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Doing Business In China: An Overview Shawn He Yuxun MeetChinaBiz.org.

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Presentation on theme: "Doing Business In China: An Overview Shawn He Yuxun MeetChinaBiz.org."— Presentation transcript:

1 Doing Business In China: An Overview Shawn He Yuxun MeetChinaBiz.org

2 Background

3 To Inform, Educate…

4 …And Enable

5 The 3 Waves of China Low Costs-driven Exports (since 1980s) Low Costs-driven Exports (since 1980s) –Low-cost everything –Enabled by government policies and/or direct subsidies –Labor, land, materials, utilities, taxes/tariffs/duties, environmental… Discounted Assets-driven FDI ( ) Discounted Assets-driven FDI ( ) –Fire-sale of state assets –Multiple forms: New plants, IPOs, Asset Management… Resources-driven Acquisition ( ?) Resources-driven Acquisition ( ?) –Natural vs. Man-made –Tangible vs. Intangible

6 Whats New

7 China-like high economic growth and market expansionChina-like high economic growth and market expansion Level of business unpredictability resembles that found in ChinaLevel of business unpredictability resembles that found in China It is a new strategy to embrace the China marketIt is a new strategy to embrace the China market Created to triangulate our networks in all 3 continents Chicago · Wash, DC · Beijing · Shanghai Buenos Aires · Lima · Sao Paulo LatAm Is The New China

8 China Tradeshow Stats China Accounts for 33.5% of Total Asian MarketChina Accounts for 33.5% of Total Asian Market –Japan: 22%, S.E. Asia: 12.5% – : 30% Growth Recession-ProofRecession-Proof –Net Space sold grow 4.3% in 2010, following dip in Capacity & Growth2010 Capacity & Growth –96 intl standard venues –4.1 Mn sq.m. in capacity –212K sq.m. more by 2013 –Worlds largest venue planned in Shanghai: sq.m Performance2010 Performance –517 Tradeshows –8.5 Mn sq.m. sold (vs. 1.9 Mn in Japan) –Total Revenue: US$1.2Bn –Avg: US$2.3Mn per show 1 sq.m. = sq.ft. Source: Exhibition World

9 Major Players Shanghai Guangzhou Shenzhen Beijing Major OrganizersMajor Organizers –China Foreign Trade Centre (CFTC) 52% –China Council for the Promotion of Intl Trade (CCPIT) 16% –Reed Exhibitions China, UBM Asia, Messe Frankfurt, Messe Koln Top 5 facilities (by floor space & no. of shows)Top 5 facilities (by floor space & no. of shows) –Beijing New Intl C & E Ctr –Shanghai New Intl C & E Ctr –Guangzhou Pazhou C & E Ctr –Shenzhen Intl C & E Ctr –China Natl Convention Ctr (Beijing) Top 6 world shows (by no. of attendees)Top 6 world shows (by no. of attendees) –Beijing Intl Auto Show –Shanghai Intl Auto Show –Guangzhou Intl Auto Show –Canton Fair (Guangzhou) –Bauma China (Shanghai) –Beijing Intl Broadcast Show Source: Koncept Living Exhibition Pte Ltd, 3D Exhibits

10 Top Cities Shanghai Ningbo Guangzhou Shenzhen Beijing Chengdu Based on 2009 figures. Source: CCE Magazine

11 The 3Ss of China SourcingSourcing –Low cost labor –Low cost materials –Lax rules and regulations (e.g., environmental) Supply ChainSupply Chain –Be part of clients supply chain –Be part of industry clustering SellingSelling –China imports rapidly increasing –US trails behind Japan and EU

12 Opportunities China doesnt have everythingChina doesnt have everything –Natural Resources: Conventional vs. Non-conventional –Intangible resources China cant make everything:China cant make everything: –Utility vs. Futility –Experiential (e.g., degree, brand equity, perception) –Complex techno-human systems China doesnt know everything (yet!)China doesnt know everything (yet!) –New models and concepts –New-found needs Demographic Trends & ShiftsDemographic Trends & Shifts –One child policy –Displacements (urbanization, un/re-employment) Emerging Middle-ClassEmerging Middle-Class –Life Style Changes: Health / Energy / Space / Security

13 The 3Cs of China 3 Fundamental Challenges3 Fundamental Challenges –Not related to LanguageLanguage CultureCulture EtiquettesEtiquettes –Cannot easily overcome –No one is immune

14 The 3Cs of China Constant ChangeConstant Change –Fast moving target –For better or worse –Long ways to go

15 The 3Cs of China inConsistencyinConsistency –Theory vs. Practice –Ubiquitous Contradiction –Result: Lack of Transparency / Predictability

16 The 3Cs of China ComplexityComplexity –East vs. West –Old vs. New –Internal / Intrinsic –Always Exceptions

17 The Big Picture AreaArea –9.6 mil sq km: comparable to the US PopulationPopulation – B –(US + EU) x 2

18 The Big Picture Population DensityPopulation Density

19 The Big Picture Cultural DiverseCultural Diverse –56 nationalities –>90% being Han –100s of dialects –Analogy: EU

20 The Big Picture Geographically DiverseGeographically Diverse –East: hills, plains, deltas –West: mountains, high plateaus, deserts –Arable land: <20% –4 natural time zones, but 1 Beijing Time –4 climate zones TropicalTropical Sub-tropicalSub-tropical TemperateTemperate Sub-arcticSub-arctic

21 Dynasties & Legacies The Chinese "Genesis"The Chinese "Genesis" –Mythological figures (Pan Gu, Nv Wo, Shen Nong, Hou Yi, Da Yao Shi, Yan & Huang...) –The Big Flood (Yao, Shun, Yu) Xia, Shang and Zhou ( B.C.)Xia, Shang and Zhou ( B.C.) –Bronze Age –First written texts (oracle characters) –I Ching (Yijing) Spring Autumn & Warring States ( B.C.)Spring Autumn & Warring States ( B.C.) –Confucius and other philosophers (Taoism, etc.) –Sun Tse (The Art of War) –The Legend of Qu Yuan and Duanwu Festival –The legend of Xi Shi and West Lake –Geographic footprints (nicknames for provinces)

22 Dynasties & Legacies Qin (Chin, BC)Qin (Chin, BC) –Unification of China and The First Emperor –Origin of the name "China –The Terra Cotta Warriors of Xi'an –The Great Wall of China Han (206 BC – 220 AD)Han (206 BC – 220 AD) –A Golden Age of Chinese history –Giving rise to the name of the majority nationality –Embodiment of the Confucius Teaching –Silk Road 3 Kingdoms, Jin, 16 Kingdoms, Southern/Northern ( )3 Kingdoms, Jin, 16 Kingdoms, Southern/Northern ( ) –A period of disunion with several rulers –Increased interest in Taoism & Buddhism

23 Dynasties & Legacies Sui ( ), Tang ( ), 5 Dynasties & 10 Kingdoms ( )Sui ( ), Tang ( ), 5 Dynasties & 10 Kingdoms ( ) –Short-lived Sui Dynasty united warring states –Tang: a high point in Chinese civilization--equal or even superior to the Han –Buddhism became a permanent part of Chinese traditional culture –Block printing was invented Song ( )Song ( ) –Emphasis on Confucianism and a revival of traditions of Chinese antiquity –Two phases: Northern Song and Southern Song, caused by the nomadic invaders –Competing Dynasties/Kingdoms: Liao, Western Xia, Jin

24 Dynasties & Legacies Yuan ( )Yuan ( ) –Mongols, led by Genghis Khan, conquered China and established capital in Beijing –Marco Polo wrote his book, Travels of Marco Polo Ming ( )Ming ( ) –Founded by Zhu Yuanzhang –Construction of the Forbidden City in Beijing Qing (Ching )Qing (Ching ) –Manchus captured Beijing –The Opium War –Treaties & concessions

25 Revolution & Civil War Sun Yat-sen & ROCSun Yat-sen & ROC Mao & CCPMao & CCP Chiang Kai-shek & CNPChiang Kai-shek & CNP WWII & Anti-Japanese WarWWII & Anti-Japanese War

26 Mao & Communism The Establishment of PRCThe Establishment of PRC The Land Reform & CommunesThe Land Reform & Communes Great Leap Forward & The Great FamineGreat Leap Forward & The Great Famine The Cultural RevolutionThe Cultural Revolution

27 The Post-Mao Era Deng Xiaoping & ReformDeng Xiaoping & Reform The First Decade The First Decade The Second Decade The Second Decade The New MillenniumThe New Millennium

28 As A Result… From Rule of Lord to Rule of LawFrom Rule of Lord to Rule of Law –Are we there yet? High- / Low-Trust SocietyHigh- / Low-Trust Society –Is China a high- or low-trust society? IntegrityIntegrity –Why seemly such a precious commodity nowadays? GuanxiGuanxi –Sufficient and/or necessary condition to do business? –Status of Guanxi Today: In more open/marketized industries and sectors: Guanxi is neutralized and resembles normal business relationship in the WestIn more open/marketized industries and sectors: Guanxi is neutralized and resembles normal business relationship in the West But still critical in highly regulated / government-controlled industries/sectorsBut still critical in highly regulated / government-controlled industries/sectors –Google Shawn Guanxi for more in-depth analysis on the topic

29 First Encounter Always a formal meetingAlways a formal meeting –Dress formally even if the Chinese dont Biz card exchangeBiz card exchange Sit with feet on the floorSit with feet on the floor Seating arrangementSeating arrangement The Chinese:The Chinese: –Indirect, subtle, and sensitive –Avoid straightforwardness, esp. with regard to monetary negotiations –Avoid confrontation, embarrassment, criticism (e.g., never say no) –Dont ask questions during a presentation Conspicuous Consumption vs. CredibilityConspicuous Consumption vs. Credibility

30 Wine and Dine Meeting over mealsMeeting over meals –Karaoke, drinking, etc. –Crash course on relationship building –Seek to know you inside out (Equivalent to a job interview) Mixed in Friendship / Family TiesMixed in Friendship / Family Ties –To further cement the business relationship

31 Negotiation & Contracts The Principal PrincipleThe Principal Principle TranslationTranslation –Beyond words –Your eyes and ears IntermediariesIntermediaries –A third party –A sympathizer or advocate on the other side Due diligenceDue diligence Plan BPlan B

32 China Biz 101 Sign a contract first, then start negotiating!Sign a contract first, then start negotiating!

33 Thank You! Shawn He Yuxun


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