chinese themselves cannot guarantee that what the country is now inherits the one they live since childhood. This old middle kingdom looks unexpectedly new as every day goes.

Every coin has two sides, and you will never know which side represents the better.

I am not going to preach. Instead, I am going to write down some stores, the stories I have learned in person and now share.

Do white faces talk now?

It is quite embarrassing and awkward, but I am not going to deny it, that some girls in China would feel proud and superior when they could succeed in getting involved with foreigners. It does not matter whether such involvement is long term relationship or short term hanging out. They talk loud in public, showing o� their feathers like they are the only class who could communicate with the external world.

Such phenomenon still dominates in some cosmo-politan cities like Shanghai, and spread into inner provinces in West China. I could take one of my trips to a city with the name starting with "C" as an exam-ple. When I was there, I came across a girl meeting an English old man in a luxurious hotel that I said No to her attempts to jump the queue and take my table. She acted like a queen, pointing at my nose to blame my o� ense, unfortunately the waiter did not

About the Author

Emma Chow, contributing writer for Fortune Chinese edition, Travel + Leisure Chinese Edition and Business Travel, is a typical Born-in-Post-1980s that has grown up in an opening up environment with eco-nomic booming deepening nationwide and has been education from both East and West sides of bilateral perspectives with years of overseas education background and MNC working experience. She is now living in Hong Kong for Sociology studies.

speak for me, though I have already made the reservation before I came down and though I am working with the one of the globally largest corporation.

However, don't feel too good, Mr. Gentlemen the white. Shanghai may maintain the courtesy towards foreigners for the foreseen period due to its legacy back to 1930s, more and more civil societies of di-versi� ed backgrounds may perform slightly di� erent. Several years ago, a girl accused of tra� cking drugs in a small South East city was sentenced to death because she refused to turn in her foreign boyfriend who was identi� ed as drug dealer, while several years later at now, the for-eign face may be surrounded and punched right in the face during daytime in the street if they show no respects to Chinese. Guangzhou, Beijing, come on, read the paper.

Well, in this section, I am particularly talking about the civil society, which strongly refers to the ordinary peo-ple and general groups living within China, rather than the government sector. As you know, the system, from top to down, may not stumble as it is believed, you could believe what you believe, but behave when it is not.

Can I learn Chinese from text book?

OMG, don't you learn a word 'Inter-net'?

Several weeks ago when I was watching a dating program on Chi-

DOING BUSINESS IN CHINA DOING BUSINESS IN CHINA

Foreign face doesn’t always talk. Courtesy talks!

nese provincial satellite channel, I realized that actually lots of white faces in China now speak � uent tongue of Chinese. On the other hand, the number of young mainlanders who speak good English, even other diff erent languages such as Spanish or Italian, is growing even faster. Some of them are hard to define their native identity when they speak the second language. This is optimal, as it suggests that after decades of economic booming and social development, the pure linguistic ability has no longer been the only competitive bar in the career stakes.

Text book is out of date, if you want to be more 'IN' in front of your Chinese counterparts both at business and in life, log on and learn from the internet. Weird, isn't it? But we know it is true, as school is the place that you would never learn the real thing, as Jimmy Page said and I quoted, oh well it was not original of course, he was blaming


The public relations "Guanxi" is of impor-tance so far, however the precise mar-ket positioning will speak more.

All along my professional career, I have been work-ing with monopoly market that I am not sensitive upon the market price and e� ciency. Furthermore, I have not been aware of the importance of Guanxi (the public relations with various social sectors). It is not because that I do not know what it is, but be-cause I have been living with it. As the employees of one of the largest multinational corporations in the world, I do not need to worry about doing things to make the world happy, in other way around, the world is making everything to make our company happy. We do not need to � nd ways to get touch with the local governments or potential cooperative partners, they � nd us! The bene� cial packages that will de� nitely satisfy our board members and stake-holders have already been well prepared far before we planned to enter the market.

Not every foreign entity is Mr. Big. Hence there are di� erent tactics.

It is always good to have contacts in the govern-ment sectors or recognized institutions, which

may make your organizations more convincing to the public. But I doubt if it could work forever. The Chinese consumers are becoming smarter, of which the dominant consuming group of 1980s are labeled as 'the reformed generation' with more advanced education and more widen horizon. Their consuming behavior is proven to be more rational comparing with that in early 1990s. If a company wants to relief their money pockets, it may need to spend more time on their demands for soft market-ing. The old way of managing the government suc-ceeding in the market may not work out, and the worse is, your company may be boycotted.

It is not strange that an individual can succeed in renting his foreign face for company functions to win the face in the public. The market is there for sure, and I believe that the demand may persist. China is large in scopes and everything is possible.

Therefore, ask yourself in the mirror when you are alone: What kind of business are your going to oper-ate and what kind of human beings are you going to act in your life? If you want to make some quick money, leave my word as nothing. But if your want to polish your name and make it brand in China, be the Mr. and Mrs. M on the Bund.

the rock education, while I, am talking about the communication.

The new word is invented on weekly, whoops no, daily basis. I know it is diffi cult. Believe or not, I feel I am dragged far behind against a large generation gap if I do not check out my Weibo account in sev-eral hours. An example is SHANZHAI. The Chinese word'山寨 'Shanzhai' originally means settlements in the valley resided with robbers. Where do God Father and his partners live in New York? Replace New York with some other remote areas, say a vil-lage in the Great Canyon, then it is exactly what Shanzhai means. In internet, the word 'Shanzhai' has its evolvement that it point out to an obvious counterfeit, i.e., a monogram LU bags as mentioned in the recently published New York Times magazine. LV, short for Louis Vuitton, can now be LU if you don't feel uncomfortable. In this context, I consider it as concessive and coherent in the original meaning

and its extended form as anyway, robbers rob from others to make a living.

I did not expect that it took me so long a paragraph to explain the new trends in internet language use. Need more explanations? I can introduce one more. When you browse some famous internet forums like mop.com or tianya.com in the prerequisite that you are master of Chinese, you will still feel confused like explosions in your head. Do you notice when President Barack Obama created his Google+ ac-count, shortly every post was occupied by Chinese responses full of 'Sofa', 'Benches', and 'Floor'? China is the largest manufacturer of furniture in the world, we are not lack of furniture for true, it is a popular expression of prompt response to a new post. Sofa means I am the fi rst one to reply you, with benches following the next, and Floor? Well, you are too late, no chairs for you.

囧, jiong, said to be the most popular Chinese character in 21st century, meaning “embarrassed” because the shape of this character looks like an embarrassed face.


Da Shan, a Canadian who speaks � awless Putonghua, is quite popular in China


MAKING THE BEST OF A CANTON FAIR VISITBy Frank Melchert (Germany)

About the author

Frank Melchert, Managing director of Fecos Co., Ltd. (Hong Kong).

Fecos Co., Ltd. (Hong Kong) provides inspection, supervision and sourcing services all over mainland China. Full assistance for purchasing companies during all stages of the business process is guaranteed. A quali� ed team of inspectors and engineers ensures reliable quality control. Contractual obligations in China are being enforced through our associated lawyer’s o� ce.

You may contact the author for more information about business in China at [email protected]. (Corre-spondence languages: English, German, Spanish, Chinese.)

Canton Fair development:

The global economic development since 2008 has undeniably had its impact on Chinese exports rates. However, the Canton Import and Export Fair attendance has reached a new peak in 2012 with almost 210.000 foreign purchasers. That’s the highest number of visitors ever recorded since the establishment of this fair in 1957 and an impressive recuperation from the attendance drop as su� ered in 2008.

Canton Fair has reached new attend-ance peak in 2012

No doubt, the Canton Fair with its ever expanding exhibition buildings and numbers of visitors is an impressive event. Yet the ever growing exhibition space and amount of suppliers makes a careful trade fair planning indispensable. Coming to a trade fair in China is still connected with considerable ex-penses and some degree of stress. By spending time and money for such a trip, purchasers want to make sure to get the best out of their visit.

Preparation is indispensable Targets: The � rst move to an e� cient trade fair visit has to be done before coming to China. Set yourself a target. What do you want to achieve with your trip to China? Which suppliers do you want to see? Which prod-ucts do you want to source and which information do you want to collect? What do you want to discuss? Which negotiations can be better done person-ally in China and how can you lead them efficiently in the avail-able time? The clearer the targets are, the clearer the results will be.

Further considerations: Most purchas-ers will know how di� cult it is to lead meaningful conversations at a booth which last for more than a short moment. This has several reasons. Firstly, many stands are crammed with visitors, especially during

the peak times of the day. It is a common picture to see exhibitors running from one corner of the booth to the other to serve newly arriving visitors. Another, not less common picture are visitors struggling to get the attention of sales managers. Too many of them seem to be always busy in discussions with other purchasers. A rather annoying experience are � nally fellow traders who try to push other visitors aside or intrude into conversations you lead with sales managers to grab their attention.

In order to avoid or at least minimize the chance of facing such situations, mind your time planning.

Timing: The mass of visitors will arrive during the � rst and second day of the fair. Various trade fair statistics show that the time of about 1.7 days is being spent at a trade fair by a common visitor. At the Canton Fair the rate may be a bit higher. The mass of visitors will arrive after 11:00 am and the stands are usually most visited after lunch time until late noon time. Visitors coming to the trade fair before 11:00 avoid the peak time and hassle of overcrowded stands. Arriving

early will enhance the chance of leading ne-gotiations for more than 3 minutes.

Take into consideration the departure time from the

Canton Fair. I f your schedule allows, do

not wait until the Canton Fair closes down. Public trans-portation system and streets are extremely over-crowded at this time. To be trapped

in these masses of people is not the

most pleasant experi-ence of a trip to China.

Get a rough overview: Do visit the official website of the

Canton Fair and check where your suppliers have set up their booth. In case of

some products and industries, the related suppli-ers are very scattered over diff erent buildings. Even with a good sense of orientation many visitors � nd


themselves soon lost in the confusing labyrinth of halls and buildings of the Canton Fair. This applies especially to the case of sourcing totally new products. Do your homework. Check the location of the places you want to visit. Make a decision about the type and number of suppliers you want to see at one day. Do not exaggerate. Too many booth visits are counterproductive and will only make you feeling exhausted at the end of the day. Make your plans feasible without super-human effort and be sure they can be achieved.

Announce your visit: You may be invited by a suppli-er to visit his booth or not. In the case of meeting ex-isting suppliers it is advisable to announce your visit.

This will give a higher degree of importance to your meeting. If you have to settle business

issues of importance, make sure the suitable person will be available

at the booth. You may need more information about

specific products or you want to discuss technical questions. Make sure a competent person is available at the booth. As a purchaser you want

to speak to a person with knowledge who is able

to communicate the infor-mation you need in decent

English. Unfortunately most exhibitors at the Canton Fair do

not train their sta� properly before the fair, so better prepare them for the negotia-

tions you want to lead.

Certificates & regulations: Know the product regu-

lations of your home market and make proper research on it before coming to China. Many sup-pliers do not give reliable information regarding international quality standards. Some try to cheat with certi� cates and others have no clue at all. You may for example ask a mobile phone supplier if CE, RoHS, FCC, or UL is available and receive the answer is “Of course. And WIFI is also available”. Such incidents really happen at the Canton Fair, so be attentive in terms of certi� cations.

Do research before arrival: If purchasers are being asked about their main target at the trade fair, a common answer is “I am here to compare prices”. But is it necessary to travel to China only to compare prices? The clear answer is no. The general price level of most products can be checked easily at home. Log on a B2B-platform such as Made-in-China.com and get into contact with exist-ing or potential suppliers. Soon you will get a rough idea about the prices in all kind of industries. That’s certainly more convenient than running through the vast gangways of the Canton Fair and asking for a price here and there. Another option is to check the exhibitor list of the o� cial website of the Canton Fair. Contact suppliers which exhibited at the last session and/or will exhibit at the next one. Some mouse-clicks will give you an overview about a variety of product groups and suppliers. Have a � rst look to the supplier’s websites. Some basic business experience given, the sheer arrangement of a sup-plier’s internet appearance will tell you a lot about this company. In many cases the website of a sup-plier reveals more about his professionalism than his booth at the fair. Finally, get into � rst contact with such a Canton Fair exhibitor by email. Do not only pay attention to his price list, but also observe the way he communicates with you through email or telephone. Is this communication smooth or rather tiresome? Based on your observation you may decide to visit the booth of such a supplier at the Canton Fair later on – or not.

Factory visits: A trade fair visit in China will regularly include one or more factory visits. Once again: only a proper preparation will make such a visit meaning-ful. This especially applies to visits of new potential suppliers. Make sure what has to be discussed and

what you want to see at the factory. Con� rm that a sales manager will be available

who is willing to negotiate with you instead of merely opening

the door to the show room and reading item num-bers and prices from a list. Confirm the basic fea-tures of the factory such as general price level, production capacities,

quality standards, existing certi� cates etc. Missing to

check out such key points in advance could make some

trips to far-away located factories a pure waste of time.

On the ground – your attendance at the trade fair

Booth impression: Having once reached the Can-ton Fair, purchasers will try to get a more precise impression of existing or potential suppliers. This will start with the assessment of the general booth arrangement. Does it look professional? Is the ex-hibitor a manufacturer of a trading company? Many purchasers will tend to favor manufacturers, but certainly not all. There are remarkably sophisticated trading companies amongst the Canton Fair’s ex-hibitors. Their broad range of products is amazing, their delivery times are quick, their MOQ fantasti-cally low and their prices surprisingly competitive. Nevertheless some trading companies have to be examined carefully. A 15 square meter booth where LED-lamps are presented next to stationary and toilet brushes should cause some first suspicion. If the sales manager at such a stand explains to you in broken English “we are factory”, you can be sure he is nothing else than a kind of agent for several factories. Without hesitation such sales managers will hand out catalogues of di� erent manufacturers. Check the


Direct communication: “What’s your order quantity?” One of the � rst questions a purchaser will be asked. You may not be able to order big quantities, but this should be better discussed at a later stage. Mention-ing a low order quantity at the very beginning may lead to a direct lack of interest in further negotiations on the side of the supplier. Due to low prices, most Chinese exporters depend on big order quantities, be aware of it.

When it comes to price negotiations another fre-quently asked question will be “What’s your target price?” Some purchasers are tempted to play back the ball by calling a ridiculously low price and check-ing the supplier’s reaction. Is this a good idea? Rather not unless you enjoy price-poker games. Before going to a trade fair, a serious supplier should have revised his prices thoroughly and not hold back to speak them out. It is the sign of a quality supplier to act in this way. A purchaser mentioning a very low target price may encourage a savvy supplier to cut in costs by saving on quality material only to open up business. By revealing his target price, the pur-chaser � nally gives up his advantage of getting a � rst impression of a supplier’s real profit expectations. Think twice before calling target prices.

ntelligent questioning: Attending a fair is a powerful tool of doing market research and getting more information about products, industries, suppliers and innovations. However, purchasers can not expect that news will be carried to them out of the blue. Purchasers have to become proactive by themselves. The key point is intelligent questioning. Suppliers have to be asked for technical support, distribution support and marketing support. Pur-chasers have to ask directly, which kind of special cooperation a supplier can o� er, may it be an agent-agreement or other stipulations. Suppliers have to be asked for product innovations, which are frequently not being exposed at the Canton Fair due to the fear of copying competitors. Purchasers have to ask for concrete references or experiences of the supplier on speci� c markets. They furthermore have to ask for quality control methods in the factory. Even a brief chat with fellow traders at a coff ee bar about impressions and experiences at the fair can bring valuable news.

According to trade fair statistics, only 10% of all visitors place orders directly at trade fairs. The over-whelming amount of visitors attending a trade fair

focuses on collecting information, observing new market trends and leading negotiations with exist-ing or potential suppliers. Hence, trade fairs are all about communication and observation. For the at-tentive purchaser willing to communicate properly, a trade fair will always yield benefits beyond the mere comparison of prices.

After the fair

Selection: After the fair the amount of suppliers will reduce itself automatically soon. Some suppliers won’t even answer after being contacted several times by a purchaser and disappear into the no-where. Surprisingly this is not only the case with tiny companies. Others will answer, but be uninteresting in terms of price and service. Some will be eager to go into deeper negotiation and show genuine en-thusiasm during the ongoing sales-process. These are mostly those sales-managers who have left a positive personal impression at the fair. In any case the purchaser who has made proper preparations before and clever observations during the fair will already have a clear picture of the attractive candi-dates and focus on further negotiations with them.

Way to the order: The bigger the order, the more careful the revision should be. Most purchasers will demand samples � rst, which is essential. However, the most perfect sample does not guarantee the faultlessness of the products of the mass produc-tion. A supplier possessing decent references and experience on your market should already guarantee some basic capability. How about other suppliers with low prices, but no experience on your market? They may have unbeatable prices, but can you trust them? A very careful inspection of such companies and the permanent control of the pro-duction process are indispensable in such cases. This can only be achieved through direct controlling and inspection in China. Companies like FECOS Co., Ltd. offer efficient business assistance on the Chinese market.

company name on his business card and compare it to the name displayed above the booth – mostly these are two di� erent names. That’s the typical case of a small trading company unable to gain access to the Canton Fair on its own. The stand was bought from an authorized company in this case.

Personal impression: What distinguishes a trade fair most from other forms of entering into contact with suppliers is the direct face-to-face contact. B2B has been and will always be based to a high degree on personal trust. Impressions about persons are

a key point when it comes to the decision-making about entering into business. Saying this, the at-titude, communication skills, product knowledge and general professionalism of a supplier’s sales manager should be well observed at the trade fair. As a purchaser, it is not less important to leave an impression yourself. Speak about capabilities and qualities of your company. Convince the supplier of being a strong potential distributor of his product. Remember: “You only once get the chance to make a � rst impression.”


HOW THEYUNDERSTANDCHINA

Guanxi in China

Guanxi (relationship between people) is equally important in the West as it is in Asia. In the West it is just not that much dis-cussed. Maybe in Chinese context, guanxi (relationship between people) sometimes gets con-fused with guanxi - relation-ship between business and government o� cials.

In my experience that gov-ernment guanxi is the one that sets China really apart from do-ing business in the West, and it's the guanxi you really need to make your business successful.

--Ingo M. Späth, BDM Asia

After reading more of the comments from months ago it seems like many fall into the same discussion regarding guan-xi as any other discussion of China

and what's important for business. In the UK we have the Old Boys Network - if

you have the right school tie you � t the club nicely, thank you very

much. I'm sure most countries have some form of guan-xi style network. I have found these in many foreign coun-tries and help is always at hand

from a fellow countryman. The concept of guan-xi in itself is not

unique.

Learn the language, be polite and don't forget where you come from and what your

(ke qi), means courtesy and politeness. (he qi), means harmony. Chinese people feel comfortable to be keqi and heqi in a relationship. Showing an-ger or annoyance may ruin the relationship between you and your Chinese partners.

own values are before you start psyching yourself out about dealing with people who have rather di� erent business practices. Remember, they are as keen to do business with you as you are to do busi-ness with them. If you are not Chinese you have no 'face' - this can freak them out as they don't know how to deal with you - in the same manner that you may be confused by 'face' you must give them.

--Joel Summerhayes, Waking Dragon Management Consultants Ltd

In contrast to the West, where building relationships has less importance due to the strict laws and a cul-ture that supports contractual obligations, without guanxi a westerner entering China is like entering an abyss. Understanding guanxi is a challenging process for a westerner, studying guanxixue and building a guanxiwang is fundamentally important. It is prudent for a western company to recruit the right people with the appropriate guanxiwang to avoid being locked out of the world’s fastest grow-ing market.

Guanxi vs. Contract

While the Western conducts business through the contract, Chinese look at the guanxi, which is beyond the contract, for sincere commitment. Guanxi often entwines with busi-ness relationships in China and plays a more important role than a contract.

Guanxi vs. Trade

Guanxi is a critical factor of the networks which serve as a bridge between the traders. For supplier, it means that they can stay on the value chain of a manufacturer as long as they maintain good guanxi. For buyer, it means a favorable terms and conditions of the deal which would be impossible without a good guanxi.

Guanxi vs. Reciprocity

To keep the good guanxi, both parties must recip-rocate. In Chinese philosophy, “No one knows when you will be in trouble and a friend in need is a friend indeed”. This re� ects the necessity of reciprocity.

Guanxi vs. Problem solving

If there is a dispute between the parties, the for-eigner should avoid the court procedure. The best way to solve the problem is through guanxi which solving the problem without damaging the good business relationships.

--Josh Chan, Ph.D, Senior Research Fellow at Oxford International Busi-

ness College

As an insider of Chinese culture, I have been observ-ing how foreign business people communicate with their Chinese partners. Some succeeded some failed.

Regarding doing business with a Chinese business person, here are some taboos to remember:

1. Never embarrass your Chinese partner in any situation. No matter how western

style he/she is, mianzi is the in-deep philosophy. If you treat Chinese well, they will treat you well. Chinese regard

the obligations of repaying favors as very important thing.

2. Don't be too pushy. Westerners love to think logically (scienti� c) but Chinese love to feel (artistic). You can talk big with Chinese but always start from small point to make sure they feel comfortable to do business with you. Once you have good rela-tionship and successful � rst corporation with your Chinese partner, they will feel you trustworthy, there will be more business � ow naturally to you. Never push. Always be polite and patient.


Be aware that people may speak perfect English but show no sign - most university-trained Chinese can read English well enough to get information from documents.

If you want to investigate or have 'freedom of movement', do not accept a lift from your host - hire your own car.

Question every price - make sure they can cover their ex-penses in manufacture - some salesmen, keen on making sales will o� er 'low prices' that change on first shipment - allow for it! Really question 'low prices' that just scrape in on RMC cost or are lower!

Never show displeasure openly - never chastise any-one in public.

Realize you 'interpreter' must follow Chinese proto-cols of guanxi and hierarchy - follow their lead. Retire politely if you need to!

Guanxi says: A 'low' person cannot question a 'high'

person - your sta� cannot telephone a manager in another company and demand anything!

Don't 'manage by secretary' - relying on one per-son to translate everything for you sets

up resentment and guanxi issues in factories or o� ces you control.

The bosses' father-in-law will be the security guard or the gar-dener in 'family run businesses', be respectful to all people in companies.

Check factory capability - specify that they must not 'subcontract' in

the agreement and when the inevi-tably do, you have something to discuss

with them.

Negotiations are always � uid - you will revisit terms many times so be patient and always check the re-vised documents thoroughly.

Make sure you are available after negotiations for a meal - this 'seals the deal' - pay attention to who

3. Don’t be very direct in refusing a favor asked: The best way to deal with a request you’re uncomfort-able with is to avoid putting yourself in that situation in the first place. If you do � nd yourself in such a situation, though, refuse without us-ing very direct language to help the other party save face. In many cases, rather than saying you can’t do it, it’s better to say something to the e� ect of “it may be dif-ficult.” Then try to think of a compromise you’re comfortable with.

--Mimi Wei, Product Manager at Focus

Technology

Price and Quality

The key thing is that people 'want' to do business - but you have to be very clear of your expectations on them in terms of delivery, shipping, quality etc. You need to be aware of these 'restrictions' and make sure that you are being 'realistic' about price and performance...you don't get a top product for bottom dollar - anywhere!

You cannot be assuming that a company 'knows'

how to ship something overseas 'safely and correct-ly!’ knows how the item will be sold/marketed and hence 'visual quality' of packaging or knowing how it will be used in your market hence 'safety quality/materials quality'. Most 'small' Chinese companies make one product really well-but they don't neces-sarily have the sophistication of packaging/market-ing/export - allow for this.

Your 'common sense' is not a paradigm that Chinese people can easily understand (because every re-quirement is di� erent plus a language barrier!).

So taking care to realize this, de� ne these qualities very well and dwell on the important items makes sure that the Chinese partner will focus on the things that you want.

--Gareth Humphris, Principal Consultant at EdVantage China

One more point is that, we foreigners must understand that lower pric-

es, tight schedule, language and culture barriers will

obviously lead in di� erent results than if you do it in your country. So you have to do compromise between quality and costs. If you want qual-ity products in China it is

100% possible to get it. But don't expect to have

for such a low price, as for-eigners usually think.

--Anthony Garcia Senior, IT Project Manager

looking for opportunities in Beijing

Negotiation in China

Chinese 'positive body language' signs in meetings and negotiation show 'understanding', not 'agree-ment'.

A contract is an invitation to continue 'negotiation' for the life of the relationship - not a 'binding' docu-ment. A handshake is just touching hands! A gentle-man's 'word' is a leaf � uttering in the wind!

Maitreya Buddha, also known as Laughing Buddha, has been com-monly respected in Chinese history. He is always laughing and has a big belly which means “bear the unbearable”


is there, the big boss arriving says you have lost big time in the negotiations!

Never believe any 'advice' you get on forums - Chi-nese business is changing and so are attitudes and understandings - in small family businesses that are away from major centers you may � nd many of the 'ideas' here to be 'true', but be very adaptable and as thorough as you can - a respectful personal ap-proach works best!

--Gareth Humphris,Principal Consultant at EdVantage China

Are Chinese people conservative?

After some super� cial contact with Chinese culture, a Westerner can easily get the impression that Chi-nese people are conservative.

In China, being conservative is considered as a posi-tive virtue. But Chinese people are progressive. Also, please be noted that China is a huge country with different regions developed quite differently. You can not generalize Chinese people with one word. People living in big cities are of more quite western

style. People living in inner-land cities are more con-servative. Also, age is a big factor. Elder people are often more conservative than young generation. Young people born in 1990s are typical generation that would be quite interesting to study. China is just so huge and customs can be quite different from the north to the south, from west to the east.

If you blend Eastern leadership styles with Western methodologies - do you end up with a better company?

My JV runs based on a hybrid management with my Chinese partners leading the relationship with customers and employees, while as foreign partner we take care of the system, advanced technology and quality management. Although there are some overlaps where compromise is needed, but the result is quite impressive. Undoubtedly the hybrid approach works better than either applying only eastern or only western management, it is simply the sum of strengths from both sides.

-- Majdi Alhmah, General Manager at BFG International China

Gifts exchanging is a good way of relationship maintenance. Are Chinese difficult to work with?

Good working relationship with clear defined re-quirement worked for me, there are huge cultural di� erences and there are also regional and genera-tion di� erences and you have to address all when building a team in China. I have seen many people fail as they fail to ensure the message they have relayed has been fully understood, even Chinese to Chinese have di� cult so you have to be very clear and ensure that they repeat what has been request-ed and the time lines required. If you are clear hon-est, straightforward and willing to communicate at all levels respectfully you can achieve your goal. Chinese work best in teams and with a good leader.

--Gary Shatwell, CFO at GZ Industries Ltd

“No problem.”

Chinese people like to say “no problem.” Or some-thing like “Yes, we can do everything.” It’s not about boasting. In Chinese philosophy, saying “no” is considered as impolite and they believe by say-ing something negative might make people feel embarrassed. If you want to make sure that your Chinese partner do understand you and will deliver the exact result as what you expect, it is always wise to make your requirements clear, and dwell on the important points.


Harmony: the key to a happy transnational marriage, and to successful business in China


I relocated to China in 2001 to pioneer the industry of “Doing Business in China.” My goal was broad but straightforward: Develop commercial bridges be-tween China and America. After a few years, I estab-lished a US based holding company in Nanjing (for strategic reasons) to invest in companies that would pro� t from China’s rapid globalization.

Today, my company, Enjoy International Holdings, owns various properties, with a broad range of licenses, in mainland China. Operating in multiple sectors has provided me with a unique and holistic understanding of doing business in China. Aside from my work as an entrepreneur, I have trained and advised hundreds of SME and large multinational enterprises in China and North America regarding strategic planning, company registration, start-up and all areas of operational management.

Overall, my experience has taught me that doing business in China is not as di� cult as the headlines

and pundits may lead one to believe. Like with anything, succeeding in China boils down to smart, practical planning; coupled with great team work and execution. Below are three suggestions for for-eign companies doing business in China:

Practical Expectations and Trouble-shooting

China’s 2001 entrance into the WTO made it an overnight success and opened the country up to the world. With little over a decade in the global business arena, foreign companies should not be surprised that China lacks global competency and sophistication. Countless foreign executives in China will woefully mourn that despite having a good relationship with their Chinese counterparts, the partnership ultimately failed due to a lack of under-standing about global standards and processes. This is especially the case in the export manufacturing

DOINGBUSINESS IN CHINA

About the Author

Adam-Paul Smolak is the Chairman of Enjoy International Holdings as well as President of Enjoy International Consultants (www.ei-consult-ants.com), a supply chain consultancy based in Nanjing, China.

By Adam - Paul Smolak (America)


sector where foreign purchasers cite inconsistency in product quality as the main reason for terminat-ing partnerships.

Despite this knowledge, foreign purchasers and Chinese sales professionals rarely talk in real time via Skype or conference call. Usually, foreign purchasers merely send emails, or Blackberry messages, that are quite frequently hard to decipher. Chinese sales professionals, lacking con� dence in their language abilities, are happy to oblige. Foreign purchasers must not make this mistake. Foreign purchasers should begin by being more communicative not less. Invest your team’s time in frequent video calls and all-hands-in technical training/sharing sessions to ensure that your Chinese counterparts under-stand your expectations. Once an issue becomes apparent, instead of talking tough about what you will do if the supplier can’t get it right, focus on im-plementing training programs to correct poor per-formance. Holding training sessions via conference call (or even sending a professional to their factory) while having its costs, will ultimately be more cost-e� ective than starting another supplier relationship. Most Chinese companies, if carefully selected, will welcome opportunities for sta� improvement and strengthening ties with their clients. Like with any successful relationship, encouraging communica-tion and problem solving will win over tough talk and threats and lead to a lot fewer broken partner-ships. In the end, your company’s success will de-pend on managing expectations and fast, e� ective problem solving.

Effective Planning

Identifying your goals by devel oping a 3-5 year strategic plan is the first milestone in setting up effective operations in China. Planning should in-clude: 1) A Mission Statement that clearly identi� es the � rm’s values and purpose; 2) An analysis of the � rm (including strengths, weaknesses and external threats) and its chosen industry. The simple goal is to develop a competitive advantage over your rivals based on costs and/or di� erentiation.

Next, relying on the � rm’s resources and leadership’s

ability to motivate staff, develop a tactical plan to implement strategies and achieve objectives. The implementation strategies must be monitored and adjusted as needed. The tactical plan must de� ne the parameters to be measured, set targets, collect measurements and compare them to the pre-de-� ned standards. Whether it is product development strategy (annual volumes/quarterly volumes), Mar-ket Research and Industry Overview or establishing a vetted supplier and client community, careful planning and evaluation are necessary for success-fully conducting business not only in China, but anywhere.

Practical Expectations and Troubleshooting


Selecting the Right Team!

Above all else, each member selected to serve on the China team must be committed to doing busi-ness in China. Business in China is determined not only by your product or service’s competitive advan-tage, but also by clearly understanding the Chinese marketplace. Relationships in China are paramount and the development of relationships is a long term commitment. Just doing business with suppliers or clients based on price is not always successful. Finding partners that are willing to develop mutu-ally bene� cial business together is the key. Quality is the best determination in any product or service and � nding quality suppliers and clients in China is no easy task. Geography, culture and di� ering politi-cal frameworks are the obvious impediments that have stymied both large & small companies who

have global reach. Companies with limited global presence will � nd expanding in China more di� cult to navigate than most countries. Whether you are buying products or selling your own products in China, the track record is littered with failure and retrenching business goals and objectives. Finding and/or developing your own sta� with the experi-ence to swim in the Chinese business waters, so far from home, has been a mixed bag. Rather than expending your own resources to develop a China presence organically, the logical alternative is to hire a China based consultant to manage your opera-tions and develop the necessary strategies and rela-tionships for you.


China is an amazing country: a heaven of manufacturers, a heaven of tourists. Here we carefully selected five cities in China where global purchasers can have fun in between their busy factory visitings.

AMAZING CHINA


Shenzhen, home of Huawei, Tencent, Konka, TCL, to name but a few top 100 Chinese companies, a city of 30 years history. Today Shenzhen has become the most innovative and dynamic city in China, having nu-merous trading companies and manufacturers in consumer electronic, promotion gifts, electricity, etc.

Sleepless in Shenzhen

Nanjing, one hour’s express train (GAO Tie) away from Shanghai, was the capital city of 6 dynasties in his-tory; a city you will � nd experienced trading companies and manufacturers in textile, machinery, chemical, construction materials, to name but a few.

A causal walk along path lined with over 600 years old stone animal statues: feel Nanjing’s still breathing history


Quanzhou, 80 km way from Xiamen, where you can visit thousands of manufacturers in shoe, garment, machinery, stone products, etc. Escape from the dull factory buildings and take a short trip to its seaside town: Hui’an, enjoy the peaceful sea view and have a look at Hui’an costume there.

Qingdao, also Tsingtao, has 730.64 km continental coastline with features similar to that of California’s north coast. Global purchasers will � nd so many trading companies and factories in tire, garment, frozen veg-etable, to name but a few. Qingdao also has strong equipment manufacturing industry. Fresh Tsingtao beer, seafood, nice people, clean city and good factories, all in Qingdao.

The traditional Hui’ian costume: "feudal head, democratic belly, thrifty jacket, and wasted trousers"

“FOB Qingdao”, containers are being loaded to be exported from Qingdao


Ningbo, 220 km away from Shanghai, is a major exporter of electrical products, textiles, food, and indus-trial tools (mould, auto parts, etc.). The port of Ningbo is one of the world's busiest ports.

DOING BUSINESS IN CHINA

Made-in-China.com has o� ces in 29 major cities (see as below) in Mainland China. With strong connection to local suppliers, Made-in-China.com can provide strong sourcing support to global purchasers in most cities in China. Talk to our Buyer Service Team for help!

Ningbo has clean city view

64 A SMALL HANDBOOK OF DOING BUSINESS IN CHINA / 10 / 2012

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