1. Ownership: 100% ownership of the business it is highly recommended. Many experts and burned out past investors believes that any other ownership combination will not guarantee success. I strongly suggest opening a company that you have complete ownership of and staying away from joint ventures. According to a study done by China Economic Research Center, close to 70% of joint ventures has failed. The only good alternative is to establish a joint venture with a foreign company that you know and that will share the business expenses. If you have no other choice but to go with a partner, chose your partner among potential suppliers, customer, or a partner from an entire different industry.

2. Facility / Product position. Stress first class appearance and quality requirements for your facility, office and products. You will be judged by the difference (higher standard) of your local competitors. What is acceptable for a local company will not be acceptable for your foreign-owned or even JV Company. Stress physical appearance, English signs and slogans in the office and factory. Fill your company with several foreign employees. Your Chinese customers are buying your products to increase their own prestige and impress foreign and local buyers by heaving worldwide recognize equipment. Chinese manufactures love to show that they have used the same equipment as the best foreign companies. Do not lease/build office or facility above your minimum requirement. Minimize your fix cost. Bigger is not better.

3. Location, location, location. This principal is universal. Choose a location that is easy to do business and the local government is friendly to foreign businesses. Generally speaking, this means doing business in the central, southeast, southwest or south of China. Shanghai, Kunshan, Suzhou, Guangzhou those are friendly territories. Check with local cultures and opinions on which regions have a good reputation for doing business. Southerners are considered to be harder working people from the Northerners. Southerners are more business oriented. Anhui people are known for their honesty and are generally good to do business with. If you chose the right location you can, register company, built facility and start your production in several months – guarantee. The rent for an industrial facility will range from100 RMB to 400 RMB per square meter per year. The rent will depend on the size and location of the facility. The construction cost will be from 600 to 1600 RMB per square meter. If you choose to lease the facility, beware of management and maintenance fees that could be hidden in fine print. Beware of the gas, electric and water agreements. The biggest obstacle for quickly opening the facility is the Environmental Evaluation. Be careful with how you describe your operation in an environmental application. For the facility location consider employees transportation needs and labor availability for specific location.

4. Market. Do not expect 1 billion customers knocking on your door to buy your product. The Chinese market is highly competitive and much segmented. The most important question is not how much you can sale to Chinese customer, but how your Chinese operation will influence, improve or help your operation in the USA, Europe or worldwide (depending where you do your business now). After you figure out the answer to vital question mentioned above, you will have a chance in succeeding in China. Place your focus to support niche, undeserved market with less competition. Choose technology or services that are not available or easy to copy. Yes, you be copied faster than a blink of an eye. Protect you intellectual property by being very active in the market place. Try to protect your intellectual property by dividing tasks among several employees and vendors. The only way to stay competitive is to be ahead of your competitors with your product’s future and quality. Make conscious business decisions of when you would like to position yourself in China and stick to your decision. Do not assign unrealistic business goals for your Chinese operation.

5. Lost and Profit Statement Everything you hear must be divided by 2; except your cost, which needs to be multiplied by 2. Expect half true information and half of your expectations. The laws are changeable; but try to do business according to your best understanding of the laws and official policies. Do not bribe, encourage or silently approve it. Bribes are not only illegal, according to US laws, but if you give/take bribes, soon you will not be able to understand who has offered the bribes, and for what reason. You will stop trusting your employees; and, most importantly, with time you will “lose face” among your most loyal employees. Beware of the rapidly cost of manufacturing increases. Most Chinese companies stress sales volume and have ability to cut the cost / price much better than you can. Sooner or later you will run out of money, regardless of how many orders you have.

6. Name Choose a Chinese Name for your company. Honestly, I am not kidding. The brutal truth is that foreigners are guests of China and we are here because we are providing something that China needs or wants. Chinese people are one of the most entrepreneurial people in this world. The national pride will always be a prevailing motivation for purchasing and employment decisions in the future. I will always recommend choosing a nice sounding Chinese name for the company. Maybe it will be drawn back in a short time; but in the future, it will be to your advantage if your company is perceived as successful local company.

7. Employees Chose younger or retired workers. Hire younger, more energetic employees for the future growth. Hire retired workers for their specific expertise and for a specific task. You will have a relatively high turnout of the younger employees, but the older employees will bring more stability. In China, even 50 year old employees can retire from a state company. Sign a contract that includes specific times with younger employees before you send them for foreign training. Be on the lookout for English sugar lip speaking employees. They are in high demand and will most likely leave you at the first opportunity they receive that seems better to them. Treat your employees as part of your family: organize trips, celebration dinners and follow Chinese tradition. Bonuses should be paid during the Chinese New Year Holiday, not Christmas! Organize trips during the October national Holiday. Avoid perfect English speaking employees that say everything you like to hear. Your employees must be able to communicate perfectly with customers, vendors and other workers. Manage your employees by assigning a small, specific and detailed task so that they understand how to perform the task and when you expect a result. Be firm with your expectations. Do not allow a free interpretation of tasks and responsibilities. Do not speak of the future, but speak of present tasks and expectations. Leave the ‘great vision’ and ‘picture perfect future’ for your investor. Be very realistic and strict in your expectations and in what you convey to your employees. Stress studies and self improvement. Organize companywide education courses and trips for all employees. Organize work instruction with very detail description. You will be expected to pay two to three time more just because you are the foreign owned company. Benefit and insurance add 45% to basic salaries. Shop workers basic salaries 1500 to 4000 RMB per month, office workers 1500 to 3000 RMB, engineers from 2000 RMB to 10,000 RMB. Plus 45% for benefits. You are expected to provide dormitory for migrant workers and lunches for all employees. Avoid any ill perception between expat’s and local employees’ compensation level or treatment.

8. Respect Be respectful of the Chinese culture and national holidays. Respect elders, treat co-workers nicely but strict, and leave quarrels to handle by Chinese employees. Be persistent and patient with your partners, employees, vendors and the whole business world. Try to be good corporate citizen working with local government and support local orphanage.

9. Company Governance and Management Style One of the most important sources of power in the governance of the company is the control of the company stamp. No majority of ownership, no majority of the board of directors or who has the right to assign managerial positions is worth much without the control of the company stamp. Yes, sometimes a small, red, insignificant looking stamp may break or make your future in China.

Divide the company control evenly between the General Manager, Vice General Manager Manage, CFO and Chairman of the Board. Do not allow one person to hold too much control or responsibility. In the Article of Association, specify the details regarding all managerial decisions and responsibilities. Try to protect your intellectual property by dividing tasks among several employees and vendors. Be flexible in your management style most procedures are not very clear or straight forward. There always will be a surprises in running daily operation.. How you react to surprises will decide on your success. All is it up to negotiation. If you find yourself in the situation that somebody manipulates obvious facts, stop immediately any further negotiation.

10. Keep an eye on the cash Make sure you hire your own CFO and firmly control this position. Who the General Manager is important, but who is your Chief Financial Officer or Accounting Manager is just as important. All purchases above 50,000 or 100,000 RMB should be signed by the two company officers. Make sure the Chief Financial Officer or Accounting Manager has personally signed all major purchases, invoices and contracts. The most popular financial shames in any Chinese ventures are: bogus names on the payrolls, inventory and asset manipulation, and kickback for purchasing material and equipment.

 

While mature economies sputter, businesses set their sights on developing markets, with China the primary target. But what exactly are the business opportunities in China?

First and foremost, look to the import or export of products. A primary driver of the Chinese economy has been its ability to manufacture goods cheaply. With wages under a dollar an hour, China can undercut many other international suppliers purely on the basis of cost. Vietnam, Malaysia and other countries are starting to penetrate low-end manufacturing while China moves to higher quality standards, better workplace conditions and increasing innovation.

Perhaps the biggest opportunities lie in export to China. China’s domestic consumerism is growing rapidly and well-off Chinese have developed an appetite for Western products, believing that many Chinese products are inferior.

Luxury goods are in particular demand. This isn’t surprising given China’s expanding wealthy class — the latest Forbes report on the wealthiest Chinese reveals that there are 128 Chinese billionaires.

Countries like France and Italy are working hard to develop Chinese interest in wine, beer, spirits and other beverages. And certainly the Chinese are keen to experience these new, sophisticated tastes.

So what about real estate? Only a few years ago it seemed that real estate investments, almost anywhere in the world, could do no wrong. I have personal experiences with friends who explored opportunities in China real estate only to be scared away by reports of declining prices and tricky regulations. It is said that many buildings on key land in major Chinese cities sit largely empty. So do you take the contrarian view believing now is the time to buy? It’s impossible to know the answer.

Franchise opportunities is another area to explore. Of course, KFC, Pizza Hut and McDonalds have found customers by the millions in China, but how do other brands fare? It seems hit and miss and highly unpredictable. I’ve heard lawyers discuss “sure things” that have fallen flat while being completely surprised but unexpected successes. It’s hard to understand or predict the behavior of this developing Chinese market.

Over the last decade China has spent billions of dollars on infrastructure projects, from bullet trains to improved highways. In fact, the just-launched Shanghai to Hangzhou line travels an amazing 400 kilometers an hour.

Recent areas of particular interest in China, based on headlines and buzz, include securing energy and mineral rights abroad, health care, engineering and IT.

Actually China is the fastest growing market in the world. It’s just a question of time (exactly it’s a question of next five years) when it become also the biggest market for luxury goods in the world. Currently it is in the second position, just after Japan.

Under the name of luxury goods we understand items not so necessary but very desirable, possession of which gives a sense of comfort and indulgence. Most of them belong to one of these sectors: fashion, accessories, footwear, perfume, cosmetics, jewellery and lingerie.

The recent 21st Century Deluxe 2009 Report effectively describes what types of products are most wanted in China. For all the high-end Italian brands it seems to be an opportunity not to be missed. Until recently the purchases were made with little awareness – today situation is completely different. Rich Chinese know exactly what they want and what they need. That’s why many fashion houses are looking to open more boutiques in the country of the Rising Sun. But luxury is not only fashion and accessories – it’s simply a lifestyle.

Here are the brands favored by the new rich Chinese:

Jewelry & Watches – Cartier (France)
Fashion – Gucci (Italy)
Airline – Air France (France)
Hotels – Peninsula (Hong Kong)
Alcohol – Martell (France)
Cars – Mercedes-Benz (Germany)
Christmas gifts – Omega (Switzerland), Swarovski (Austria)

Crisis? Not for Chinese millionaires.

The Chinese people love and buy luxury goods. Their passion for luxury is irresistible and the market seems to be rising despite global crisis. In 2009 they bought a quarter of the luxury goods produced in the planet, at a total of 9.4 billion USD. This sum could be even higher, if account were taken of the purchases made by the Chinese outside the country. It is undoubted opportunity for all those who want to start their own business in China. Business opportunities which offers the country widened to a new field.

This trend has been noted by luxury brands (mainly French and Italian) which invest all the time in Chinese market. Louis Vuitton, Bally, Gucci, Salvatore Ferragamo are one of the first brands that have opened their first stores in the country of China.

Customer Profile

Among those who drive the situation on the higher-end products are mainly young people of China that are 20 years younger than their counterparts in the United States and Japan. It is the new rich class that are potential consumers of the best quality goods. China has great potential for this type of market, primarily due to the huge population living in large cities. Not without significance is that the young consumers wish to emphasize their status. Being an influential person of high social status impresses others. And how to let others know with whom you’re dealing with? Of course with branded gadgets.

It’s also worthy of note that young Chinese accepted very quickly “shopping and mall culture”. In 2020, seven of the ten largest malls in the world will be located in China. But Chinese like to shop abroad as well. Mainly because it is often more cost-effective. That’s why they often travel to shop in Europe’s designer fashion boutiques. According to The Word Trade Organization about 100 million of Chinese will go abroad in 2020.

Which are the basic strategies for those who plan the opening of luxury brands in China? First of all, investment in promotion of new brands with sufficient incentive to the client is very important. For example, organizing promotional, closed events necessarily with the presence of celebrities. Second of all, it is necessary to involve local elements to the production of luxury brands, mainly by moving the factories into China and by cooperation with local partners.

The UK Border Agency have announced the introduction of a new Olympic/Paralympic Games visit visa for Games family members wishing to enter the UK to take part in specific Games related activities in the lead-up to London 2012.

Games Related Activities

Examples of Games related activities include:

  • Meetings with London Organising Committee for the Olympic Games (LOCOG)
  • Participating in UK based training camps as part of a national team;
  • Participating in individual sport Olympic/Paralympic test events.

Games Family Members

Games family members include athletes, coaches, officials and accredited media. To be eligible to apply the Games family member must have been identified by LOCOG, who must issue an official invitation letter inviting them to visit the UK for a purpose connected to the Games.

 

Olympic and Paralympic Sports

The UK Border Agency have produced an exhaustive list of Olympic and Paralympic sports which is available here                                                                                      (link to http://www.ukvisas.gov.uk/en/ecg/visitandtransit/sportsvisitor). Any sport outside this list will not qualify.

 

Applications

Prospective applicants can apply up to 3 months before they intend to travel to the UK and are advised to apply at least 2 months in advance to allow sufficient time for their application to be processed.

Applicants will need to attend a Visa Application Centre in their country of residence to submit the application and enrol their biometric information. In addition to a signed invitation letter, applicants will need to provide evidence of how they intend to fund their trip and may also wish to consider submitting evidence of their marital status, itinerary, occupation, income and their association with the Olympic or Paralympic sport.

Successful applicants will receive a visa that is valid from the date of issue until 8 November 2012, irrespective of the date of the application. The maximum stay in the UK on any one visit is six months and it will not be possible to apply as the dependant of a Games visitor or switch from the Games visitor visa into a different immigration category.

 

How Can Paragon Law Assist You?

Paragon Law are specialists in UK immigration law. Through our offices in the UK, China and India and our association with NeJame Law in the USA, we are well placed to assist individuals seeking to enter the UK on an Olympic or Paralympic Games Visit Visa. To find out more about this type of visa and how Paragon Law can assist you then please call Thalej Vasishta in our London office on +44 (0)845 519 6966 or email him on thalejv@paragonlaw.co.uk.

Business lunches and negotiations are obligatory events and nobody denies or calls it in question. What is always necessary to know? What are the basic requirements? At business lunches, seating follows a strict business protocol. That is to say, you cannot just come and take any seat you want. The rule is the following here: the most honorable guest or the head of the negotiations is likely to be seated facing the door. Furthermore, at a business lunch you should never get down to business right away.

That means that you should start with common questions and find common ground with the negotiations participants and then everyone will automatically pass into business talks after a while. During a business lunch, a toast is proposed, first of all by the host and only after that you propose your toast. It is very important to remember. Another rule is “the rule of both hands”: always accept and take everything with both hands. That is important, polite and delicate. Now we will be talking about business cards where “the rule of both hands” will be also mentioned. That is what I briefly wanted to say about business lunches.

Gift giving

Small gifts are always appreciated everywhere but in China there are certain rules which specify what kind of gifts may be given and what ones you should not give. These rules are described in a separate range of issues. One thing you always need to keep in mind is that you should not give a clock or a watch as a gift to the Chinese as it would signify the cutting of relationship. Moreover, do not expect your business partner to open your gift immediately for the Chinese never do it in anybody’s presence. They are not in European habit of showing what is given them as a gift. Why is it so? Firstly, because a Chinese does not want to be an offense to your feelings and give you any reason to think that your gift is cheap. And secondly, a Chinese does not want to show his emotions as they are hidden. This is what I briefly wanted to say about gift giving.

British industry is voicing concerns over the Government’s proposal to introduce a cap on the number of skilled non-European nationals entering the UK to work.

The Government’s rationale is to reduce net migration to tens of thousands and tackle unlimited migration, which, it says, places unacceptable pressure on public services, housing and school places.

The Government’s aim is to demonstrate to the public and frequently hostile press that immigration is under control.

In an area that receives little accurate debate, it should be noted that skilled non-EU nationals who come to the UK to work are not entitled to claim benefits for themselves (or their families) and are not entitled to free housing.

From experience, they often take out private medical insurance and send their children to private schools.

The Government’s stated aim of reducing migration contradicts with their wish to continue to attract the brightest and best people to the UK. It fails to recognise that by imposing restrictions and uncertainty against the best and brightest in the world coming to the UK (and the businesses and services that want to employ them) we will not attract talent but instead lose out to our global competitors.

If a UK business wants to employ a non-EU national, it must register first with the Home Office as a sponsor. They will then be allocated certificates to sponsor non-EU skilled workers.

At my firm we have acted for clients who have been granted hundreds of certificates and also a business which has registered to obtain one certificate to make a strategic hire of an “A” star in their sector. This system was working for employers.

However, July 2010 saw the Government without notice reduce allocations of all existing employers. Consequently, for example, a client with 300 plus allocations saw a reduction to 50. Anyone who wants to register as a new sponsor since the interim limit was introduced will find that they will be given no allocation of certificates with little hope of being able to request an allocation on an exceptional basis.

I advised a niche sector client – one of three in their market in the UK – who had offered a high level post to a leading operations director in their sector based in Australia.

They decided not to pursue the recruitment because of the uncertainty caused by the interim limit and are instead considering transferring operations to Australia. The impact to the UK economy is stark – jobs may be lost to Australia.

There is also uncertainty as to how the cap will work when introduced in April 2011. Will certificates be on a first come first served basis until the annual cap is reached? It is unclear whether the annual quota will be broken down on a monthly or quarterly basis.

It is suggested that a panel of senior UK border Agency managers will have power as to how the allocation of certificates will be distributed in a particular month/quarter.

This begs the question how this panel will deal with competing interests between, for example, a hospital that wants to bring over a leading neurosurgeon and a design company which wants to bring over a leading designer from say, Japan, to fulfill a contract it has secured with a Japanese client.

What happens to the loser in this round? Are they allowed to enter the subsequent month/quarter’s lottery? There are many unanswered questions.

Businesses often plan their recruitment months if not years ahead. We act for Blue Chip retailers who look to recruit trainee pharmacists and trainee opticians while their potential recruits are at university. Because of the lack of interest in studying these subjects amongst UK students, a large proportion of their recruits are international students.

In particular, where small and medium businesses operate, the requirement to recruit foreign nationals can be business critical; that is, they cannot afford to wait to have their foreign talent stuck in a quota queue system.

Moreover, if a UK hospital or university wanted to recruit a leading foreign specialist doctor or academic, that talented person will have other options around the globe other than the UK.

The Government has faced widespread and significant opposition against the cap. It will be better served allowing the current system to bed in further which has sufficient checks to ensure that the system is not being abused.

Currently, a business needs to illustrate that they have tested the resident labour market through advertising before allocating a certificate of sponsorship to a non EU national.

It could take a generation before the resident work force is in a position to fill the gap in the market that necessitates the UK’s current dependency on foreign migrants.

In the meantime, UK immigration policy must encourage businesses which are attracting the best minds, investors and multi nationals globally to ensure that our key sectors remain world class and competitive.

A leading world specialist will inevitably attract the best team around him and this can only benefit the UK in up-skilling its resident workforce.

Instead, the UK’s attractiveness is being hampered, particularly because of foreign press picking up on the hostility towards immigration in the UK press.

The Government still can be forgiven for saying that it got it wrong and that they will not impose the cap.


 

 

It’s obvious the top entrepreneurs and investors understand that India and China are the future of our global economy. Do you?

One of India’s wealthiest business leaders, Anil Ambani, invests $325 million in Steven Spielberg’s movie studio DreamWorks – something unimaginable just five years ago. In turn, Warren Buffett invests $230 million for a 10% stake in Chinese electric car manufacturer BYD, the same investor who shunned technology investments earlier this decade. It’s obvious the top entrepreneurs and investors understand that India and China are the future of our global economy. Do you?
With over 1 billion people moving into the middle class, effectively increasing the global market for products and services by 50% over the next decade, can your firm afford to ignore the single largest market opportunity in the history of business? It’s time you consider “going east” as part of your 2011 strategic plan. And it’s as critical for small to mid-size firms to make the move as it is for top investors and large corporations.

MADE IT IN CHINA
Two entrepreneurs helping others make the leap are Graham Jeal and Simon Cann, authors of a new book series entitled Made It In…. Graham, a British-born entrepreneur who has been building companies in China since 2001, is the former president of the Entrepreneurs’ Organization (EO) chapter in China. Cann, a prolifi c writer, has been a management consultant to companies spanning the music, entertainment, and broadcast industries.
I met Graham and Simon on my last trip to China and was impressed by their enthusiasm and initiative to encourage others to leave the comfort zone of their own markets and venture out into some of the leading business hotspots around the globe.
In their first book, Made It In China, they feature specifi c lessons learned from nine entrepreneurs including Graham, who have built manufacturing plants, launched internet businesses, started hotels and restaurants, and created large sales organizations within China. One of the entrepreneurs was even the first foreign participant on China’s equivalent of “The Apprentice.” In all cases, these entrepreneurs left their home countries and built businesses in a culture different from the own – and their stories are both inspirational and instructive.

In all cases, these entrepreneurs left their home countries and built businesses in a culture different from the own – and their stories are both inspirational and instructive.

Other countries in the series include Vietnam, Russia, and Kazakhstan with more in the works. I encourage you to go to their website www.MadeItIn.com to learn more.

COMING WITH QUALITY
Another must read book for growth firms wanting to dominate their industry is Hermann Simon’s Hidden Champions of the 21st Century. I was speaking with Hermann Simon upon his recent return from China. He brought news that Chinese firms are focused on building competing quality products that will challenge even Germany’s lead in many export areas – and that they are building factories in Germany and the U.S. and other parts of the world. They want to get “in our backyards” before we get in theirs! And with over $2 trillion in surplus cash vs. a projected U.S. 2011 $14 trillion deficit, they have the financial muscle to do it.
No longer will the “Made in China” label mean low cost or low quality. Their entrepreneurs are hungry to learn from the best and bring their business models, products, and services to other countries.
India is aiming for the same upgrade to their brand. Seen primarily as a cheap supplier of back office functions, they are building global brands and bringing their products, like the $2500 Nano car, to the developed world. And with one of the youngest populations in the world, India is well poised to incubate entrepreneurs that will be hungry to get into other markets. Again, it will be crucial for established businesses to plan their India strategy for next year and beyond.

WHOLLY OWNED SUBSIDIARIES
Hermann Simon notes, based on his research of the world’s top mid-market companies, that they almost always set-up wholly owned subsidiaries vs. licensing or joint venture relationships. It’s been critical for these fi rms to control their brands and have their own people “on the ground” in other countries. And they tended to expand into one or two diff erent countries each year, with many now having operations in over 50 countries.

When these “hidden champions” are asked which countries they’re focused on for the next decade, it is India and China.

When these “hidden champions” are asked which countries they’re focused on for the next decade, it is India and China. And while it might be too late for manufacturers outside these countries to make inroads as quickly, the customer service models and cultures of the west will not be easy to imitate by the eastern entrepreneurs. This is the distinct advantage, plus a long history of good management practices, that entrepreneurs in the west have as they pursue these eastern markets.

Read the two books mentioned above and make 2011 the year you focus on the east.

For more information please click here

 

Thalej Vasishta, Managing Director of the Paragon Group has launched Paragon Law and assisted other businesses with market entry into China, provides 5 quick tips on dealing with Chinese counterparts;

 

1. Cultivate “guan xi”.
To make things happen in China, you have to know people. “Knowing” is what the Chinese mean by “guan xi” or “connections.” When you cultivate “guan xi” with Chinese people, they will often do anything to please you including important introductions to people they know. However, if you start trying to do business before people get to know you and feel comfortable with you, it is unlikely you will be successful. 

 

2. Make friends first, do business later.
The Chinese enjoy small talk and pleasantries. The importance of hosting and budgeting for dinners and lunches where a relationship can be developed should not be underestimated. They want to learn more about you and start to build a long term relationship before conducting business. This is why it takes longer to get things done there. Therefore, initial meetings rarely produce direct results. 

 

3. Introduce your team to the Chinese personally.
The Chinese people are conditioned by centuries of history to obey their political leaders the way they obey their parents. If you’re the only person who travels to China but you need your wider team to help out with operations, introduce them formally to your Chinese contact, especially in person. It is this that forms the basis of trust. 

 

4. “Yes” does not literally mean affirmative.
Chinese people have a habit of saying “yes” to show that they’re paying attention or that they’re following what you say. In this context, the word “yes” doesn’t mean that they agree with what you say or with your terms. 

 

5. Recruit a good interpreter
Decision makers will tend to be of the older generation and rarely speak English. It is key for any meeting you use an interpreter who is both good and you feel comfortable with. Therefore spend time selecting and getting to know an interpreter.