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China business ventures in joint holdings are permitted in manufacturing, import/export and global sourcing as well as sales operations in China. In addition, a joint China business venture is also allowed to market its products through own sales network in China apart from import and export while being free to conduct global sourcing.

- Regulations for China Business for Import/Export and Global Sourcing

Equity joint venture: China business, for manufacturing, import & export or global sourcing is set up as a limited liability company under the Law of PRC on Joint ventures through foreign and Chinese investment participation. Profit and loss are shared by the parties proportionately to their contributions to registered capital in joint China business. An equity JV can conduct both import/export and global sourcing.

Co-operative Joint Venture: In many ways, a Co-op JV may be thought of as an Equity JV going by the China business law on Chinese-Foreign Contractual Co-operative Enterprises for Co-operative Joint Ventures. However, differences between a Co-op China business and an equity JV include and specify that Co-op JVs don’t need to be legal entities. Secondly, the profits/losses, arising out of conduct of business, global sourcing and import/export, may be shared in any agreed proportions by members in Co-op JVs unlike in an equity JV. All fixed assets are transferred to the Chinese partner upon withdrawal by the foreign participant. Co-op JVs enjoy entitlement to import and export besides global sourcing of materials.

China business JV registration must be through application to MOFTEC or its branch offices before setting up the JV for manufacturing, import/export and global sourcing. MOFTEC at its discretion decides whether to grant approval but does so within three months. The JV China business must be registered, upon the grant of approval, with the State Administration for Industry and Commerce (SAIC), within a month and obtain license to commence its China business. It is this license that legally establishes a JV as a China Business.

- Global Sourcing, Import/Export Permissions and China Business

The China business law, permits wholly foreign owned enterprises for import & export and global sourcing since 1986. Foreign enterprises can establish China business for manufacturing, import/export or global sourcing subject to conformity of Wholly Foreign-Owned Enterprises (WFOE) while global sourcing is permitted.

WFOE is regarded as a limited liability China business entity owned entirely by foreign investors. These China business entities are not branches of foreign companies. Although WFOEs are barred from certain businesses they enjoy freedom of import & export and global sourcing besides China business. Setting-up a China business venture for manufacturing, import/export or for global sourcing is easier than other Asian countries.

By Jeffrey Leong

The 104th China Import and Export Fair, popularly known as the Canton Fair, begins this October. Held twice per year, the Canton Fair has been a bi-annual event since 1957. This makes the fair almost as old as modern China, which considering all the changes that have occurred in China since then is a pretty significant feat.

What makes the fair successful enough to have such a long history? It is considered to be the trade fair in China with the largest assortment of products and the highest attendance. They say it’s also the fair where the largest numbers of business deals are made, but I think this is most likely because of the largest assortment of products and highest attendance stats.

But while the Canton Fair once helped to globalize China, globalization seems to be slowly evolving beyond the traditional trade show. Many in the global sourcing business do not seem to attach as much importance to the Canton Fair as they once did a few years ago, especially those who are based permanently in China and often find the show to be a superfluous hassle. The reasons for the Canton Fair’s potential decrease in popularity have their logical reasons: the export scene is becoming depressed, with the emphasis being on more custom-made products than commodities; Guangdong is losing its position as the window of China’s export world, and China’s position as the world’s sourcing leader is also being eroded.

Of course, technology is the biggest culprit. With the communications system we have today, there is no need to have a scheduled trade fair in one physical location. Just look at Yiwu— they have a trade fair almost year-round, and have literally built a city around their marketplace. 50 years ago, all buyers were in one place— at the Canton Fair. Now, all buyers are still in one place— on-line. There is no need to fly to Guangzhou, business cards in hand, looking for a product to source when you can contact these suppliers on-line. I wonder how the “most deals made in China” Canton Fair statistic compares to the “number of deals” made on Alibaba.com and its competitors. And even if you do not use Alibaba.com, they will be at the fair handing out trade show magazines with full contact information and product photos of hundreds of suppliers in your industry for you to check out after your visit.

With these threats, the fair has to find a way to adapt to survive. Canton Fair fans can take heart knowing that the show has been successfully adapting for decades. For 2008, they are holding the fair over a 3+ week period based on industry. This is a good idea, as it eliminates the mob scene and thus eliminates some of the “hassle” part mentioned above. With attendees spread out into separate 4-day periods, you might even be able to find a decent hotel room when you go (not). This should prove to be a popular decision for most buyers, especially those in niche industries, but it might be inconvenient for China’s many global trade companies who want to attend.

The real trick to adding a modern punch to the Canton Fair is to use all this new technology to the fair’s advantage. At this year’s International Textile Expo in Shaoxing, expo organizers have teamed up with Yoyoor, Inc. to provide free smartphone rental for overseas attendees. Conference attendees can utilize the phones to make and receive international calls and take advantage of Yoyoor’s live bilingual Call Center to resolve any translation issues or other inquiries. Yoyoor will also send daily text messages with the day’s schedule and important activities, in addition to setting up a hotline for fair information.

This sort of integration of technology suddenly makes attending the fair seem like a more productive idea. It would not be complicated for the Canton Fair to attempt something similar. Even simpler additions, maybe GPS navigation around the grounds to find booths, would make the event sound more attractive. And I hope those grounds have wireless internet access by now, too.

Fortunately, even if some aspects of the fair are lagging behind technologically, there are also plenty of buyers and suppliers who have maintained fairly traditional procedures. No matter how much technology allows buyers to search for suppliers, there still has not been anything to substitute seeing what you’re going to buy in person. Business between buyers and suppliers will always be on a large scale, and meeting the people you will be doing business with, while seeing the products you will be buying up close, are crucial. This will always be an advantage of the Canton Fair (and any other trade show), and is a significant enough advantage to give the Canton Fair life for many years to come.

By Elisabeth Eaves
Thanks to increased foreign travel to China, international-standard hotels now exist in virtually every major city, and roads and airports have improved by leaps and bounds. But while it’s easier to get around, there remains plenty of room for culture clash and business mistakes.

We asked veteran China visitors to give us their top tips for first-timers.

Here’s what you need to know.

Show Some Respect
Avoid embarrassment–not just your own, but other people’s too.

“Saving face” is one of the building blocks of Chinese culture, says Soeren Petersen, regional analyst for Asia at iJet, a travel risk consultancy. In practice, it means avoiding conflict and preserving other people’s dignity, he says.

It can come in handy when dealing with anything from standard travel snafus to boardroom negotiations.

“If you say something euphemistic or somebody tells a white lie,” he says, “it’s OK for everybody to know that the truth is somewhere in the middle, but not hammer it out until everybody is humiliated.”

Don’t Jump In
The Chinese are comfortable with silences in conversation, says Kenneth Lieberthal, author of numerous books and articles on business in China and a professor at the University of Michigan.

“After you’ve asked a question, it’s worth pausing a little longer than you would with an American,” he says. If you rush to fill a silence, you could miss the most interesting thing someone has to say.

Have Your Own Interpreter
The value of a private interpreter is “not so much to do the interpretation, but to tell you afterward what was mistranslated. I’ve rarely sat in on a session where I didn’t think something was missed,” says Lieberthal, a fluent Mandarin speaker. Prime example: If a Chinese negotiator says the words, “we have to do research on that” at the end of a discussion, you might only get the literal translation. In fact, the expression means “no.”

That’s Mr. Hu To You
Given and family names are said in the reverse order from English. So President Hu Jintao is Mr. Hu.

Know Your Superstitions
Four is bad, eight is good–which is why hotels rarely have a fourth floor.
No Politics At Dinner
Bringing up Taiwan, Tiananmen Square or the Cultural Revolution is no way to ingratiate yourself. To do that, mention China’s 4,000-year history.
Accept Business Cards With Two Hands
Why? “It’s a little representation of the person you’re taking it from, so it should be treated with respect,” DeWoskin says. That means no crumpling, dropping or stuffing it hastily in your pocket.
Don’t Bow
While this was once a Chinese tradition, and is still common in neighboring countries, the Chinese have mostly dropped the habit, especially when dealing with Westerners.
Remember All Those Things Your Mother Said
Certain lessons are universal. Be polite. Eat what you’re served–if not in great quantities, at least with enthusiasm, says DeWoskin. “If you treat people with patience and empathy, you’ll get farther.”

By DREA of USA

Perception #1: Assuming Chinese Do Business the Same Way Americans Do

Though both parties deal in US dollars, Americans and Chinese have vastly different business cultures. While America is transaction-oriented, China is relationship-oriented. There’s a chasm between these two styles of interaction. The following paragraph illustrates the comparison between Chinese, Indian, and American styles of conducting business.

Americans are transaction-oriented. We like to walk in the door, figure out a deal, sign the contract, do the deal, and get out. We then use these transactions as building blocks towards developing some kind of a relationship. The building blocks are the transactions. The transaction is we’re buying, you’re selling, it’s all very arm’s length.

Indians are project-oriented. It’s a little bit of a longer view than a transaction, because in a project, there are more details and teamwork involved. A project involves doing the task together—unlike an arm’s-length transaction—but there’s a defined beginning, middle, and end. The Indians are *very* good at this.

The Chinese are neither transaction-oriented nor project-oriented. They are relationship-oriented. Chinese only use the people they know, like, and respect. To them, a transaction is not really business. This is part of the reason why there are quality problems. To Chinese, shipping a container of widgets for a letter of credit is not a relationship, even if you’ve been doing it for 16 years.

Before Chinese does a transaction or project with you, they want to know who you are. They have to figure out whether they respect you and like you before starting. They’re not comfortable doing a project or transaction first.

The Chinese’s form of capitalism is “we know where you live” capitalism. Traditionally, they’d lend you money to start your factory because they know everyone in your clan or village. In the modern area, they’ll lend you money because you’re following certain directives. Everyone has to follow government directives. If the state tells lenders that have to lend to wind power, and you have a wind farm, they’ll lend to you. If anything goes wrong, they know where you live.

Perception #2: Assuming a Contract Will Get You Respect from China

Chinese are concerned with being in a business relationship that is based on mutual respect, realism, and flexibility, and that can evolve over time.

From a Chinese point of view, if situations change during the course of your business relationship, naturally you’re not going to be bound to the initial agreement. That would be rigid and unrealistic, so they don’t respect that point of view. They believe that if you’re going to be business partners, it’s not about the rule of law, it’s about the relationship.

For example, if I’m a going to contract a cotton business with you as a supplier, and the price of cotton quintuples during the term of the contract, and I’m losing my shirt abiding by the contract terms, then, from a Chinese point of view, you’re driving me out of business by keeping me bound to the contract.

As a Chinese, I would want a relationship where I go back to you and informally renegotiate the terms of the relationship. For example, I would say “listen, the price of cotton has quintupled. We have to get out of this business completely; we’re going bankrupt here. I know we’re in a relationship with you where we have to supply you cotton for the next five years. So how about I find you some cotton from Turkey and Vietnam, and you and I both take some of that margin that we were initially going to take from the cotton field, and we invest it in a joint venture to process it. Wouldn’t that be better for both of us?”

If you’re impatient and short-term in that kind of situation, you won’t win their respect. They’ll think you’re using them by forcing them to sell products for you at low cost and almost no margin. Then they might say that “if it’s going to be that way, then I’m going to steal your intellectual property.” What’s so one-sided about that? They’re just treating you the same way.

Perception #3: Assuming Chinese are Unethical Because They Don’t Respect Contracts

The misconception about doing business in China is that they don’t respect contracts and that makes them unethical. What it really makes them is practitioners of “we know where you live” capitalism, which quite frankly they’ve done really well with. China’s been the most powerful, wealthy, and technologically advanced nation in the world a couple of times. And they invented capitalism. They’re not suffering from some sort of malnourished form of capitalism compared to how Americans do it.

Their form of capitalism is entirely relationship-based. Our form of capitalism is so impersonal. It’s “other peoples’ money” (OPM), and it’s all about performance forecasts, transparency, etc. It’s not about realism. The attitude isn’t “Hey honestly, I respect you, you respect me, I’m a good businessman in my part of the world, you’re a good businessman in yours, let’s get together and make sure that this works for both of us.” It’s more about “I’m sorry, you missed your numbers, you’re screwed.” If you think about it that way, you see why respecting contracts makes more sense in a transaction-based economy.

Perception #4: Thinking Chinese Need American Business

A major misconception Americans operate on is the assumption that the Chinese need something we have. This is decreasingly true. Americans know it in their guts, but they do not want to say it.

They will hire me to go in and be a corporate trainer. I will say: “What are your objectives?” They will answer that “We don’t want to inadvertently offend the Chinese.” Well, in that case, I think you better start figuring out how the make them respect you.

Right now, we think that being a big American brand, like Johnson & Johnson, will make them move heaven and earth for you. They won’t. They’ll take your purchase order if they need it, but American clients typically are not the #1 account for Chinese firms.

Even if you’re a big American company, they haven’t necessarily heard of you. If they have, they don’t necessarily have any innate desire to do business with you. Your purchase volumes might be smaller than what they really want. Your demands for diversifying the product line (we’re a mature economy with a lot of customization) might be a serious pain in the butt for them. We think they’re going to want our business, and it’s just often not the case.

The Chinese can do business with the British, the Dutch, the French, the Japanese, the Italians, the Taiwanese, the South Africans, the Yemeni, and 20,000 Chinese companies who are doing something similar to you. Back home, you’re probably dealing with, at most, a couple hundred competitors. In China, you’re dealing with global competition, a couple thousand competitors.

Perception #5: Treating Chinese Our Way, and Assuming They Will Adapt

The dollar is in the can right now. As a businessperson, you have to really figure out the laws that the Chinese are in. Treat them as a valued customer. Sell them on the idea that you are an asset that they should be doing business with. If we want to play the game, we need to focus less on what we want from them, and more on what we have to offer, what we have that will add value to their professional lives.

Right now, the mindset is more aloof. We assume they want to have our business. That really needs to change. We need to start with an open approach that acknowledges that these people don’t have to do business with us. They don’t need us.

Past that point, you can be as American as you want. We’re always going to want contracts to be respected, and the Chinese know that. They are working very hard at moving their whole economy and society to something that’s more respectful of the rule of law. We’re doing a great service to the Chinese nation as a whole by showing an example of how the rule of law is implemented. We need to keep doing that. We can be ourselves, just a little more open-minded and respectful.

Instead, Learn About “We Know Where You Live” Capitalism

Know that Chinese are not going to respect me unless you spend some time showing them who you are and who your company is. They’re perfectly happy to shoot you a container of widgets or a letter of credit, but if you want a real relationship, you need to show them who you are, as an individual.

The Chinese do not separate their personal and professional lives, because it’s “we know where you live” capitalism. How would they know where you live if they’ve never eaten at your house for dinner? My Chinese friends and I will call each other and talk about business anytime of day or night, literally at 2 o’clock in the morning. The time of day doesn’t matter. You could call and say hey, I’m out at the disco, let’s talk about this business aspect.

Being in a relationship means sharing more information with them, involving them in product development, giving them better terms, helping them finance their raw materials, and who knows what else. If you’re their real partner, and give them what they need to grow their business, they will stick with you.

Perception #6: Thinking All You Need is One China Guy

Another important misconception is that if you have a China guy, you’re fine. This is why it won’t work: Picture a bridge. At one end of the bridge, you have a really effective local guide to New York City. At the other end you have a really effective local guide to Shanghai. Each guide is really good at his or her locality, but going across the bridge, they might get lost.

Then there are people like me, who stand in the middle. I can kind of reach both ends, but I’m not an expert guide to either place.

If you’re serious about doing business in China, you don’t just need a single China guy, or a single expert who stands in the middle of the bridge. You need a whole team. I’m talking about legal, tax, and commercial due diligence people, marketing strategists, HR specialists, Chinese local counsel (foreign lawyers are not allowed to practice law in China), and good government affairs people.

It takes a whole network. If you underestimate the role of the Chinese government in creating demand and fostering enterprise growth, you are dead in the water. If you underestimate the importance of the regulatory regime in China, for example, getting your permits, licenses, and operating documents in order, you are dead in the water. I don’t think corporate America really knows that yet.

Perception #7: Thinking We Don’t Have to Worry About China Yet

Many corporate headquarters don’t seem to realize that there is such a thing as Chinese business culture, but individuals are bumping up against it every day. A lot of employees in corporate America have realized how important success in working with Chinese colleagues is for their professional development. If you work for Proctor & Gamble, Motorola, Johnson & Johnson, or Black & Decker, chances are, some percentage of headquarters personnel are carrying out communications with China every day.

There is growing awareness on an individual and executional level in America that Chinese are different from us, they are worthy of our respect, and we’re not dancing in the way they’re dancing, so we have to try to get along.

Conclusion:

If you want to do business with China, you have to earn their respect. Do this by being open, flexible, realistic, having a sense of humor, and being a human being rather than a corporate functionary. Be someone they want to have a relationship with, not just the mercenary of a transaction. You have to prove to them that there’s some advantage in working with you. Don’t just take for granted that there’s some built-in incentive.
That’s all it takes, the mindset of acknowledging that they’re really important to us. We need to put in a little effort to try and meet them. Maybe we’re not capable of meeting them halfway right now, but they’re all speaking English. They’re all doing business in US dollars. If you think about it, they’re meeting us more than halfway.

And I don’t know whether that’s necessarily permanent.

Visit www.chinaclub2u.com to find out more on how we can facilitate your business in China without having you physically present in China.

By Jeffrey Leong
To many, the experience of importing goods from China is both exciting and terrifying. On one hand there is huge potential for making money from reselling the goods purchased from China for that they are indeed very cheap. But on the other hand, language and cultural barriers present a great difficulty to the overseas buyers. The main thing that every overseas buyers worried is payment; questions such as how do I pay; will my goods be shipped after payment is made; keep bothering many buyers.
The issue lies in the fact that most Chinese wholesalers will only accept Western Union and wire transfer payments. If possible, they prefer cash. These are not secure payment options so it must be treated with extra caution. However, the main reason why these are the only payment options accepted by the Chinese is because these are the only payment methods available to many Chinese in China. Getting a credit card in China is an extremely difficult task with a lot of government regulations and strict criterion to adhere to. Without credit card, it is impossible for them to have a Paypal account.
Despite the risks involved with using Western Union and wire transfer, these are the methods you have to use if you want to import from China. To minimize this risk, our advice is to start with a fairly small shipment so you would not stand to lose too much money if everything falls apart. After trust has been established, you can gradually build up your order over time. On the whole, most Chinese suppliers are genuine and hard working people who want to establish a long-term relationship with their customers. They need the business, so it’s unlikely they’ll try to deliberately screw you up! Another big issue for buyers importing from China is communication. It can be extremely daunting trying to negotiate complex business issues when language is the barrier.
To get around this problem, we always ask a new contact for their MSN or QQ address and chat with them online. Usually, all young Chinese are very friendly and they enjoy talking to people who speaks English as this helps them improve their English too. You may have to bear with them on the slow typing skill but yet this is an effective way of allowing you to know your supplier more instantly.
With communication now established, you can proceed to ask questions and get them to send you pictures of stock and so on. Once you’ve built up a good relationship with them, you can then ask them to send you a sample before your order. For any genuine company, this usually isn’t a problem and it allows you to see the quality of the product before placing an order. If the product is an inexpensive item, the seller normally send it to you for free but it is understood that you would have to bear the shipping charges. If it is an expensive item such as a laptop or a TV, you would have to pay for the item.
One thing we haven’t talked about so far is quality. This can be another major concern for sellers who often have difficulty telling whether a brand name product is genuine or not.
In our experience, the vast majority of brand-name goods that come from China are either replicas or faked. We strongly recommend that you assume that this is the case in the first instance. eBay is currently cracking down heavily on people selling fakes and it is not an area of business we suggest you get into!
Generally, we find that Chinese suppliers are best suited for cheap generic goods (they are manufactured there so you won’t find cheaper anywhere else!) that can be sold at higher rates in the Western countries. For example, some of the latest trends are pocket bikes, scooters and generic electronic goods. These goods do not have to have a brand name in order to sell well and they can be purchased wholesale at very good prices if you are serious about importing from China.
This should give you a heads up if looking at dealing with wholesale suppliers in China! Remember, always keep an open mind, ask questions and do your research!

Visit www.chinaclub2u.com to see how we make your buying experience in China easier and less hassle!

By JEREMY HAFT
As the Chinese recover from the aftermath of the devastating earthquake, it’s worth remembering that they can’t rebuild Sichuan province alone. They need America’s help.
In the months to come, China’s central and provincial governments will spend billions to remake hospitals, communication and power networks, roads and infrastructure, dams and water-treatment facilities, factories, schools and houses.
But many of the goods and services needed to rebuild aren’t produced in China. That’s not because of any damage that the earthquake may have caused; Sichuan accounts for less than 4% of China’s GDP. Rather, there’s a fundamental deficiency in China’s industrial capability.
In most industries, China lags decades behind the U.S., with factories that don’t meet modern quality standards. That’s a problem if you want to make a Barbie doll, but it’s an even bigger problem if you want to make a safe nuclear power plant. Or rebuild a province.
U.S. exports to China will no doubt increase as a result of the earthquake, but China buying American is nothing new. Indeed, China is our third-largest export market behind Canada and Mexico. Few politicians talk about it, but 406 out of 435 Congressional districts have seen triple-digit export growth to China from 2000-2007. Those exports have created jobs and built value in local communities.
In fact, U.S. exports to China are growing five times faster than any other export market. This is less a function of the falling dollar and more of rising Chinese demand for U.S. products. Put simply, they need what we make – from chemicals and components to turbines and telecommunications, from drugs and medical devices to sewage and sanitation equipment. If a product requires modern technology and precise engineering, chances are, China needs it. Not to mention all the services and after-care required for set up and maintenance.
The broader lesson here applies to our ailing economy. If the International Monetary Fund is right and the U.S. economy is slipping into a recession that will ripple out into the global economy, then that ripple will stop at China’s shore. China’s demand will help absorb the shock of our solvency crisis.
To understand why, we need to compare balance sheets. China is essentially America’s economic alter ego. American households have a negative savings rate. Chinese households have a formidable 80% savings rate. Our treasury is trillions in debt. China’s treasury has trillions in retained earnings. We’re leveraged to the gills. China is swimming in black ink.
China’s behemoth currency reserves and strong demand were why China was able to weather another financial crisis – the currency crisis that hit Southeast Asia in the 1990s. China was one of the only regional economies not to collapse. Indeed, its savings rate and high demand helped rescue its neighbors.
More than a decade later, China has accumulated even greater savings. There’s enough money under China’s mattress to midwife the largest middle class on the planet. Which means China will keep buying more and more from America.
China couldn’t ask for a better time to buy American. The falling value of the dollar – coupled with the steep appreciation in China’s yuan – is nothing short of a gale force tailwind for U.S. exporters. The Sichuan earthquake only adds urgency to China’s already powerful demand.
So, in dealing with this catastrophe, America and China’s interests are aligned. By exporting American goods and services, we help China in a desperate time of need – while creating jobs and building up our national savings account in the process.
(Mr. Haft is the author of “All the Tea in China: How to Buy, Sell, and Make Money on the Mainland”)

By Vitaliy Srel
the subject I want to discuss with you - is it easy or hard thing to have a business with China?
Import-export and other trading operations is almost clear, than that great and very important process of finding information.
Please look on some main points that we found in our researches of China market.
If you are new in that business, you can meet both good and bad situations if you are not familiar with their national habits, their life style and their way of making business deals.
So, let’s turn to talk about pluses.
1. The goods and materials from China are more cheap than anywhere around the world.
2. The quality of “made in China” goods becomes more and more higher, moving on the next level.
3. Their service in working with client is also pretty good, because they have respect to every visitor.
4. Final price in your own country would be small and you would easily get a good profit.
But…let’s speak about minuses.
1. Only personal visit or visit of your trusted friend could give you exact understanding about product quality, the way of production and character of your possible future business-partner.
2. Too often you can get in trap, if you will look on some product through Internet browser, because picture is looking so nice but the real things may be far away from that.
3. Certificates… Headache for every businessmen, because usually they valid only on 60%.
4. Payment process contains a high risk.
5. Before sending your order, they can to put the worse quality products than you were looking for.
To my mind, the best way to trade with China - is to give the opportunity to professional agencies and experienced people that can help you.

Both time and result depends on their work, you just get final description of products and some important wishes on how to work with your new business partner.

Product check, factory visiting, certificates, payment-delivery process, all paper work. Huge work, but they will do it quick and with respect to your desires.

Money you’ll spend - too small in comparison with your possible future lost.

By David Foo
Tier 1 cities in China are mainly Beijing, Shanghai and Guangzhou where most of the major enterprise had sunken their teeth long ago. However China had more than hundreds of cities which was considered Tier 2 with population of more than 1 million each which represented untapped massive market potential. In this article, an overview of how we can tap into this massive scale of abundant resources are discussed.
China with her growing population can be categorized into three basic zone, newly developed area, developing and rural areas. Unlike other nations where the gigantic enterprise just wrap up and uproot themselves and move to lesser developing places to leverage on lower human and operating expenses. China had it unique advantages to progress inlands. In facts, million of rural workers dynamically relocate to urban cities to seek better employments vehemently as part of their birthright. Many had encountered differential degrading working conditions and wages as compared to their urban peers.
Chinese authority is facing a delicate situation of balancing aggressive growth which concentrated along the coastal area and inner rural developments, the social fabric and infrastructures represent a critical factor of which if uncontrolled will led to massive scale of instability which may weaken the Chinese superior competitive edges as a whole in her efforts to attract foreign investments.
Early signs were detected when the factories in golden triangle area discontinued production when their laborers who most if not entirely return to hometown for holidays and decided not to return to work as they found better jobs at home. Certain industries in the coastal areas also didn’t received warm welcome as before by the local administrative especially if they are involved in high energy consuming and environmental polluting activities. Many need to take turn to schedule for production shutdown due to rationing of energy resources.
In fact, the Chinese Government encourages many well established manufacturers and retailers to explore inlands as an effort to balance prosperities and growth between urban and rural areas. Big names operators like P&G and Danone had restructured their luxurious and imported products and services to cater for the less fortunate rural consumers with lower cost packaging and materials. For example, branded soft-drinks cost only 30% more as compared to local made equivalents.
The race to remain competitive also had significant impacts to big scale manufacturers where thousands of rural workers are given accommodations and meals to offset the higher standard of urban livings. Thousands of unskilled and semiskilled workers sleep, eat and work 7 days a week virtually at the same location to keep up with the production outputs. Better terms are negotiated between the management and workers to avoid losing the work forces back to their respective home towns where conditions are improving dramatically on a daily basis.
Cultural heritages had trained many supervisors to be aggressive where verbal and mental abuses, such as shouting and rude manners to achieve their production outputs with their operators. Physical and heated arguments are not uncommon scenes one can expect to find in thousand if not hundred of thousands of manufacturing facilities scatter all over in China.
With increasing pressure on infrastructures on public transports, private cars and living conditions, the lures of seeking an employment in urban area had started to lose ground. Matters are made worse as due to the communism system, the local district practice profits sharing among it registered residents where thousands of RMB are distributed as a results of rental and land incomes. Many were doing pretty well and travel overseas regularly whereas their rural counterparts can only hope they are never born. All Chinese residents are registered with their respective territory account and relocation had to be approved by the relevant authorities. The contrast of an urban and rural Chinese in terms of their respective employment, education and financial status had never been so obvious before.
Management of their fellow rural and urban citizen’s expectations become a top priorities as nobody likes to be left behind in the full steam of growth Chinese had experiencing for the past few decades. In the past, everyone was being assigned a job and accommodation by the state own enterprises and with more than 500 of them declaring bankruptcy last year alone, many had been “exiled” into the free enterprise market to take care of themselves.
So, how can an individual like you and me take advantages of this wind of change?
1) One can start sourcing higher margin products from the tier 2 manufactures where their overall operating cost are lower where the quality standards are preserved.
2) One can joint ventured with manufacturers which are operating from rural areas to leverage on the increasing bargaining powers.
3) One can negotiate with lower cost products if you can identify their lower cost of producing the goods based on the manufacturing location
4) One can repackage products with lower packaging and materials cost to cater for the massive rural markets where the volume can make up the shortfalls in lower price.
5) One can identify manufacturers with high potential to become as big scale as their urban counterparts to groom the relationship to grow with them.
6) One can invest on the local rural properties with potential of extremely handsome returns in long run.
Believed it or not, some Taiwanese manufacturers who had set foot in China more than a decade ago had reap in huge profits with the escalation price of lands. In other words, these entrepreneurs make the seemingly unrealistic explosive fortunes from the warehouses, lands, shop-houses and factories they acquired in the course of running their business.
In summary, the same opportunities had already presented itself on rural areas exactly like what had happened 20 to 25 years ago in urban areas. One can regards China as a mixture of countries in varying stage of economic progress where the same language and system is in placed. With improving transportation on land, sea and air, another wave of China made products which swipe across the globe like nobody business is highly possible in the next 5 to 10 years. Remember the remote controlled cars which could easily cost a fortune 10 years ago, now they are made so affordable and everyone can afford to buy one for their kids. China made automobiles, heavy machinery, consumer products and even aggressive Chinese businessman are everywhere. Like what someone told me, if you can’t beat them, join them.
Author is the founding member of the of the
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