Olympic Games 2008

The-meaning-of-Guanxi by Eric Castro

The first Chinese word that anybody who does business in China must learn is “Guanxi” And what means this word?:

China is a country that is developing in a very fast pace and at the same time it is growing. So many business opportunities are starting to float. A city where you can set up operations is Shanghai. In this city you can stay and meet people, and for those looking to build up their Guanxi, there is always a networking event, conferences and many opportunities to promote yourself and your company along with a few drinks and chips.

During the last 2 decades there have been fewer topics more important than to build strong business relationships, and in China the word Guanxi is one of the first words a foreign executive must learn.

But what means Guanxi? In a Mandarin dictionary you can find that it is relation; relationship; to concern; to affect; to have to do with; relations.

In other words Guanxi is your network of people; who you know; how many cards you have; whether potential customers know of your product; and, if you are in sales, who knows you.

Before to do business in China meant that a foreign executive was interacting only with Chinese businessmen in introductions were critical and relationships were coveted. Meetings with factory managers, bankers, government officials, and distributors were conducted in Chinese around large tables in rooms that had no heat or AC over scalding hot tea were conducted.

Meals were eaten, sites were visited, families were introduced, gifts were given, alcohol was consumed, and relationships were raised. It was the first step for doing business in China, and those relationships were critical for the future stability and success of the operations.

But, in the last few years as more and more foreign companies have not only visited China, but also invested in China, the role of relationships has changed. When European or American executives once complained about the snails pace building relationships took, many relationships now are built on the business fundamentals of the deal being discussed, and thus are moving much quicker.

In many ways, government officials, manufacturers, distributors, and customers are all a bit tired. Many have been visited many times by related companies, all offering the same interest in investing in a particular area, buy a particular product, or partner with a particular company, and unfortunately, this has changed their level of excitement from ecstatic to muted as many did not put their money where their mouth was.

However, on the other side, the importance of relationships with other foreign companies is becoming more and more important for Chinese. Due primarily to the number of companies entering China, there is now a new group of companies entering China that deal solely with other foreign companies, and thus need to have strong relationships with foreign companies rather than Chinese companies. This is also true for many who are supplying services like freight forwarding, outsourced accounting, and many other services.

This article was researched and produced by Posicionarte for China Trading Company , 2007

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China-is-a-Fast-Growth-Market-be-Prepared by Eric Castro

A company that is planning to start their business in the fast growing market of China needs to have in mind many factors that are a major role for succeeding or not in these growing economy. Below I will advice you in one very important factor.

The first step to have in mind if you want to succeed in the fast growing market of China is to start small. So it is important for companies to be advised to “Start Small”. This is because any business has to leave itself time to learn about China, find the right partners, hire the right people and develop the right strategy.

But, no company should be like this all the time. A company must be prepared to quickly change to keep up with the pace of change in China, and to make decisive moves to help its business when the time is right. Opportunities can come and go very quickly. So it is imperative to have your eyes wide open and try to be in pace with the fast growing market of China.

This behavior of the Chinese market takes us back to the proverb about the tortoise and the rabbit. In China, in the beginning, a company should start as a tortoise that mean slow, but when the team and everything else is in assembled, it should transform itself into a rabbit and start to go at the same pace as the growing market.

China is a giant that is waking up, and there is a big opportunity for companies all over the world to be part of this growing market. But first of all, these companies must be prepared to face all the challenges that China will put over their road.

So if your company is planning into moving to China the first advice to take with you in your bags is to be prepared, start slow and then follow up with the rapid changes of this fast growing economy.

This article was researched and produced by Posicionarte for China Trading Company , 2007

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Exporters-to-Encounter-More-Technical-Barriers by Eric Castro

Exports from China will encounter increasing technical barriers among major China trading partners like the United States and the European Union in the coming years because of strict new rules on energy use and chemical content in those markets, a top official warned.

Although it is still too early to say what kind of impact such barriers would have on exports, they could be serious, said Li Changjiang, minister of the General Administration for Quality Supervision, Inspection and Quarantine (GAQSIQ).

The growing number of foreign regulations has caused exporters from China to suffer huge losses, and it is conceivable that such growth will continue in the future, Li said.

Consumer goods generally have to conform to technical regulations and standards that set out specific characteristics for a product, such as its size, shape, design, function and performance. These rules can also cover labeling and packaging.

Export products that fail to meet the standards in the markets they are destined for will be denied entry to those markets.

Such regulations impose costs on manufacturers and exporters, which have to adjust their production facilities to comply with the requirements and pay for testing and certification to prove that their products meet the foreign regulations. Even translations and explanations of the regulations can raise costs.

A Xinhua report said about 90 per cent of China agriculture and food import and export enterprises are affected by foreign technical regulations, costing China approximately US$9 billion every year.

Official figures also show that the Restrictions on Hazardous Substances (RoHS) directive, which the European Union adopted on July 1, affected more than US$60 billion worth of electronic and electrical products exported from China.

China received 895 notifications of similar technical barriers from WTO members last year, up 50 per cent from 2002. The number of notifications involving sanitary and phytosanitary measures reached 853, up 30 per cent over 2002.

Phytosanitary refers to the health of plants and covers such issues as plant diseases and pests.

The majority of these notifications came from the major China trading partners, such as the United States, the European Union, Japan, New Zealand, Brazil, Canada and Israel.

GAQSIQ has taken steps to address trade issues involving automobile exhaust, food components, chemical residues and animal diseases. These areas will continue to be key issues for exporters in coming years.

Li said most technical standards are adopted and applied in an effort to protect human safety or health, animal and plant health, and the environment.

However, there is a risk that some countries could use technical regulations and standards to protect favored domestic industries.

Li said China would actively take on inappropriate regulations through the World Trade Organization’s dispute-resolution mechanisms.

This effort has already born some fruit. Japan last month lowered its standards for chemical residues in 18 categories of food products, and at almost the same time the European Union lowered standards for pesticide residues on tea from China from 0.01 mg per kilogram to 30 mg per kilogram. With a better understanding of WTO rules, we will be more active in international trade affairs, Li said.

This article was researched and produced by Posicionarte for China Trading Company , 2007

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Chinas-Economy-Grow-to-set-up-New-Record by Eric Castro

China economy grew 10.7 percent in 2006, its fastest rate in more than a decade, as China trade as investment and exports powered ahead despite a raft of government curbs to keep the pace of expansion in check.

The world’s fourth largest economy has now grown at double digit rates for four years in a row.

At that pace, China output could leapfrog Germany’s and catapult it into third place in the global rankings as soon as 2008, when it will showcase its meteoric rise by hosting the Olympic Games. It overtook the Great Britain in 2005.

“The message is that the economy of China is booming and I’m forecasting that it will grow 10.7 percent again in 2007,” said Tim Condon, head of Asian financial market research at ING in Singapore.

The 10.7 percent clip of gross domestic product growth was faster than the preliminary 10.5 percent estimate given earlier in the month by officials. It was up from 10.4 percent in 2005 and was the briskest rate since 10.9 percent in 1995.

The National Bureau of Statistics, in a report released on Thursday, said that China GDP between October and December rose 10.4 percent from a year earlier, slowing a bit from a 10.6 percent annual pace in the third quarter.

Economists traced the modest slowdown to the ripple effects of a spate of tightening measures in recent months.

Since April, the China central bank has raised interest rates twice and increased four times the proportion of deposits that banks must hold in reserve instead of lending out.

The central government of China has also cracked down on wasteful investments, naming and shaming officials and provinces that failed to comply with orders to tighten up planning procedures and observe tougher environmental protection criteria.

Still Having Some Problems

The curbs succeeded in slowing down growth in investment in fixed assets such as flats and factories in urban areas to 24.5 percent in 2006 from 27.2 percent in 2005.

“China investment structure has improved and investment in sectors experiencing overcapacity has been brought under control,” statistics chief Xie Fuzhan told a news conference.

In December China alone fixed-asset investment growth sank to 13.8 percent from a year earlier.

China economists dismissed the figure as unreliable but said Beijing would have to keep the economy on a fairly tight leash in 2007, especially as consumer price inflation rose to 2.8 percent in the 12 months to December from 1.9 percent in November.

Stephen Green with Standard Chartered Bank in Shanghai, China said the central bank of China could bring forward the next increase in interest rates and let the tightly controlled yuan rise faster.

“From our read of the economy, it would do no harm. We hear that bank lending in the first few weeks of the year has been really substantial,” Green said in a note to clients.

Capital spending has been driving China boom, pushing up commodity prices around the globe and fanning fears in Beijing that the sheer scale of investment is creating serious pollution and depleting water and other resources.

“We’re facing problems of energy saving and doing better in environmental protection,” Xie said.

He said policy makers also faced a challenge to mop up the money pouring into the economy from China trading surplus, which rose 74 percent last year to a record $177.47 billion.

China is striving to rely less on exports and investment and more on consumption. But Xie conceded: “We’re finding it hard to meet the target of changing our economic structure.”

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This article was researched and produced by Posicionarte for China Trading Company , 2007

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More-Mergers-and-Acquisitions-Deals-Set-to-Occur-in-China by Eric Castro

China is set to see more mergers and acquisitions this year after emerging as the second-biggest Mergers & Acquisitions market in Asia Pacific in 2006, according to Standard & Poor’s.

A record US$99 billion worth of mergers and acquisitions deals was sealed in China in 2006, the rating agency said. China growing M&A market boosted the value of transactions in Asia Pacific, excluding Japan, to a record high of US$385.4 billion, a 50 percent jump over the previous year.

Most of the mergers and acquisitions deals in China in the past year targeted banks, metals, oil and gas, medical and technology companies. Deals among China companies contributed to more than half of the transactions last year.

Foreign funds flooded into China mergers and acquisitions market last year as the government opened more sectors to overseas investments. Even in the banking sector, where overseas players can only hold a minority stake, several acquisitions were often heard last year. Overseas investors can hold a combined 25 percent in a domestic lender while a single investor can only own 20 percent.

For instance, Banco Bilbao Vizcaya Argentaria SA, the second biggest financial group in Spain, agreed to pay 501 million euros (US$650 million) for a five percent stake in China City Bank.

“Foreign investors are likely to be drawn to a wide range of sectors in 2007, such as in the retail, service, and consumer goods markets, where competition is intense,” said the report. “Some of these sectors are viewed as less strategic to China and are therefore less protected, with foreign investors able to buy a large or controlling shareholding.”

For this year, foreign companies seeking mergers and acquisitions deals in China will look at key factors including the government’s push for ailing state owned firms to go into the private sector, the potential lucrative returns in a fast rising market and low cost manufacturing opportunities, the report said.

This article was researched and produced by Posicionarte for China Trading Company , 2007

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Special-Things-to-Consider-When-Negotiating-in-China by Eric Castro

Chinese people arrive on time for meetings and other occasions (and sometimes 5 or 10 minutes in advance). It is considered rude to arrive late for engagements of any kind. Traveling from one point to another in many cities in China can be extremely time-consuming due to traffic delays. Make sure you leave early enough to make it to your destination on time.

Take time to get to know your counterparts. You will need to establish a high level of trust in your partner. Business style in China relies on personal relationships based on trust rather than legalized, impersonal obligations. Don’t rush things.

China is a developing country, but be prepared for prices which in some cases exceed those for comparable goods and services in your local place. Doing business in China is not cheap. Accommodation, meals, entertainment, rent, business services and other necessities are expensive. Look into the costs before you go.

Physical conditions in China cities can be difficult sometimes, with heat, cold, dust, crowding, noise, traffic, and their sheer size. Be prepared for this. China best foreign hotels afford a wonderful refuge from the stress of such an environment, as well as providing business centers with modern computer and communication facilities.

For serious transactions and information-gathering, you will require a guide or an interpreter. (These may be provided by your China hosts for sightseeing and shopping, but for business you should find your own.) China based consultants can help you in this respect. Local guides can also provide important cultural guidance on an on-going basis as they accompany you during your stay.

People from China use intermediaries to make personal introductions, to carry bad news and to settle disputes. It is possible to carry on an acrimonious argument without ever facing your opponent. Everything goes back and forth through a third party who communicates each side’s position without displaying the unpleasant emotions that may be involved (though these emotions may be reported). Result: the hard feelings and embarrassment that accompany a dispute and even threaten the underlying relationship are mitigated. This is a highly civilized system - explore it.

Entertaining is a very important part of doing business in China. You should be prepared to spend more money on entertainment than would be normal at home. For your China counterpart, entertainment is an important step in getting to know you and in establishing good relations - long before a letter of intent or contract is signed. In China, this entertainment commonly involves banquets, speeches, whiskey from China (look out!) and karaoke.

Banquets are an integral part of deal-making in China. On these occasions, you can’t go wrong by taking cues from your counterpart from China. Sit where your host suggests; try the food that is offered; make a reciprocal speech and toast. If karaoke is part of the evening, gather your courage and sing your favorite song. Your host will enjoy it! If you don’t know any songs, learn the words to a couple of popular English songs before you leave for China. (’Red River Valley’ is a great choice, since the melody is exactly the same as a very popular Chinese folksong. Your Chinese hosts will be stunned that you know Chinese folk-music, and in English translation to boot!).

Foreigners can expect a lot of goodwill from the Chinese. Your China friends may make disparaging remarks about China “backwardness”, but don’t take this as an invitation to add your own criticisms. If you can think of a positive thing to say on such occasions, it will be appreciated.

This article was researched and produced by Posicionarte for China Trading Company , 2007

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Building-a-Network-of-Relationships-in-China by Eric Castro

To have a good network of relationships in China is critical for your business success.

To build a network you need time, this won’t come true overnight and in most cases it requires something around 6 months up to a year for a network to consolidate.

The kind of approach and the effort require will vary on the kind of relationship to be built. Below you will find how to build relationships between your organization and manufacturers, distributors and costumers. All of them have their own twists and they will require different strategies, but will be very helpful in you next visit to China.

Relationships with Manufacturers/ Suppliers:

This is one of the easiest relationships to establish but to maintain in is the difficult part, these relationships are today based more on an economic and practical basis than on anything else.

To make first contact in now easier, this is thanks to the Internet as many websites will provide you with directories of thousands of manufacturers and trading companies. Also fairs and industry specific conventions take place everyday so suppliers are more accessible and in one trip you can get your self many potential suppliers.

Relationships with Distributors:

Building a strong relationship with a distributor is often more difficult to make than those with manufacturers, and for almost every company these contacts are more important because you can train up a manufacturer but a good distributor is priceless to obtain.

The role of a distributor is a very important one, and these relationships must be managed in a very careful way because some distributors are very powerful in some markets.

It is a good advice before you make relationships with distributors to know which ones are the strongest or have the best track record in the market you want to enter. Once you identify them the second most important thing to do is to understand their portfolio, their capabilities and their network.

Relationships with Customers:

Relationships with customers, is one that there are probably the most resources for depending on who a target customer is.

If you are selling to foreign customers you can find many resources and to build the relationship is just a matter of time and patience. But maintaining these relationships strong it will come down to having a proper team, good pricing, and stable quality.

However, in China, one area that sets the winners apart from the pack are those companies that commit to the product development process of their customers

In conclusion some relationships in China are important, no question. However, more than that, making sure the right relationships are developed and maintained is even more important.

In the end, it is the business model that will dictate what relationships will be required, and once those are determined, the course of action will be dictated. Once that course of action has been dictated, it should be followed. Unfortunately, there are no short cuts and it will require time and patience, but once established relationships in China can bring real mutual benefit to both parties in business and on a personal level.

This article was researched and produced by Posicionarte for China Trading Company , 2007

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Private-firms-new-force-in-overseas-investment-in-China by Eric Castro

Privately owned Chinese enterprises are set to become the new force among China overseas investors from all around the world. So said Hou Zhirui, an official from the All China Federation of Industry and Commerce, based on data from an eight-year period.

The organization’s statistics showed that the growth rate of private enterprises has seen more of them become large companies with sales volumes of 300 million yuan. And these firms will be ready to go abroad when they reach a certain level.

“It will not take a long time (for China private enterprises to become a new force in overseas investment). Maybe only three to five years,” he said.

A large number of private firms from China have already increased their presence in overseas markets. Outbound investment includes overseas processing, technology and equipment exports, establishing sales channels, and mergers and acquisitions. But most of the firms still focus on small-scale projects.

The federation’s Zheng Yuewen said the Chinense government should remove restrictions on private enterprises “going out”. He said the government should, for example, remove the approval process for outbound investment.

The outbound investment of China firms totaled $16.1 billion last year, according to statistics from the commerce ministry. China went from being the 17th largest investor in the world to the 13th in 2005.

Although the figure reflects a 31 percent increase from a year earlier, it is still small compared with the $64.5 billion of foreign investment China attracted last year.

style=”>Chinese overseas investors are facing major obstacles such as a lack of core technologies, cultural differences and a lack of well known brands, according to a report on style=”>China transnational corporations by the Research Institute under China commerce ministry.

“But enterprises cannot go out until everything is ready,” said Wang Zhile, a researcher with the institute.

The report suggested that Chinese government should offer more policy support to enterprises from China for their overseas investments, quoting the successful experience of South Korean companies.

“Only by cultivating a large number of China transnational companies can the country concentrate its limited resources to lay a solid foundation for economic strength,” the report said.

Meanwhile, the report said enterprises from Chinese must improve their abilities in overseas investment and management.

“Investors from China must learn how to shun trade obstacles such as safeguards, tariff barriers and trade conflicts brought by foreign countries,” it said.

This article was researched and produced by Posicionarte for China Trading Company , 2007

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Ways-of-Doing-Business-in-China by Eric Castro

China is the economic frontier of the 21st century and with that comes unlimited promise, and maybe pitfalls. People from China are wary of foreign companies that they believe may only be there to make a quick buck. Nevertheless, the Chinese market is not without at least some rules of its own.

Build a network of relationships

In China, guanxi, or connections, is important. It is essential that companies establish strong relationships with distributors as well as midlevel government bureaucrats, who often have great influence over policy decisions. Once trust is established with key players, foreign firms will find that production, distribution, and advertising are easier to achieve.

Establish strategic partnerships

Many U.S. businesses believe if they go to China, they need to get a deal (any deal) quickly. But the wrong deal in China can sink a business, and exclude it from other more lucrative partnerships. Analysts advise companies to consider partnerships carefully and ask these questions: What does the Chinese partner expect? How quickly? What connections does the partner have in government? With other technology providers and distributors? The rule: Don’t try to do too much too fast.

Sell solutions, not products

China is looking for products tailored to its market. Foreign firms that project a “take it or leave it” attitude will not succeed. Analysts recommend that companies examine the obstacles to technology in China (different character set, immature infrastructure, desire to control Net content) and adapt their products to overcome them. This will impress officials in China and aid in establishing strong relationships.

Be flexible

China regulatory and legal environments are still immature and basic infrastructure is not readily in place. Companies must learn to manage change and accept the “fluid” business environment. Foreign firms should understand that it is incumbent upon them to maintain and revitalize relationships, even if things don’t turn out as they expect.

Develop aggressive technology transfer strategy

People from China are very protective of the information technology market. While they welcome foreign firms, their goal is to make the domestic IT industry self sufficient. Therefore, the government favors (and in some cases requires) foreign firms to transfer technology. Chinese managers especially are looking for companies that are proactive, not reactive, which means that foreign firms’ plans should include a constant flow of technology to domestic partners. In sum: Companies must think strategically not opportunistically.

This article was researched and produced by Posicionarte for China Trading Company , 2007

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How-to-Find-a-Good-Wholesale-Supplier-in-China by Eric Castro

To have success in your Internet business of selling products, you need to find a Wholesale Supplier of products you can sell, and work with them directly. China has become to be known as the world factory. Browsing the Internet you can find that almost every major company has a factory in China. So if you can contact a bulk wholesaler that can provide you with these products you will get the highest profits. So don’t get surprise if you can get great bargains of high-quality products. So the smart way to expand your business is to work directly with a China bulk wholesaler supplier.

The question that you ask yourself is How to find these suppliers? These process can take a great deal of time and some of them will not work with a home based business. Also once you find some how you know they are reliable. These can be a nightmare because you can risk a lot of money.

Regardless of how many years you are in business, you can follow these basic tips so you wont lose your money and time.

• Where can I find a wholesale supplier in China? For personal experience I can say that one of the best and trusty companies to work with is IWU (www.chinatrading-company.com). It is the perfect place to finds different kind of products at great prices. Even more they confirm your delivery to your home country.
• Don’t just focus on the prices. With IWU you can find reasonable prices and can think that lowest prices are better, but that is always not true. So you should not only focus on prices, the quality and customer services are very important.
• Verify for the priority delivery information. IWU works with important couriers like UPS, DHL and others. So ask for their priority delivery information and track online. Checking the status of the shipping information will help you a bit.
• What is the best payment method? Personally I to don’t use any other payment method except paypal. Paypal has a number of protection policies that cover the qualified buyer who purchase using paypal. If the wholesaler is a qualified seller and accept paypal payment, you will be protected by paypal. If you never received paid goods or goods not as described, you can file a complaint via paypal. But also you can pay via wire transfer or your favorite credit card.

So follow these guidelines and you can be safe to start your business with a very good and responsible wholesaler in China. Remember that in China you can find almost everything at very reasonable prices.

This article was researched and produced by Posicionarte for China Trading Company , 2007

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