China to Build Seven Industrial Bases for New Materials

China will build seven production bases for new materials to boost the development of high-tech industries, the top economic planning authority said Friday.

The National Development and Reform Commission (NDRC) said the bases would be built in Ningbo, Dalian, Luoyang, Jinchang, Guangzhou, Baoji and Lianyungang.

These bases will turn out new materials for industries covering information technology, biotechnology, aeronautics, new energy and environment protection.

The NDRC required that local government departments offer preferable policies for building these bases and create a sound environment for the development of high-tech industries.

Source: Xinhua

China's Economy to Grow Moderately Slower in 2008

China's economic growth is likely to stay high but "may moderately slow down" this year, according to the country's central bank.

The economy would be affected by a decelerated world economy, weakened by outside demand and domestic disasters such as the snowstorm in January and February and the 8.0-magnitude earthquake in southwestern China, said the People's Bank of China (PBC) in a report on its website.

It noted that the country's central areas, the hardest-hit by the snow storm, need to strengthen infrastructure such as power, transport and telecommunications facilities.

Post-quake recovery work was also an arduous task, it said.

Official data showed the freak winter had led to a direct economic loss of 151.6 billion yuan (about 20.8 billion U.S. dollars), while economists estimated the quake loss could reach hundreds of billions of yuan.

The government would continue to carry out a tight monetary policy and properly control bank credits this year, according to the report.

Innovative, conservative enterprises as well as rural and service sectors should enjoy preferences in getting loans while lending to smokestack, polluting and overproducing industries must be checked, aid the PBC.

"More priority should be given to curbing price rises and preventing inflation," it said.

The PBC suggested increasing supplies of grains, edible oil, meat, eggs and vegetables to rein in surging food prices.

China will see its annual gross domestic product (GDP) growth slow down to 9.8 percent this year and 8 percent in 2009, compared with 11.9 percent last year, according to a forecast by Lehman Brothers.

Individual housing credit risk, which had triggered a U.S. sub-prime crisis, would be basically under control in China in the short term, the PBC noted.

It said the default risk caused by inadequate economic ability to repay the housing loans was relatively small in China, while most borrowers had good credit.

The average proportion of down payment in housing loans was 37.2 percent in the country, while only 3.7 percent of surveyed house buyers were unable to repay the loans in time because of money shortage, according to the PBC report.

Meanwhile, the country's commercial banks could face larger risks from borrowers who repay their housing loans in advance due to interest rate hikes and income rises, which would add uncertainties to the banks' fund use plan, it said.

Outstanding housing loans to individuals reached 2.7 trillion yuan as of the end of 2007, 36.1 percent up year on year and accounting for nearly 10 percent of all loans in the country, said the PBC.

Source: Xinhua

New China Business Weinars Announced

Artisan Business Group announced new web seminars in coming months: Profitable and Effective Sourcing from China; Introduction to China's General Aviation; Risk Control and Management Strategies in China Market; In addition to webinars, an online consulting session China Business Clinic is also added. For program details and online registration, please log on http://chinaseminars.eventbrite.com

ABG Pledged $1000 to China Red Cross for Earthquake Victims

Mr. Brian Su of Artisan Business Group announced $1000 donation to China's earthquake relief efforts.

Machinery, a Brilliant Perspective Market in China

Author:Angulo Fu

The machinery industry has a major bearing on China's manufacturing industry. In 2004, China's machinery industry accounted for 17.0% and 10.6% respectively of national sales and exports. Rapid economic development in China has led to a corresponding increase in industrial machinery. Almost all leading international players have formed joint ventures in China including John-Deere, Daewoo, Hitachi, Parker, Sanyo, ABB, Emerson, Siemens and Volvo.

Chinese machine builders are also enhancing their international participation through larger exports as well as a higher degree of internationalization. At an average annual growth rate (AAGR) of 12.0%, in 2010 consumption is estimated to reach $910.14 billion. In the near future, China will be an important player in the global industrial machinery marketplace.

Representative Machinery

1. Agriculture Machinery

Today China’s agriculture is a new era of historical development. In a long period of time from now on, expanding operating scope, industrialized management, sustainable development, and scientific and technical innovation in agriculture shall be the four tendencies and driving forces. The development and adjustment of economic construction in agriculture requires higher level and larger scope of mechanization. Now mechanization has already developed from the traditional growing wheat to rice, maize, from traditional tillage to protecting tillage, from machine for producing grain crops to oil crops and cotton economic crops, from growing to livestock farming, aquatic products industry, fruit growing, garden farmland and manufacturing agriculture products etc. So there is a bright future of market for farm machinery.

2. Construction Machinery

Construction machinery is the largest customer of hydraulic products, which makes up about more than 40% of the total market volume of hydraulic products. The percentage shall further increase in the future. China is in an extensive developing and constructing period, thus the demand of construction machinery in the coming several decades will up, and China will be the largest market in the world.

3. Metallurgical and Mining Equipment

The total demand of steel in China reached 352 million tons in 2005. Therefore steel and iron industry shall speed up the adjustment of product structure. In the next 10?15 years, put stress on manufacturing flat plate steel, especially sheet steel and products with high additional value. State should enlarge the investment for them and make the degree of self-sufficiency of steel reach 90%. For this reason, China need to use advanced machines to replace the backward machine, to realize continuous and automatic production with equipments in large scale, and upgrade the industry. Meanwhile China will give great impetus to process of group-collection for iron and steel industry, carry out technical reform of manufacturing process for large enterprises, make every effort to raise the utilization rate of steel by 10%?20%, take further steps to save energy by 15%?20%. Consequently, many new continuous casting machine and cold/hot rolling mill etc are needed.

4. Machine Tools

Along with the progress of manufacturing technique, China’s demands for high precision, high-efficiency CNC machines, is getting more and more. By the year 2010, the yearly output of CNC machine tools will be approximately 50,000 units. Now, in China there are about 3 million machine tools in use, and it is expected that about 4 million units machine tools will be in use by the year 2010.

5. Plastic Machinery

The demand for plastic products will increase remarkably to cater for the development in the fields of agriculture, automobile, electronics, light, foodstuff, packaging and construction industries and the improved living standard of the people as well. At present, the total output value of plastic in China has come to the forefront of the world, but the annual plastic consumption per capita is only 14.5 kg, less than the 20 kg world average annual consumption per capita and far from the 50 kg to 100 kg annual consumption per capita in developed countries. It is expected by the year 2010 to be a litter bit higher than the world average annual consumption per capita. The growing consumption of plastic products provides the opportunity for developing plastic machinery. It is expected that the annual demand for plastic machinery will be about 150, 000 units by the year 2010.

6. Petrochemical Equipment

Energy problem shall be the restricted factor in a long period of time in developing national economy. Accelerating the development of energy industry is of great urgency. State need to accelerate the development of petroleum and natural gas, except the project to deliver natural gas from the west to the east and other petrochemical projects are under construction, in the period of 11th five year plan shall be built 5000 km high pressure crude oil pipeline. Besides, in this period the demand of oil refining, ethylene and three synthetic materials (synthetic resin, synthetic rubber, synthetic fibre) shall increase at the rate of 6%?9%. So, there need collection and delivery equipment for oil and gas and large-scale and high-efficiency petrochemical equipment with the emphasis laid on the development of large-scale petroleum prospecting and drilling equipment for desert and ocean, large complete equipment with a yearly output of 600 000 ton ethylene, 450 000 ton synthetic ammonia, 800, 000 ton urea and chemical fibres etc.

8. Food-stuff, Packaging, Electronics, Light-industry and Textile Equipment

The emphasis is laid on the development of various high-efficiency, energy saving, multifunctional and automated complete sets of equipment and production lines, such as various liquid filling lines, production lines of fast foods and puffed foods, sterile medicine production lines and packaging lines, bag-making and bag-filling lines, suitcase making lines, high-speed tobacco processing machinery, air-jet looms, automatic winders and production lines of various household electrical appliances and electronic apparatus.

9. Harbor Terminal Facilities

In order to meet the demand of domestic construction and enlarged export and import trade, task for building coastal port and inland port is very heavy, a great number of ship loaders, car dumpers, stacking machines and container cargo handling equipment will be additionally provided or updated.

10. Ship-building and Ocean Engineering Equipment

By the year 2010, the total yearly production capacity of ship building industry will be about 10 million ton, account for 30% of the world annual output, with the emphasis laid on the development of large ocean-going tankers, LPG ships, container ships, engineering vessels, bulk ships, high-speed passenger liners and ocean-going fishing vessels. Ocean engineering equipment shall be put stress on building large engineering facilities for recovering ocean petroleum, such as large self-rising drilling ship, deep sea drilling machine, heavy-load lift, large crane and piping erection ship.

11. Power Generating Equipment

At present, electric supply has become the bottle neck, which restricts the development of economy. In the coming 20 years, the largest power-building market will be in China. Water, coal, nuclear and gas are the four pillar for power generating in China. It is estimated that the installed capacity by the year 2020 will be 960 000 megawatt, but the installed capacity per capita only 0.67 kW, less than half of that in developed countries. In future, every year need to add new installed capacity of more than 200 000?300 000 megawatt.

12. Environmental Protection Equipment

In order to keep the development of economy, society and environment well coordinated, and make the ecological damages and environmental pollution well controlled, environmental quality and comprehensive utilization of resources are raised further, state will add the investment for ecological preservation and environmental protection. China is putting emphasis on developing: urban sewage and solid wastes disposal and comprehensive utilization equipment, urban and industrial noise control equipment and atmospheric pollution control equipment.

Machinery Trade Shows

The 12th China Xiamen Machinery and Electronics Exhibition (CXMEE)
The 12th China Xiamen Machinery and Electronics Exhibition (CXMEE), authorized by China's Ministry of Commerce, is jointly organized by the China Chamber of Commerce for Import and Export of Machinery and Electronics Products, the Taiwan Electrical and Electronic Manufacturers Association, the Xiamen Municipal People's Government. It took place in Xiamen, China on April 8-11, 2008.

The 7th China (Hangzhou) International Machine Tool and Mould Expo
The 2008 China (Hangzhou) International Industrial Fair (formerly "Zhejiang International Industrial Fair") was originated in 2002, it is held at Hangzhou Peace International Exhibition and Conference Center every May. It has experienced six years of persistent, healthy and stable development. It was listed in the formal exhibition of "China Hangzhou West Lake Expo" in 2006, becoming a large exhibition and conference project specially supported by the municipal government of Hangzhou.

For more information about doing business with China, please contact us at MidwestUSAChina.com

Establishing Chinese-Foreign Equity and Contractual JV Medical Institutions

To meet the needs of the reform and opening-up, and to promote healthy development of Chinese medical and public health undertakings, the Ministry of Health and the Ministry of Foreign Trade and Economic Cooperation have promulgated Provisional Measures for the Administration of Chinese-Foreign Equity and Contractual Joint Venture Medical Institutions, in accordance with laws and regulations concerning foreign investment and the Administrative Regulations of Medical Institutions. The Measures permit foreign medical institutions, companies, enterprises and other economic organizations to cooperate with Chinese medical institutions, companies, enterprises and other economic organizations to set up medical institutions in form of equity and contractual joint ventures.

　　Conditions for the establishment of Chinese-foreign equity and contractual joint venture medical institutions:
　　
　　1). The establishment and development of Chinese-foreign equity and contractual joint venture medical institutions must be in conformity with the regional public health planning and medical institution establishment planning of the area concerned, and must follow the Basic Standards for Medical Institutions, stipulated by the Ministry of Health.
　　
　　2). The Chinese and foreign parties applying for the establishment of Chinese-foreign equity and contractual joint venture medical institutions should be legal persons or entities capable of independently assuming civil liabilities. The said Chinese and foreign parties should have direct or indirect experience in the investment and management of medical and health undertakings and should meet one of the following requirements:
　　
　　a. The capacity to provide world-advanced medical institution management experience, and management and service models;
　　
　　b. The capacity to provide world-advanced medical technologies and equipment; and
　　
　　c. The capacity to supplement and improve the medical services, capabilities, technologies, funding and facilities of a given area.
　　
　　3). The Chinese-foreign equity and contractual joint venture medical institution to be established must meet the following requirements:
　　
　　a. It must be an independent legal person;
　　
　　b. The total investment should be no less than 20 million yuan;
　　
　　c. The Chinese party involved should hold an equity share of no less than 30 percent in the Chinese-foreign equity and contractual joint venture medical institution;
　　
　　d. The period of the joint venture or cooperation should not exceed 20 years; and
　　
　　e. Other conditions set by the health administrations at and above the provincial level.
　　
　　4). The Chinese party involved that makes its investment in the form of state assets (including evaluation-based contribution or using the state assets as conditions for cooperation) must obtain approval from the relevant departments and must, in accordance with the regulations concerning the state assets assessment management, have the state assets to be invested evaluated by an evaluation agency recognized by the state assets management authorities. The result of an evaluation confirmed by the state assets management authorities at the provincial level or higher may be used as the basis of the pricing of the state assets to be invested.
　　

Going Global - Studying China Law is Key to Tapping this Emerging Market

Today, all eyes are on China in its emergence as the world's next potential superpower. With a population of 1.3 billion and a workforce that the U.S. State Department estimates at over 710 million, China's economy is burgeoning. The country's exports alone total over $760 billion, and range from electronics and apparel to furniture and medical equipment. With the country's GDP growing at around ten percent per year, it's no wonder that companies ranging from Google to Wal-Mart are trying to gain a foothold. After all, China is a country of consumers as well as of producers, and businesses around the world see China as a ripe market for goods and services.

Those looking to the bright future of China are quickly discovering that a key element of breaking into that market will be a thorough understanding of China law. In fact, many students are choosing to study at a China law school, such as the Tsinghua Law School at Tsinghua University in Bejing. The Tsinghua LLM degree, analogous to a degree in jurisprudence, has been conferred upon students from countries around the world, including the U.S., Spain, Italy, Australia, Japan, and Canada. A China LLM communicates to players in the global economy that the person holding the degree is well versed in China law and can navigate the nuances of the legal system in that country.

Such knowledge is critical, particularly because the law in China is evolving. The country has a long and sometimes contradictory legal history, dating back to the seventh century, when laws were first codified. From the mid nineteenth century through the mid twentieth century, Chinese law developed to more closely resemble Western law. Today, there are really three legal codes, one for Mainland China, one for Macao, and one for Hong Kong. The laws for Mainland China rely heavily on German civil law, whereas Macao's system has it roots in Portuguese law and Hong Kong in British common law.

According to the U.S. State Department, the next five years are key in determining China's place on the world economic stage. A State Department report says, "To investors and firms, especially following China's accession to the World Trade Organization in 2001, China represents a vast market that has yet to be fully tapped and a low-cost base for export-oriented production. Educationally, China is forging ahead as partnerships and exchanges with foreign universities have helped create new research opportunities for its students." It goes on to say that half of China's exports are produced by enterprises that have foreign investors, and that the country has the largest foreign exchange reserves in the world.

This all bodes well for those who choose to study China law. Competing in such a vibrant, growing marketplace requires knowledge of both the Chinese legal system and the ways in which it changes in response to its changing economic landscape.

Author: Chris Robertson is an author of Majon International.

Cultural Mistakes You Should Avoid

Though the Chinese business people wear Western style suits and are open to Western business practices, China is an ancient culture, which has very nuanced rules of behaviour and etiquette. Most of these can be learnt if you do your homework before meeting the Chinese.

Though the Chinese will forgive most of your cultural mistakes if they get to respect you, it is best to avoid some mistakes which the Chinese feel very uncomfortable with. Here are some quick guidelines for avoiding cultural mistakes in dealing with the Chinese.

Do not do these in China -

* Make the other person lose face. This is a cardinal sin. Keeping Face or Gei MianZi - Letting the other keep face (giving due respect) is a very important concept in China. You must show the other person appropriate respect according to rank and seniority. For example, if you are buying gifts for an initial business contact, make sure you buy better gifts for the senior managers instead of buying similar gifts for everyone. To shout at a Chinese person in public, to reprimand them in front of their peers or to raise one's voice when exasperated will cause both parties to lose face. Remember always to refuse invitations if you have to indirectly. It is impolite to refuse invitation directly.

* Never write notes or letters using red ink. Using red ink symbolises that the writer will die soon.

* When setting down chopsticks between courses, never place them in the rice-bowl standing up, as this resembles sticks of incense burned at a funeral and is considered highly inauspicious. Lay your chopsticks horizontally across the rim of the bowl or on the table.

* Do not address business partners by their first name unless given permission to. Seniority is very important to the Chinese, especially if you are dealing with a State owned enterprise or government body. Instead of addressing the other party as Mr Hui Neng, address the other party by his designation i.e., Chairman Hui Neng, Director Hui Neng, or Manager Hui Neng. The sitting arrangement in a meeting room or a dining table is always according to rank, importance and seniority.

* Chinese people are superstitious about the number four, which signifies death. Many people think that this should be avoided.

* Though Chinese people are curios and like to discuss many things, avoid discussions, which may cause embarrassment such as death or divorce in the family and Chinese politics.

* Never get upset when someone asks personal questions about your age, marital status, income, and family background. This is rather common in Chinese culture.

* Never hand out your business card or receive the other person's card carelessly or with one hand. When giving out name cards or brochures, make sure you start with the most senior person before moving down the line. When giving out a name card or receiving one, ensure that you are stretching out with both hands with the card. Remember to face the card you are giving out so that the receiving party gets it facing him/her correctly and can read at a glance.

Most importantly, gaining mutual respect is the key to managing relationships with the Chinese. Besides the above rules of behaviour, a genuine understanding of the other's position, an appreciation of the other's culture and achievements and a willingness to form a long-term give and take two-way relationship is necessary. Doing business with the Chinese is difficult if mutual trust and respect has not been achieved so make this your main focus. When you gain their respect, you have all the potential for a long-term loyal business relationship with your Chinese counterpart.

Finally, try to be a fair, open-minded and decent person, who uses common sense. It helps.

Author: Rana Sinha is a cross-cultural trainer and author. He now lives in Helsinki, Finland and runs http://www.dot-connect.com.

Due Diligence for Foreign Joint Ventures in China

Due diligence is an absolute must if you plan to team up with a Chinese partner. It’s a jungle out there, so be wary. This is no place to cut expenses or rush through things because a half-done job may cost you twice as much time and money later. Due diligence is not a particularly prevalent practice among the Chinese and they may have trouble understanding why you are “making things difficult”. If your prospective partner refuses to cooperate, don’t be afraid to walk away.

There are three main types of due diligence that you need to concern yourself with – financial, legal, and environmental. Keep in mind that these three inquiries often overlap.

Financial Due Diligence

Many Chinese enterprises (it is said) have three sets of financial records: one for the owners, one for the tax authorities, and one for foreign investors. Accordingly, determining the value of an enterprise based on its financial records can be difficult. It might be necessary to carry out an independent assessment of the enterprise’s reputation, connections, and key employees.

Key pitfalls to watch out for are:

Double-dealing employees – it is not at all uncommon in China for senior management to have their own businesses that directly compete with their employer, and for these executives to use their employer’s confidential information to further their own private interests.

Corrupt relationships with Chinese government officials – this presents the risk of civil liability or prosecution, not only by the Chinese authorities should things take a turn for the worse, but also by the US authorities if you happen to be American or otherwise subject to the US Foreign Corrupt Practices Act (some other nations have equivalent legislation; check your home jurisdiction if you are unsure).

Intellectual property piracy – rampant in China.

Legal due diligence

Legal due diligence focuses on a variety of issues including contract rights, corporate authority, regulatory compliance, ownership of assets, and liabilities and claims against the target company. Issues that often arise include:

Scope of business issues – At the minimum, you should authenticate and inspect an original of the enterprise’s business license (the scope of business is listed thereon).

Contracts – whether contractual arrangements are adequately documented (or documented at all).

Ownership of buildings and Land Use Rights – Check to make sure all buildings are owned outright and all land is “granted” rather than merely “allocated”.

Intellectual property – make sure that trademarks, etc. used by the target company are either owned by it or licensed to it.

Constitutional documents such as Articles of Association – make sure that they are up to date (properly amended to reflect the company’s current situation).

Construction permits and approvals – these should be examined not only for construction in progress, but also for existing structures

Labor disputes – determine whether there are any outstanding disputes, and the level of employee morale.

Debts and encumbrances – make sure that these are adequately documented and not excessive.

Environmental Due Diligence

In a nutshell, you need to know whether your partner’s site environment or your FIE’s proposed site environment has been contaminated (contamination of your Chinese partner’s site could affect its financial stability even if it is not used for the FIE).

Author: David Carnes is licensed to practice law in California. He speaks and reads Mandarin Chinese and has several years experience working with Chinese law firms and Sino-American joint ventures. For more information about Due Diligence, visit us online at http://www.midwestUSAChina.com

Meeting with Chinese Executives

There are really some cultural difference between Western management and Chinese management. I will be sharing one example of the Chinese management style as the following. Basically I share some ideas of what you should do when you are meeting up with Chinese Businessman.

Business Meeting with the Chinese

Preparation

Try and work out the management structure of the Chinese organization. Often the person with the most impressive title is not the one who makes the decisions. Carry plenty of business cards to distribute. All documentation should be presented in both Chinese and English. Language should be kept as straightforward as possible to assist the interpreter.

Using interpreters

An interpreter will be required at most meetings and their role is central to the success of the negotiations. Ideally a member of your staff should be trained up as he/she will understand the nature of the business under discussion. An interpreter?s understanding of local dialects (i.e. Shanghaiese) is vital for accurate comprehension.

Before the meeting, check that your interpreter can translate technical or business related words, as well as any numbers which may be mentioned All documentation should be available to the interpreter. Agree on signals the interpreter can use to let you know if he/she cannot follow what you are saying. The process will be slow with an interpreter, so be patient. Take breaks often, as this will allow the interpreter to fully brief any additional remarks made during the conversation. If your interpreter?s sentences are consistently shorter than yours, take a break to check they fully understand what you are saying. If your party includes other Chinese members, do not make your interpreter lose face by having the other members openly question their translation, except in moments of serious confusion. Attempt to make eye contact through the interpretation process.

Gift giving

Corporate gift giving is an expected part of the Chinese business scene. Make sure the gifts take the form of objects and not money. Items like pens or a book from your native country. All gifts should be wrapped, but do not expect them to be unwrapped in your presence.

Author: Kelvin Cho is a well established self made successful e-traders; he is running a highly successful trading firm based on Guangzhou, China as well as an e-commerce consulting firm giving valuable and practical advices and guidance to online traders to maximize their sourcing and trading needs. For more information about doing business with China, please log on http://www.midwestUSAChina.com

Litigation in China for Foreign Investors

The People’s Courts

Chinese courts rely on a legal system more akin to continental Europe than the common law system of the UK, Canada, or the United States, yet there are distinctively Chinese characteristics. Get a good local lawyer before litigation in China - only Chinese nationals working for mainland Chinese law firms may appear in court.

Local Bias – Although there are a number of examples of foreign investors prevailing in Chinese courts against state-owned enterprises and other well-connected local parties, results vary drastically with location (big cities being considered among the safest bets for foreigners), and it is often difficult for the foreign party to enforce favorable judgments.

Jurisdiction and Forum Shopping- Lower courts in China operate on a regional basis, and the Supreme People’s Court is the court of last resort. Jurisdiction rules must be complied with - a corporate defendant must usually be sued in the jurisdiction where its headquarters are located.

Procedure

Some of the key features of the People’s Courts include:

Great emphasis on formal documentation over witness testimony

A lot of attention to the production of powers of attrney, authenticated original documents, notarizations, and seals

Relatively low-cost, high speed procedures, at least compared with the glacial speed of litigation in the United States

Strict limits on ability to compel the production of evidence (discovery procedures), probably the greatest disadvantage of litigating in China

Lenient treatment of perjury

Lack of emphasis on precedent – judicial precedent is not binding in China, although higher courts do issue detailed legal interpretations to guide lower courts

Lower damage awards - damages awards are low by US standards, and it is more difficult to prove the amount of loss than in Western countries

Difficulty in enforcing injunctions, seizure of assets, and specific performance - large bonds are often required before a temporary restraining order will be issued.

Administrative action (bypassing the couret system) is often available in cases or intellectual property infringement or counterfeiting.

Appeals – Dissatisfied claimants ar usually entitled to one appeal, whci is usually granted and executed speedily. However, some judgments are effectively unappealable.

Enforcement

Domestic judgments can be difficult to enforce. Local authorities may fail to assist the enforcement a judgment that is seen as damaging to local economic interests. Furthermore, the People’s Courts have a reputation of being vulnerable to the “Enron Effect” – they seldom bother to trace and seize assets deliberately hidden by defndants through the use of complicated corporate structures.

Foreign judgments are enforceable in theory but difficult to execute. Enforcement is generally based on the principle of reciprocity, meaning that China will only enforce judgments originating from jurisdictions that enforce Chinese judgments. However, since China is signatory to a number of relevant bilateral enforcement treaties, the principle of reciprocity is subordinated to treaty requirements. Of course the best way to enforce a foreign judgment is to locate overseas assets of the defendant in a jurisdiction willing to recognize the judgment and seize assets.

Judgments from Taiwan, Hong Kong and Macau - Judgments from Taiwan have long been enforceable on the mainland, and judgments from Macau have been enforceable since April 2006, in both cases subject to certain conditions. Nevertheless, expect difficulties in actual practice. Surprisingly, judgments from Hong Kong are currently unenforceable in the mainland except in cases where the judgment was rendered pursuant to an exclusive jurisdiction clause in a contract, and even this provision is subject to exceptions.

International tribunals

Other alternatives for foreign investors include adjudication by the World Trade Organization (WTO) or the International Centre for Settlement of Investment Disputes (ICSID). Both of these tribunals have serious drawbacks, however – the WTO because foreign investors cannot sue directly (the plaintiff must be a state), and ICSID because jurisdiction is based on consent and unless you are Dutch, German or Finnish, your country has not entered into a bilateral investment treaty with China that would authorize ICSID jurisdiction (although this situation may be about to change).

Author: David Carnes is licensed to practice law in California. He speaks and reads Mandarin Chinese and has several years experience working with Chinese law firms and Sino-American joint ventures.

Effects of China RoHS on Packaging and Crating

Since February of 2003, suppliers of electronic materials have been making significant changes to their products in compliance with the Restriction of Hazardous Substances (RoHS) Directive initiated by the European Union (EU). While the economic implications of following this new standard have adversely affected a number of companies, overall the directive helps reduce pollution and protect both the environment and health of humanity. RoHS regulation restricts the use of six materials in the components of most electronic devises. These materials are:

* Lead
* Mercury
* Cadmium
* Hexavalent Chromium
* Polybrominated biphenyl (PBB)
* Polybrominated Diphenylether (PBDE)

The EU directive took effect on July 1st, 2006, and RoHS is now part of a vernacular with which electronics manufacturers are very familiar. In March of 2007, China adopted its own environmental standards, known as China RoHS. China's standards are similar to those implemented by the EU; however, the differences in the China RoHS have put North American companies who import and export across the globe in a tight spot. Here we will look at some of the major differences in the standards set by the EU and China, and how they apply to the packaging industry.

China Initiative

In the last few decades, China's Gross Domestic Product (GDP) has increased at a stunning rate. Compared to the minimal industrial activity in the 1970's, China's GDP growth has been a miraculous change for their economy. Their growing middle class population is spending trillions of dollars on electronics like computers, televisions, and cell phones. However, this economically-beneficial trend has caused China to be home to 5 of the 10 most polluted cities in the world. According to the World Bank, China surpassed the US as the world's largest waste generator in 2004. They stated that, "No country has ever experienced as large or as fast an increase in solid waste quantities." Desperately needing to promote waste minimization, reuse, and recycling, it is no wonder China has adopted such strict and profound environmental standards.

In short, just as companies were recovering from the high cost of complying with the EU standards - which included everything from changing assembly lines to managing the quality of the new solders - China announced new standards that were even less flexible. Some companies have responded by setting their own standards to cover the strictest of implications they may encounter when doing business overseas. Even so, China requires specific markings separate from other regulation checklists to indicate whether the materials comply.

An overview of the differences between the EU and China RoHS include:

* While the same six restricted substances are identified in both directives, China tolerates even smaller amounts.
* The EU standards have allowed certain domestic materials to be exempt from the restrictions (for the time being), but China included no such exemptions.
* The amount of time given to companies to comply with the standards was significantly less than when the EU announced their change.
* China restricts the materials not only in the electronic components, but also in the product packaging.
* If the materials do not comply with China RoHS, companies need to determine the environmentally-friendly life span of their product.

Packaging Implications

Dealing with tighter guidelines in the manufacturing aspect is one thing, but when the restrictions affect packaging, the process becomes quite complex. Note the last two items listed above. These points have a significant impact on the ease of exporting goods to China.

Article 14 in the English translation of China's Measures for the Administration of the Control of Pollution by Electronic Information Products details the packaging inclusion:

"When making and using packaging for electronic information products, the producers and importers of electronic information products shall use nontoxic, non-hazardous, degradable, and recyclable materials in accordance with State standards or industry standards for the control of the toxic and hazardous substances or elements in electronic information products. The producers and importers of electronic information products shall mark the names of packaging materials on the packaging of electronic information products; in the event that it is impossible to make such marking due to limitations in size and external surface [area], [such information] shall be placed in the product instructions."

The greatest downside to China's packaging restrictions is that they only enforce them on packages that come into the country, not on goods exported out of the country. As a result, companies who buy materials from China to use in their electronic information products (EIP) or packaging of such products may not be able to send these products back into China. Realistically, adhering to such restrictions should be made easier by first buying from China. If the process of packaging a product has complex restrictions, ideally a company could play it safe by using materials already approved to leave the country. Here this is not the case. Companies must custom each package about to enter China to meet their environmental standards. "Packaging" is not explicitly defined in the China RoHS, but presumably it entails materials or material sets used in the shipping, storage, retailing and protection of the product. By this definition, crates, shipping containers, cases, and boxes are all subject to China RoHS standards. Items to consider span every element of packaging:

* Screws and Brackets - zinc plated and zinc-alloy plated metals would require a chromate conversion coating
* Packaging Foam - some foam plastics contain fire retardant materials that would violate China's specifications
* Plastic Trays and Brackets - PBB's, used as flame retardants, are added to plastics to make them difficult to burn
* Plastic coverings - again, the brominated flame retardant materials typically found in plastic breach China RoHS.

In addition to the restrictions on packaging materials, China requires that all components and packaging display specific markings that indicate whether the materials are China RoHS compliant. If the materials meet the specifications, products are marked with a green symbol that appears as two arrows forming a circle with the letter "e" in the middle. If materials do not comply, a similar orange arrow-circle is displayed with a number in the middle. The number displayed is how many years the materials will last before potentially leaking the restricted substances. Even if the package and materials indicate EU RoHS compliance, the arrow-circles must be present to be accepted into China. If a company cannot adhere to the China RoHS directive, they must calculate the environmentally-friendly lifespan of their product(s).

Compliance

For those companies who unknowingly violate the standards or are tempted to feign compliance with the China stipulations, the risks are enormous. Phase 2 of the China RoHS entails mandatory toxicity testing. Failure to meet requirements brings about severe consequences. Fines are amongst the most obvious, and no company wants to take such a hit. Both suppliers and finished goods manufacturers face legal liability.

Companies who are not armed with resources to understand the China RoHS face the challenge of deciphering some confusing and ambiguous descriptions of the standards. Companies who are frantically working to develop a packaging system may be best off looking outside their company for answers. The safest way to package a product to comply with China RoHS is to recruit help from a company who is familiar with the restrictions. While companies are capable of understanding the China RoHS as it applies to their own packaging, even a shred of doubt may lead to unrecoverable ramifications. Knowing that even materials purchased in China might be restricted from entering back in, it is best to leave the RoHS compliance to experts. Enlist a company you can trust for your China RoHS-compliant packaging needs; it may save your business a lot of time and money.

Author: Ryan Kuehn is a Packaging Engineer at Packnet which designs and manufactures specialty products mostly used in the packaging industry such as wood, plastic, corrugated and custom foam packaging products.

For more information log on http://www.midwestusachina.com

Chinese Negotiation 101

Will your negotiation skills back home equip you for negotiating in China? Well they're important, but they're not quite enough. You'll also need a good grasp of the cultural differences or you'll be mystified by unexpected responses and they'll run circles around you. So here are a few key principles for negotiating in the land of the dragon.

1. Be Objective

Many stories about China are exaggerated, one way or the other. We've heard of fabulous deals, providing goods and services at a fraction of local costs. We've heard of toxic Chinese products and business tycoons who will cheat you at the drop of a hat. But China is neither black nor white, and a successful business person needs to strip away the political agendas that get in the way of sound business decisions.

We should also be wary of snap judgments by people who bail out impatiently with accusations of rampant deception and contracts never honoured. Certainly we should heed all warnings of danger, and be constantly on our guard. But we must seek a realistic view, neither wearing rose-coloured glasses nor seeing treachery in every misunderstanding.

It's important to be realistic regarding issues of honesty. As in any country, there is no shortage of scoundrels in China. Neither is there a shortage of good and respectable citizens at all levels striving to meet high standards. Nothing unusual about that. But cultural differences make it easy to misinterpret strategic manoeuvres on their part. We may see it as outright deception when - in their own view of proper behaviour - they are acting honourably but cleverly. And they may see our own clever manoeuvres as questionable behaviour within their ethical system. The point is not to judge each other and kill the deal, but to find that common ground which produces a good contract for both parties. That requires us to find a delicate balance between giving our opponents the benefit of the doubt when we fail to fathom the purpose of their actions, and avoiding the risk that someone will take advantage of our trust.

We need to be careful about old advice. Any economy, in the years before it gets properly regulated, has a lot of leeway, and plenty of opportunities for unscrupulous dealers to rip you off. So consultants used to give sound advice to clients - watch out for treachery and dishonesty. Serious caution is still good advice, but times are changing at an amazing pace. The Chinese have aspirations of becoming world economic leaders, and they fully recognize the need for strict professionalism and integrity to meet their goals. It's not much of a stretch, since there's no lack of professional pride in Chinese history. You'll find that your major cautionary task in this century, apart from normal vigilance, is to identify the modern high-quality firms and separate them from the rogue elements. At the same time, the Chinese economy is still in flux, and there are still enough bandits out there to warrant serious caution.

2. Ease In Carefully

Think you can leap in, sign a great deal, and move on? Not likely. You need to get the feel of negotiating in China. You have to get to know your partners, to determine who can be trusted and where you need to be careful. You need to make your first mistakes on low-value and low-priority deals. This can be good advice in any case, but it's especially important if you don't have much experience in the treacherous waters of inter-cultural negotiations. Try out a couple of low-risk transactions before plunging into the deep end.

You need to rein in your western tendency to jump in, cut to the chase, and score a deal cleanly and quickly. The Chinese don't quite work that way. Nonetheless, they've learned how to deal with we cowboys with money to burn, barging in to do serious business on the spot. We'll get the runaround, as befitting someone who isn't serious enough to develop a trusting relationship first. In their view - some barbarian who won't take the time to build relationships deserves to be outfoxed.

At the same time, this isn't universally the case. If you're dealing in Beijing or Shanghai or any other highly developed centre, they're more familiar with western styles of business. In fact, they're quite sophisticated. They're a little more willing to play the game your way, and make some compromises to western impatience in order to move the process along efficiently. In the less developed regions, they're often a little more steeped in traditional Chinese ways. But they both know how to deal with your eagerness and get what they want. In either case, learn the culture first, and take your time.

3. Work with the Right People

Here's where a good knowledge of Chinese relationship structures is important. Certain people are authorized to make a deal, while others are only intermediaries - and you may not find them in familiar positions. In your first set of meetings, perhaps even for a long time, you may be dealing only with the intermediaries. They won't tell you that at the start, and you'll be frustrated when you find out that nobody has the authority to cut a deal. This may be offensive in the west, but it's proper protocol in the east. You'll probably be escorted to several meetings and banquets, and the key officials will be present at some of them, but you won't really know who's who until late in the game. This is where you need your diplomatic skills, to show your respect for Chinese traditional ways at the same time as you badger them to get the proper authorities at the table.

Actually, the intermediaries do have considerable importance. They're there to do the grunt work of finding out what's possible, and to iron out the initial proposals, so that their superiors need only deal with the final decisions. So treat them with respect, or you'll never get to see the key players. At the same time, be careful to determine if they really are properly connected to do the job. You may end up with some peripheral agent - who cites great experience in dealing with western business, but who really has little stature - because they want to feel you out before they have to deal with you directly. Beware if they send you a westerner who is really little more than an English teacher with grand aspirations. They don't trust him any more than you do, but he'll keep you at bay until they're ready to move.

Check references, making sure they're all in the same industry. Make the call to confirm. Be a detective, with an interpreter if necessary. Ask about track record. Did they meet deadlines? Did they understand the meaning of a completed job? In any environment of economic development, expect incompetence to be common, and search for the competent ones. Incompetence and inexperience are just as much trouble as dishonesty. Avoid firms dealing with westerners for the first time - they'll be out to establish their cleverness by taking you for a ride. Your best bet is a western-invested company with western executives at the highest levels. Check out everything.

4. Seek Clarity

A good western negotiator, with any sense of strategy, will not offer his opponent a clear picture of his ultimate goals or what compromises he will accept. Chinese intermediaries have an even greater incentive to disguise their specific objectives and, in fact, to keep shifting them as the negotiation proceeds. They don't feel obligated to adhere to their proposals from session to session, since they're not the deciders. They don't think it's beneficial for either party if they stick rigidly to some "deal" they made with you yesterday. That would be viewed as irresponsible, since only the higher authority is entitled to make final decisions. They don't delegate authority as readily as we do. Don't expect to sign off some clause and then move on to the next, secure that the clause has been finalized, as you would back home. It doesn't work that way. Intermediate deals are flexible, and can be sacrificed unilaterally in the end game. Since everything is tentative until the final act, they may be quite evasive in the early stages. Or they may overstate a verbal agreement due to difficulties in understanding our language and our culture. So during these intermediate stages, you may have to fight tooth and nail for clarity.

But don't just treat it as fighting the culture, or trying to educate them in the straightforward ways of the west. The Chinese are indirect and group-oriented in ways that serve them well, even in business. They are rooted in a pre-market family-oriented culture, in which social harmony is maintained through a gentle style of communication - where individuals are not assaulted too directly with brutal facts. It's a communication style that comes into sharp conflict with our blunt and unfeeling western directness. The Chinese view their communication style as the essence of civilization, as distinct from us barbarians, and they will not abandon it easily. So don't just dismiss them - "The Chinese don't do clarity". Learn the language of indirect communication, and you will elicit much greater cooperation in finding what you need to know. Learn the trick of assertive indirectness.

5. Bargain Strategically

To begin with, get control of the agenda. They may use their position as host to load you down with meetings and banquets, especially if they are old school - though in the modern centres they're more inclined to get straight down to business. Still, if you're spending the money, you're in charge. Determine if the meeting or banquet is important, if the officials you're meeting are really relevant to the discussion, or whether they are just window dressing to show off their connections and keep you tied to their agenda. You have to find a balance between receiving their hospitality graciously and getting down to business. Overall it's a polite power struggle right from the start, and you need to make it clear you want to negotiate the agenda. At the same time, remember that they want to deal with you and keep you away from their competitors, so leave the exit door open a little in case they're too inflexible. If you come in wide-eyed about making a China deal, you'll end up playing their game. Have a Plan B - an alternate source of supply will boost your confidence enormously.

Many western advisors will tell you to expect deception in China, but it's often just a different vision of what's legitimate and honourable in the competitive arena. It's only deception if the other party expects something different. That doesn't help you much. If you don't know the culture well, it's going to be deceptive in your eyes. So it's safer to follow the rule: expect deception. But don't express disrespect unless you catch them blatantly cheating or lying - and give them the benefit of the moral doubt if they're just backtracking because they got into trouble. It's a delicate game. Protect yourself without being offensive.

It's important not to automatically accept any claims at face value, without good reason. Are they really an old established company with a healthy market valuation, a strong market share, exclusive rights and patents, all the proper certifications, and plenty of orders from Europe? Better check these things out, since their definitions may be different from yours. Is the new plant they're preparing to build really going to bring dramatic improvement in quality and costs? You're putting up the money, so you should be allowed to see the books, though sometimes their claims of inadequate bookkeeping may be valid. You may need help here, since legitimate Chinese accounting practices are different from ours, and in some ways hard to fathom. And finally, don't accept the claim that they have the powerful connections that will make everything work out just fine in the end, because you have no way whatsoever of checking that out. Perhaps at this point they will throw the trust argument at you, claiming that your doubts are undermining a valued relationship. Don't fall for it.

If you're not picky, you'll leave holes they can drive a truck through. "Best effort" sales agreements are not enough. Get the details on their marketing network. Cash in advance is dangerous, no matter how much they throw the trust argument at you. Present it as a strict matter of policy, and point out safer payment vehicles which are readily available. If they can't get a bank to cooperate on a letter of credit, run for the hills. If you're a buyer, insist on a test order. They will talk about not doing test orders because they're building long-term relationships, but don't buy that argument. Chinese firms will do test orders when pressed. Look behind the facade to see if there's real brick and mortar and infrastructure in place. And remember that, if a firm is not very cooperative before the money has been transferred, they'll probably be even less cooperative afterwards. So get everything you can firmed up in advance, even if it threatens to sour the deal. The politeness and respect that you demonstrated from the beginning of the process will serve you well when you have to hold the line at the end.

Even when you reach an agreement, you'll find that many more things than you thought were unclear, or interpreted differently. Be prepared to renegotiate often, and get their agreement on a renegotiation process before you sign.

6. Learn the Price Game

In a country where they bargain for apples on the street, they're not shy about bargaining, and they bargain hard. Don't be put off by an outrageous initial price. It's all part of the game. Whether or not they move to a reasonable price in short order is a clear indication of whether or not they're ready to bargain seriously. Let the opening moves play out. With apples on the street, some will overcharge a foreigner just on principle, as well as to defend their national pride and to save face. So keep a clear eye on your own range of acceptable prices, and stick to it rigorously.

If you're putting up the money, don't let them talk you into quoting the first price. The first move should be theirs, though exceptions may be allowed if you already have a good relationship with them through past dealings. Present it as your firm's policy, and refer to proper procedures. It's a game of polite assertiveness, and this may be the opening power struggle. Insist they provide figures to back up their price, and eventually settle for just a first price offer. But keep up the demand for backup data as the price discussion progresses. Don't let them win this opening round, or they'll have the upper hand.

Be prepared to deal with an outrageous price, which will be especially outrageous if they've lost the battle over the first offer. Match an outrageous price with a fairly-outrageous counter, because they may only inch their way down and you need room to manoeuvre. Be prepared to walk if their moves are only tokens. Do your homework, and know the market, so that you can confidently hold the line until they bring it into the ballpark. Then the real bargaining begins.

Don't accept a high price on a promise that they'll lower the price in the near future,

"when we get the new technology online",

"when we move to the new facility",

"when we develop the new product",

"when we hire the new engineer",

"when we get approval from the government',

"when we finish the merger".

Maybe they're sincere. But maybe they're wishful thinking. Hold out for the price you need. Cut them off quickly. "Not a chance. We don't do speculation. We need to work with real prices right off the bat."

And you may have to leave your fancy management theory behind. It's quite fashionable in the west to seek win-win solutions. But China's a developing country, not long out of poverty, in a brutal marketplace. They're quite accustomed to win-lose, and they're quite happy to win. But again, you'll find them somewhat more refined in the major centres.

7. Pay Attention to the Non-price Issues

Many traders will tell you that Chinese are motivated by price alone. They will attach little importance to issues of quality or delivery or service, assuming these are secondary issues that can be put aside. That view of Chinese negotiators is someone outdated. A narrow price orientation is not as prevalent as it used to be, but you will still run into it often enough, and you may need to insist that the price is contingent on the whole package. Insist that the price agreement will be void if certain conditions are not met. Price cannot be negotiated in isolation. Some may try to brush that off, figuring that you won't push it. Push it. Be picky. Insist on engineering specs on the useful life of the product. Have them explain their quality control procedures, and their warrantee policy. Get a precise definition of how satisfactory performance is specified, and what constitutes a completed project.

8. Understand Networking and Contracts

This is a tough one. Networking isn't the same in China. It's a much deeper and more complex phenomenon, with implications that we westerners cannot easily fathom. The potential for misunderstanding is enormous.

It can be simplified a little. Think again of a pre-market society. How would a pre-market society organize themselves without benefit of the marketplace? They organize themselves into trusted circles of family and friends, and they exchange favours. The rules are strict - if someone offers you a favour, you owe an equal favour in return. These circles overlap and interconnect into complex networks. Over time some of these circles become more important than others, and if you find yourself linked into an important circle, you have "connections". The Chinese call it "guanxi" (pronounced gwan-shee), and there are two main rules as far as you're concerned. One, any favour or gift is a debt which must be repaid in full measure, or more if the giver belongs to a more important circle. And two, people with the right guanxi can accomplish anything for you, but it won't be free. And it's not guaranteed. Do him a favour and he will owe you something. But don't count on him to spend his guanxi capital to repay you.

Connected with that is an attitude toward contracts. The guanxi circle is a relationship of trust among colleagues. To overstate the argument a little - it's a western aberration to demand that all relationships be reduced to an impersonal rats-nest of contracts, as if no one can be trusted. For civilized people, your word is your bond. While in the modern Chinese business centres they've come to appreciate the value of a contract, and will even initiate it, there are still some who will try to convince you to make a commitment (and transfer your money) without one. They may play the trust card, so know how to deal with it.

Recognize that a westerner like you will never become a full member of any Chinese guanxi circle. You will always be an outsider, and a second-class citizen, with no rights and no recourse. "My guanxi is your guanxi - don't worry, I can get it for you" is not in the slightest degree a commitment you can take to the bank. You need it explicitly detailed in black and white, no matter how much that may brand you as a western barbarian. But I hasten to repeat that, the more progressive Chinese managers are on the same page as you and I, fully appreciating the need for a water-tight contract. Those are the ones you should look for. But if you're in a more traditional centre, you may have to fight for it.

9. Understand Indirectness and Face

China is a relationship based society, developed long before the market turned our European ancestors into disjointed individuals competing with each other in the marketplace. Again to overstate for the sake of argument - we have no need for relationships. Market contracts regulate our lives and how we interact with each other. But for the Chinese, relationships are everything.

So how have the Chinese kept it all functioning smoothly? We have civil order based on a system of contract law to keep us in line. How have they kept people in line for thousands of years without that? They have established a mature and stable hierarchy of status relationships, and they maintain certain strict norms of behaviour. Chief amongst these behavioral norms, essential for maintaining order in a relationship-based society, are the following two. First, never provoke a confrontation by issuing direct challenges to others - which results in the famous Chinese indirectness. Second, never undermine someone's status in society by causing them to lose face. Understand how these rules lies at the root of the Chinese psyche, if you want to understand their reaction to our western brutishness.

So don't wonder why sometimes they seem to be running around in circles, and never seeming to get to the point. Bluntness is insensitive and uncivilized. A way must be found to press the point gently. You're just not understanding the language of indirectness. And don't wonder why they seem so concerned about losing face. Humiliating others is insensitive and uncivilized. Actually they are insensitive and uncivilized, when you come to think of it. In the midst of a frustrating negotiation session, take a moment to look at it from their point of view. Then look for a way out of the impasse which will not put them on the defensive, and which will grant them face. In fact, face-giving is the key to success. Find ways to make them happy, and they'll make you happy.

10. Play the Game, but Cleanly

China has a sophisticated set of laws. She's come into the market only recently, but she's done a remarkable job of setting up a legal framework for commerce in such a short time. However, there's a Chinese way of doing everything, reflected in those laws and regulations, and you would do well to learn to play the game. At the same time, China still has a long way to go, and not everything is fully covered by laws and procedures. There's a lot of leeway everywhere, in the gap between the socialist regulation of society and the law of the market.

Corruption ranges from black to shades of grey. There are many kinds of activities which anyone, east or west, would call corruption. And China's come a long way in routing out real corruption in the major centres. At the same time, there are many activities which fall into a grey area - they're not strictly illegal but not quite legitimate. Or the paperwork is lax, and nobody really knows what's going on. How do we deal with those?

It's often not so simple. The guanxi system runs by different rules, and it may be unclear what's legitimate and what's not - in their terms. What do we do when something is perfectly legitimate and honourable in Chinese eyes, but outright corruption in ours? After all, exchanging money for various considerations among in-groups is the essence of sound relationship economics, but we tend to view it in a market context as unethical. Do we call it corruption? Here's where we have to find a balance. Don't insult your adversaries by denouncing every favour that facilitates a transaction. But don't agree to anything illegal or clearly unethical. You'll have lot's of company. In modern Chinese society, there is a strong sentiment for rooting out corruption.

It's hard to know the prevalence of corruption. The government is probably correct to say that their anti-corruption campaigns have been effective, and there's a critical mass of influential people who pride themselves on clean practice. In that view, widespread corruption is old news, and you may well get caught. But there are also people in many places who still credibly claim they can't do a day's business without passing the red envelope under the table, and you just have to play along if you want to get anywhere.

So you'll have to play it by ear. Your general stance should be that you refuse to pay bribes. You run a clean ship with a clear set of transparent practices, and you want to keep it that way. At the same time, you may feel some need to look the other way when discretion dictates. But if you find yourself in a situation where bribes and kickbacks are the only game in town, you'll have to make your own decision whether to hold your nose or bail out.

11. Do Your Due Diligence

Any economy like China, rapidly pulling out of underdevelopment, is going to be a contradiction containing many advanced firms with high standards alongside a significant still-backwards sector. So your primary due-diligence task is to sort them out. If you deal with a firm which is still trying to remain back in the lawless days, not only will you be propping up regressive forces, but you'll get ripped off. And you may get in trouble with the authorities. In recent years, Chinese authorities have been pretty effective in using enhanced enforcement and professional peer pressure to shift the centre of gravity toward ethical practices in the major centres. If you're working in the less developed areas, you'd better be on your guard.

In either case, you need to check their references rigorously. Conditions vary in China, and that dictates process. As a still-developing country, you can still expect to find many firms functioning at low levels with low standards. The days of poor quality, deadlines not honoured, work not finished, inappropriate substitutions, financial rip-offs, etc. are still alive in some quarters. It's true enough that the famous Chinese national pride is impelling them to develop higher standards and join the world community of top-level professionalism. So don't underestimate them, or the rapidity of their progress. Just don't get caught with a dud.

Of course there is the matter of the language and culture gap, which is why you need to work with knowledgeable consultants. But these consultants themselves will vary in quality, so there's the first item for strict reference checking. Who have they worked for? Contact past clients and ask how satisfied they've been. These are probably people who speak English, so you can readily get a useful reference. Stick to professional references, not just friends and colleagues, and look for a track record of successful international deals.

When checking out Chinese firms, specialize in naive questions and keep asking until you're satisfied. Don't let them deflect you with embarrassment. There's no such thing as a stupid question, and there's no shame in questioning repeatedly until you understand. Persistence may be effective in breaking through a runaround, and it's helpful if you know how to use indirect language in a passive-aggressive manner. But you'll do best when you can deal with the higher-quality firms that will be straight with you and won't give you the runaround in the first place.

Got this all down? Done your homework? You're ready to meet. Good luck.

Author: Dr. Gary Russell is a Canadian professor who has been teaching business and economics in China for several years. He is well positioned to advise North American business on trade and negotiation with Chinese counterparts. Contact Gary@RussellResearch.ca

For more information about doing business in China, log on http://www.midwestUSAChina.com

China Win Win Business Strategy Series

Artisan Business Group and BizDev Associates Pty.Ltd.(Australia) announce China Win-Win Business Strategy Series executive training program. The first tour will start in July 2008. For complete program schedule and registration, please log on http://www.BizDevAssociates.com

Doing Business In China - Ten Tips For A Good First Impression

If you're getting ready to travel to China for business, there are a few things to remember that might make your business talks go a little smoother. Knowing a few of the customary practices can go a long way in making a good first impression!

1. Understand that before you talk serious business, you must first introduce yourselves to each other. But I don't mean just a quick introduction. I'm talking about being invited or inviting them to lunch or dinner first. During the meal, casual conversation is the priority. Some minor business talk can be included, but keep it light and with no serious promises being made. Wait until the second meeting to talk serious business. I promise you, you will get a lot more accomplished that way.

2. They don't always give you time to prepare for a meeting. Trust me on this one. While you are visiting, you may be tempted to let it all hang out and blow off some steam thinking that you will be given plenty of notice before having to appear professional in front of potential business clients or partners. Don't bet on it! If you really need to take a break from it all, then the best thing you can do for yourself is to make sure to prepare for the unexpected meeting. Have everything you could possibly need in order to run out the door to an important meeting with only a ten minute warning. I'm really not kidding. You may think that you are on a set schedule, but just when you let your guard down, you will get a phone call from one of your Chinese clients stating that they have another partner who wants to talk to you, they are both currently standing in the lobby of your hotel, and that you are invited to eat with them right now. You had better not say no! It is a big insult to say no when you are invited to eat a meal from a Chinese citizen wanting to welcome you to talk business.

3. Plan to eat a lot of food. If they invite you to eat, it is customary to order a spread of food that is way too large for the group to finish eating. So if you are the one doing the inviting, you had better plan to order enough food to feed double the amount of people, and make sure it is a large and colorful variety of dishes! Keep in mind, it is always served family style! If you don't order much food, or you expect everyone to eat one individual meal for themselves, then you will insult them.

4. If you are invited to dinner or lunch, be prepared to drink clear hard liquor (at least one big shot), or beer (at least one bottle). If you are the one doing the inviting, then you had better be prepared to buy lots of liquor and beer, and at least ask what each person prefers! But either way, no matter what you are drinking, you will probably be drinking it out of a juice size glass. Oh, and one important thing to remember, when they say "Cheers", they don't want you to just take a sip. They expect you to down the whole glass! So make sure you fill your stomach with as much food as possible so you don't get drunk to early! Besides, if you eat more food, they will be happier with you, and I don't mean lots of food. I'm talking about tons of food. Eat until you are going to explode, if you know what I mean!

5. When it's time for handing out your business card, if you want to impress your Chinese business partners, then plan on using two hands. Place one hand on each side of the card. Make sure you very slightly bow your head, but not too much, just a hint of a bow.

6. Here's a really big one! If you're serious about impressing anyone in China, just learn to speak some Chinese. The more you can speak, the more impressed they will be. It is a serious compliment to take the time to learn their language. But if you are only going there for one business meeting, it would still make a big difference to just learn to say a few common sentences. If you learn to pronounce them well, you will be showered with compliments, and your first impression will go a long way towards softening up your conversations. You will also be viewed completely different from your colleagues who didn't bother to learn any Chinese at all!

7. Most people don't have their own vehicles in China. Even if they have a nice income, they probably rely on the amazing public transportation system. You can make a fantastic impression by arranging a car to pick up all of the prospective clients and drive them to the place of meeting, which will most likely be a restaurant.

8. Here's an interesting one. When you and your colleagues are getting ready to sit down at a table along with your Chinese business partners, you will notice a slight difference in the customary practices. It is not vitally important who sits down first, but you will notice a conflict of interest when a male Westerner is waiting for a Chinese woman to sit down before he does. The problem is that the woman will also be waiting for the man to sit down first! I have experienced this on many occasions and it still amuses me when neither one of us can decide when to sit down because we are both waiting on each other! Here's how it usually goes. The two Owners or Head Managers of both parties (male or female) sit down before everyone else, at the two most important positions, and at the same time. Then everyone else sits down in no particular order except with most of the women casually waiting for the men to sit down first.

9. Remember the the basic manners you were taught when you were growing up and you will make friends quickly. Saying "Please" and "Thank you" at the appropriate times is well respected within Chinese Culture. Genuine smiles are viewed as a sign of intelligence and a good honest heart. This is very important.

10. Now for one final, and extremely important concept to understand about making business contacts with Chinese citizens. In order to become good business partners, you must first become good friends. If you feel comfortable with your business partners, then make sure to call them your friend. Before anything else truly important can happen, the two parties must agree to be friends.

Of course all of these tips are not set in stone, but if you put them to use during your next trip to China, whether it be for business or for pleasure, you will make a great first impression.

Author: Thomas Barto, owner of GlobalQue, an import/export business that operates primarily offline. Helping manufacturers and distributors find each other from across the world. His website: http://www.globalque.com/

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Testimonials on ABG Services and Seminars

Brian Su has extensive network of Chinese government and business connections, together with the amalgam of his Chinese background, U.S. education and multinational work experience, leaves him well placed to bridge the business knowledge gap between the two cultures. Mr. Su is able to give its clients a unique inside view of what is happening in China found nowhere else. Mr. Su is also a public speaker, speaking on a wide range of China-related business and culture topics. Mr. Su has facilitated many trade missions to China, and also assisted Chinese trade and government delegations to the U.S. He has won the trust and appreciation from clients both in China and the U.S. Please contact us today.

What Others Say about Our Business Services and Training Programs:

"...Excellent insight into working with and understanding the Chinese culture and marketplace. Highly recommend it."
Hellar Armbruster, President & CEO
Armbruster Manufacturing Company

"Well organized and presented; Very informative and impressive! I recommend Mr. Su's seminars to any companies that are interested in doing business in China."
Eric Lessard, Senior Investigator
John Brown & Associates

"A Real China expert! Communicated his knowledge very well. Great program! I recommend Mr. Su's services to anyone who is interested in doing business in China."
David Riggle, Senior Partner
Riggle & Craven Int'l Trade & Customs Laws

"Mr. Su's expertise facilitated the smooth delivery of our business jet from Cessna Aircraft Company; my family and I sincerely appreciate his professionalism and hospitality."
Deng Bin, Cairman & CEO
Xingyao High Tech Group Corp. China

"ABG helped us develop a realistic market entry strategy and assisted my company in establishing contacts in China and Hong Kong. None of this would have been possible without their in-depth China knowledge and excellent execution. Mr. Su was there for us every step of the way. I have highly recommended his firm to other companies as the best way for them to get started in China, even if it's just exploration of the China opportunity at first. "
Anthony Woodson, Owner & President
King Tut's Treasures, Inc.

"Mr. Su did an excellent job for us in finding and qualifying potential business partners in the U.S. We were impressed with his knowledge of the industry and his ability to get into the highest levels of the best companies. I would definitely recommend him to anyone looking to find strong partners in China or the U.S."
Mao Lei, President/Owner
AWH Company, China

"Brian's personal experience and knowledge with both China and the West really made him an outstanding instructor!"
Mike Wang, President
Midstates Enterprises (USA) Corp.

"Mr. Su of ABG provided us with excellent information on marketing automotive aftermarket products in the U.S. I would strongly recommend his services to any company that wants to find the most qualified suppliers in China and establish transparency in their supply chain."
Floyde Ye, Owner/President
Shanghai Shengdi Int'l Trading Co.

China Business Mentoring Program

Whether you are a business executive or entrepreneur, looking into Chinese market possibilities, we will help you in getting well versed with China Business. Our unbiased advisory provides you quick answers with low cost. China Business Mentoring Program offers a personalized 3-month mentoring program exclusively designed for corporate executives! Talk one-on-one with Mr. Brian Su, the China Guru! One hour phone consultation weekly, unlimited questions and trainings through e-mail! Free one-on-one "Compete to Win: Doing Business with China" seminar on your own schedule. Ask anything you need to know. For more information, log on http://www.midwestusachina.com today

The Advantages of Bilingual Business Cards

In today's business world, you can't help but handle all sorts of customers from all countries. Additionally, while you're doing business with clients from countries where English is not their common means of conversation, then here is where bilingual business cards come into play.

Imagine you're at a certain social occasion where a speaker from Taiwan is discussing something that's really crucial to your personal business. While you listen to the translator interpreting every word of the speaker, you begin to consider to yourself that you really want to have a chat with him after his delivery.

However, when the speaker gets down the stage, Taiwanese folks who seem to be his co-workers promptly encircle him. They begin talking in Chinese, and you've no idea what they are discussing since you don't speak Chinese. You turn over for the translator only to find out that she has left too. Yet, from the sound of the conversation, you thought to yourself that the speaker doesn't know how to speak the English language in the least.

Luckily, the crown starts to spread out and the speaker is now free for conversation. You rapidly pick up the footstep and come up to the speaker. After introducing yourself, you find out that he does understand English, though he doesn't actually speak the language fluently. After sharing a couple of essential things about your company and the trade you find yourself in, you try to reach your jacket's pocket for your business card. And this is where the wonderful thing about bilingual business cards kicks in.

This situation is really the ideal example where the use of bilingual business cards would be maximized. On the front side of the card, you'd have everything there's to acknowledge about your business, entirely in English. At the backside of the card, though, is the Chinese translation of what can be found on the card's front end. This means, you are able to leave the occasion knowing that the Taiwanese speaker would fully understand what your business is all about.

It would be more in effect to have bilingual business cards prepared in several languages, and these can include Chinese, Mexican, Spanish, French, Japanese, Thai, and so on. This makes you more geared up for whatsoever nationality the next client would be. It doesn't matter what second language your business card would have, it's absolutely crucial to consult a linguistics professional about this. This way, you will be able to make certain the info on your business card is translated correctly.

If you need a bi-lingual business card or brochure, contact us at http://www.midwestUSAChina.com

Investing in China

Author: David Carnes

Many small and medium sized enterprises (SMEs) in western countries are caught between the proverbial “rock and a hard place”. Economic pressures at home are forcing them to consider setting up in or at least sourcing from China, yet the Chinese market gets tougher and tougher to crack every year, in part because so many of their competitors are already there. Following are some strategies for squeezing your SME through.

Partner up with a Chinese company (or companies): Chinese companies willing to form partnerships or joint ventures with western companies are plentiful, and the (Chinese) woods are thick with local investment consultants who are both fully bilingual and hip to local conditions. However, although a reputable China investment consultant might be able to find you a trustworthy Chinese partner, the fun is only just beginning. Differences in management philosophy, financial resources, and understanding of local conditions often combine with communications difficulties (not all of them linguistic) to make these kinds of arrangements a frustrating experience for all concerned. There have been successes, of course, but in general the popularity among foreign investors of partnering with Chinese companies has waned significantly in recent years.

Strength in Numbers: Since there are a lot of other SMEs in the same situation as you, it would not be wise to simply write them off as competitors. Taking advantage of an existing trade association (or forming your own) to share resources, labor, and market intelligence can help your SME in several ways. First, negotiating as a group gives you bargaining power to secure concessions that would otherwise be unavailable. Second, your trade association could pool funds to set up a representative office in China that would act as a sourcing center that would provide its members with a list of pre-qualified local suppliers with whom discounted pricing has already been negotiated. It could also perform market research and negotiate distribution networks for the benefit of its members who hope to sell their products in China. Finally, your trade association could partner with a Chinese industrial park to set up shared facilities available to all of its members, including management and infrastructure. Although you would need to formally establish a Chinese company in order to perform income-generating activities on Chinese soil, there is no particular reason why a group of SME couldn’t jointly invest and establish a wholly foreign-owned enterprise in China that would bypass the need for local suppliers by producing its own products with local labor.

The foregoing is just a taste of the various possibilities available for taking advantage of China’s low labor costs and its large domestic market. Think creatively and you may be writing the sequel to this article yourself.

About the Author: David Carnes is licensed to practice law in California. He speaks and reads Mandarin Chinese and has several years experience working with Chinese law firms and Sino-American joint ventures.

For more information about how small business enterprises succeed in China market, please contact us at http://www.midwestUSAChina.com.

Registering A Trademark in China

Author: Jet Tze

China, with its population of about 1.3 billion, is an attractive market to many businesses. Those who wants to join in the bandwagon to market their products in China should seriously look into the intellectual property protection in China. Unlike some countries, China do not provide protection for unregistered trademark under the common law. China practices "first to file" system for trademarks, meaning the right to a mark goes to the first party who registers it.

Generally, the process of of applying for a trademark in China can be summarized below:

1. Get a intellectual property agent/attorney to do the filing for you. China laws require foreigners with no permanent address in China to engage a State-approved agent if they want to register a trademark in China Even if you have a permanent address in China, it is advisable to get an agent to do it.

2. Before applying for the registration of a mark, the applicant should conduct a preliminary search at the China Trademark Office to determine if a similar mark is already registered.

3. Complete all the official forms and documents. China Trademark Office only accepts documents submitted in Chinese language.

4. There are altogether 42 classes of trademarks in China. You have to submit your application for at least one of the classes.

5. If you are entitled to claim priority registration, you have to submit your letter of priority, with the proper translation, together with the application. These documents have to be certified by the relevant organizations.

6. Upon submission of all the necessary documents to the China Trademark Office, the Office would review the documents for compliance.

7. After a preliminary examination, if the Trademark Office is satisfied that the mark applied for registration is not similar or identical to existing registered marks, it will grant a preliminary approval and will publish the mark in the preliminary examination gazette.

8. China trademark law provides that marks published in the preliminary examination gazette are subjected to public opposition for a period of 3 months. If there is any opposition filed, the Trademark Office will inform the applicant.

9. Upon receiving the notice of opposition from the Trademark Office, the applicant has 15 days to respond and to request for an administrative review.

10. If the applicant is not satisfied with the outcome of the review, the applicant can, within 30 days of receiving notice of review decision, file an administrative appeal to the Court.

11. If no party files an opposition to a mark that has received preliminary approval within three months, the Trademark Office will register the trademark and publish notice of the registration in the Trademark Gazette.

About the Author: Jet Tze is a freelance writer who specializes in search engine optimization. He is currently working on some trademark sites. For more information, please contact us at http://www.midwestUSAChina.com