CHINA

by YuShanshan

Country Background

• China encompasses diverse topographies, climates, cultures and people. Economic development has generally been more rapid in coastal provinces than inland and there are large disparities in per capita income, culture and lifestyle between regions.
• Foreign investment remains a strong element in China's remarkable expansion in world trade and has been an important factor in the growth of urban jobs.
• The main exports are manufactured goods, including textiles, garments and electronics.
• China is a rapidly rising global economic power. Overall growth has averaged a robust 7% to 8% for more than a decade, with some markets expanding much more rapidly: 
• China's auto market exploded in 2003, passenger car sales jumping 82% year-over-year. Yet China's auto industry is still in early stages with strong growth projected for years ahead.
• China is the world's largest telecommunications market with some 280 million mobile subscribers and 270 million wireline subscribers. 
• Chinese household appliance manufacturers are experiencing growth in excess of 35% per year. The demand for China's household electric appliances, both domestic and for export, pushed production levels overall for many small and major appliance product categories up 40 to 50 percent or more in 2003.
• At approximately 1.29 billion people, China is the world's most populous nation, yet Internet penetration and ecommerce are still in the developmental growth stages. 

Unique Challenges for Marketers in China

• Distribution of spending power is very uneven: most of China's affluent consumers can be found in the main cities such as Shanghai, Guangzhou and Beijing, or the more numerous secondary cities like Chongqing, Harbin, Wuhan, Nanjing, Chengdu and Tianjin.
• However, there are also millions of potential customers in the hundreds of smaller cities around the country.
• This urban population is expected to grow rapidly as one of the biggest mass migrations in history from the countryside to cities gathers pace.
• In the decade to 2010, the United Nations estimates that 200 million rural Chinese will become city dwellers. 
• For now, it is the smaller cities that are proving to be a special challenge for outsiders.
• The diversity of China's market doesn't mean creating multiple messages. Instead, campaigns need to be carefully devised and tested across a variety of markets to make sure they have a uniform effect. 

Major Opportunities

• There are a multitude of trade and investment opportunities for exporters in the China market.  
• Some of the major sectors currently experiencing rapid growth:
• processed food and beverages, 
• gambling, transport, 
• IT and telecommunications, 
• minerals and energy, 
• environment protection, 
• building construction products and services. 

• Three of the major growth industries:
• the exporting of education, 
• processed food 
• wine products.

Doing Business in China

• There are three different business incorporation vehicles which can be utilized to do business in China. These are:
• The utilization of a representative office
• Seeking a Chinese joint venture partner
• Establishing a Wholly Foreign Owned Enterprise (WFOE)

• Key Millward Brown Metrics of China:

Using an agent/distributor

• Selling your products through distributors or agents is the “easiest” way to penetrate the Chinese market. 
• It is not free of risks, though, as you may find yourself in the middle of a chaotic distribution network that is difficult to control.
• Tips on how to deal with agents/distributors in China：
• Tip #1. Licences: 
• Ensure your distributor/agent has the required licences to retail your products.
• Tip #2. Exclusivity: 
• Try to reduce the exclusivity territory (you may attach a map to the contract). Generally, exclusivity for all China is a BAD idea.
• Tip #3. Establish sales targets and regulate your rights in case they are not met (e.g. termination or end of exclusivity).
• Tip #4. Commissions: 
• describe clearly the calculation basis for commissions in the agency agreement.
• Tip #5. IP Rights: 
• Define the use of IP rights, promotion and publicity materials. Do not grant property on IP rights; grant instead a licence of use.
• Tip #6.  Termination: 
• Reasons for termination are a key issue in distribution/agency contracts. Do not forget to regulate the consequences of such termination (e.g establish sale of stock to third parties / to the foreign investor, destroy / return the promotion materials, etc.).
• Tip #7. It is quite common for entrepreneurs and SMEs to initially “test the waters” with a distributor or an agent, and once they understand the market better and how their product works, they take it to the next level.

Establishing an office

• Obtaining the License.
• Designation of a Chief Representative.
• In order to be able to start operating you MUST designate a Chief Representative for the R.O. This person will hold legal authority and will be legally liable. The Chief Representative will also pay taxes in China.
• Registering with the Tax Bureau.
• Accounting.
• As soon as you get your license you must start paying taxes. You pay the income tax monthly and the office taxes every three months.
• Recruitment.
• You may choose whom you hire but you cannot complete the recruitment process directly.  Instead you need to use an employment agency that has a license to provide this service.
• Opening a Bank Account.
• Looking for an Office.
• You cannot just set up a Representative Office anywhere you want. The location/building needs to have a certain type of classification. A Chinese company can set up in locations we are not allowed to.

Joint ventures/licensing

• In China, most joint ventures are equity joint ventures (EJVs), though some investors establish cooperative (or contractual) joint ventures (CJVs). 
• CJVs and EJVs are similar in many respects. 
• The PRC government approval process, approval authorities, format of agreements, tax breaks, legal standing, and the means, laws, and authorities for dispute resolution are identical. 
• The general management structure and governance procedures are also virtually the same. 

Electronic commerce

• Internet market develops rapidly in China
• The enterprises demand on E-Commence intensively in China
• Enterprises investment in E-Commence changes to maturity and application
• Market structure of E-Commence in China
• Mobile E-Commence market developes rapidly
• Basic conditions of E-Commerce have been built
• The Chinese government promote E-Commerce-market actively
• Byelaw of Internet and security of communication network comes on conjointly
• Constitute the laws of E-Commerce actively
• Commercial banks found bank-online and China Finance Center of Authentication (CFCA)
• Commerce dept. of government and large scale state-owned enterprise connect the Internet actively
• Little enterprise s local IT basic construction level raise quickly
• Appeared new mode of EC like eMarktplace etc.

•  The development tendency of the electronic commerce market in China
• Develop E-Commence internally and externally
• Lighthouses effect
• Success will come when conditions are ripe

Openness to foreign investment

• Since 1979, a multi-tiered, multi-channel and diversified management system has been established in China's foreign trade and economic relations.
• comprises specialized foreign trade firms at various levels and of various kinds; 
• productive enterprises that manage their own import and export;
• scientific research institutes;
• commercial and goods supply enterprises
• foreign-funded enterprises. 

Business customs 

• Relationship &Communication
• The Chinese don't like doing business with companies they don't know, so working through an intermediary is crucial. This could be an individual or an organization who can make a formal introduction and vouch for the reliability of your company.
• Before arriving in China send materials (written in Chinese) that describe your company, its history, and literature about your products and services. The Chinese often use intermediaries to ask questions that they would prefer not to make directly.
• Business relationships are built formally after the Chinese get to know you.
• The Chinese see foreigners as representatives of their company rather than as individuals.
• Gender bias is nonexistent in business.
• The Chinese prefer face-to-face meetings rather than written or telephonic communication.
• Meals and social events are not the place for business discussions. There is a demarcation between business and socializing in China, so try to be careful not to intertwine the two.
• Business Meeting Etiquette
• Appointments are necessary and, if possible, should be made between one-to-two months in advance, preferably in writing.
• You should arrive at meetings on time or slightly early. The Chinese view punctuality as a virtue. Arriving late is an insult and could negatively affect your relationship
• Send an agenda before the meeting so your Chinese colleagues have the chance to meet with any technical experts prior to the meeting. Discuss the agenda with your translator/intermediary prior to submission.
• Meetings require patience. Mobile phones ring frequently and conversations tend to be boisterous. Never ask the Chinese to turn off their mobile phones as this causes you both to lose face.
• It is imperative that you bring your own interpreter, especially if you plan to discuss legal or extremely technical concepts as you can brief the interpreter prior to the meeting.
• Visual aids are useful in large meetings and should only be done with black type on white background. Colours have special meanings and if you are not careful, your colour choice could work against you.
• Presentations should be detailed and factual and focus on long-term benefits. Be prepared for the presentation to be a challenge.
• Business Negotiation
• Only senior members of the negotiating team will speak. Designate the most senior person in your group as your spokesman for the introductory functions.
• Chinese are non-confrontational. They will not overtly say 'no', they will say 'they will think about it' or 'they will see'.
• Chinese negotiations are process oriented. They want to determine if relationships can develop to a stage where both parties are comfortable doing business with the other.
• Under no circumstances should you lose your temper or you will lose face and irrevocably damage your relationship.
• Business is hierarchical. Decisions are unlikely to be made during the meetings you attend.
• Attire
• Business attire is conservative and unpretentious.
• Men should wear dark coloured, conservative business suits.
• Women should wear conservative business suits or dresses with a high neckline. 
• Women should wear flat shoes or shoes with very low heels.
• Bright colours should be avoided.
• Business Card
• Business cards are exchanged after the initial introduction.
• Have one side of your business card translated into Chinese using simplified Chinese characters that are printed in gold ink since gold is an auspicious colour.
• Your business card should include your title. If your company is the oldest or largest in your country, that fact should be on your card as well.
• Hold the card in both hands when offering it, Chinese side facing the recipient. 
• Examine a business card before putting it on the table next to you or in a business card case. 
• Never write on someone's card unless so directed.

Local time, business hours, & holidays

• Local time
• No time difference compared with Malaysia
• Business hours
• The Chinese government stipulates a five-day workweek with no more than 8 hours a day and no more than 44 hours a week.
• The regular working time generally is from Monday to Friday, with Saturday and Sunday off. 
• The Chinese people usually work between 08:00 and 18:00 each day, with a lunch break from 12:00 to 14:00. However, local variations may occur due to the time difference or policy in different cities. For instance, the working day in Xinjiang usually starts from 09:00 or 10:00 due to its longitude.
• Holiday

Fact Facts

Population	1,339,724,852
Capital	Beijing
Area	9,640,821 km2
Ethnic groups	91.51% Han, 55 recognised minorities Han - 91.59% Zhuang - 1.28% Manchu - 0.84% Hui - 0.78% Miao - 0.71% Uyghur - 0.66% Tujia - 0.63% Other - 3.51%
religious	non-religious and atheist 50%;  Daoist (Taoist) 32%;  Buddhism 9%  Christianity 8%;  Islam 2%.
major language	Modern Standard Mandarin(Main) Cantonese; 55 minority peoples have their own languages; many local dialects in mainland of China
monetary unit	Renminbi (yuan) (¥) (CNY）
major industries	Typesmining and ore processing, iron, steel, aluminum,  and other metals, coal; machine building; armaments;  textiles and apparel; petroleum; cement; chemicals; fertilizers;  consumer products, including footwear, toys, and electronics;  food processing;  transportation equipment, including automobiles,  rail cars and locomotives, ships, and aircraft;  telecommunications equipment,  commercial space launch vehicles, satellites.
major export	Machinery, transport equipment, crude oil,  natural gas, minerals or agricultural products.
major imports	Machinery and electrical appliances; High-tech products; Crude oil; Primary plastic products; Rolled steel products; Refined oil products; Iron ore;
GDP	USD$11.316 trillion
GDP per capita	USD$8,394

Reference:

• http://en.wikipedia.org/wiki/China 
• http://www.china-window.com/china_business/doing_business_in_china/do-you-konw-what-kind-of-.shtml
• http://www.kwintessential.co.uk/resources/global-etiquette/china-country-profile.html
• http://www.foreignentrepreneursinchina.com/tag/agents-in-china/