4 14.1 Starting a businessFirst things first Selecting a business type Drafting a business plan Multiregional difference
5 Determinants of an ideal location for your business (Lapowsky, 2010): What are your transportation needs?What are your logistical needs?Are you relying on goods that may be imported to China?How can you get the goods from the port to your location?What government inspections and restrictions will you be subject to?
6 Figure 14.1 How long does it take to start a business in different parts of the world? Source: World Bank (2008, p. 9).
7 Table 14.1 Time needed for starting a business, selected nations and Chinese provinces Days in 2010Chinese provincesDays in 2006Austria, Palau28GuangdongTanzania29India, Russia30ZhejiangBahamas, Benin, Nepal, Nigeria31JiangsuBurundi, Poland, Thailand32Guyana (CR), Israel, Kenya34Jilin33Cameroon, Kuwait, Paraguay35Shanghai, SichuanSudan36HubeiDjibouti, Guatemala37Beijing, JilinChina, Sri Lanka, Tajikistan38HainanMalawi, Nicaragua, Seychelles, Vanuatu39ChongqingCôte d'Ivoire, Lesotho40FujianGuinea, Peru41Liaoning, Tianjin, HenanTrinidad and Tobago43Anhui, Heilongjiang, Hebei, Hunan, Shaanxi, Yunnan42-43Bangladesh, Belize44XinjiangBhutan, Fiji46Jiangxi, GuangxiSpain47GansuWest Bank and Gaza49Inner Mongolia48Bolivia, Vietnam50GuizhouPapua New Guinea51QinghaiPhilippines53Shanxi, Ningxia55Sources: World Bank (2011, pp ) and Annex B.1.
8 14.2 Ease of doing business across China Registering property Getting credit Enforcing contracts Summary
9 Sources: World Bank (2011, pp. 145-205) and Annex B.2. Table 14.2 Time needed for registering property, selected nations and Chinese provincesNationsDays in 2010Chinese provincesDays in 2006Italy27Chongqing28China, Luxembourg, Mali29ShanghaiBahrain, Chile, El Salvador, Zimbabwe31JiangsuAustria, Panama, Kosovo, Philippines32-34Niger, Hong Kong, Iran35-6Guangdong35Tajikistan37FujianIreland, St. Vincent and the Grenadines38Gabon, Tunisia, Zambia39Jilin, SichuanDjibouti, Germany, Kazakhstan, Ethiopia40-1Albania, Brazil, Denmark, Mozambique42TianjinRussia, Chad, India, Swaziland43-4Latvia45XinjiangParaguay46AnhuiAlgeria, Morocco, Venezuela47Inner MongoliaLiberia, Pakistan50Jiangxi, Shaanxi, ZhejiangIraq51LiaoningArgentina52Hunan53Congo, Dem. Rep.54Jillin55Congo (Rep.), Jamaica, KuwaitHeilongjiangCambodia, Vietnam, Macedonia56-8Hebei58Burkina Faso59Beijing, NingxiaBelize, Dominican Rep., Rwanda60Hubei, HenanCôte d'Ivoire, São Tomé and Principe62ShanxiGambia, Uruguay66Yunnan, GuangxiFiji68Qinghai69Central African Republic75Hainan76Grenada, Uganda77GuizhouCzech Republic, Eritrea, Uzbekistan78GansuSources: World Bank (2011, pp ) and Annex B.2.
10 Table 14.3 Time needed for enforcing contracts, selected nations and Chinese Days in 2010Chinese provincesDays in 2006Jiangsu112Singapore150Guangdong120Uzbekistan, New ZealandJilin210Belarus, S. Korea, Azerbaijan225-37Shaanxi235Kyrgyz Republic, Rwanda260LiaoningNamibia270NingxiaLithuania, Guinea275-6Hubei277Hong Kong, Norway, Russia280-1Armenia, Georgia285Henan, Zhejiang, Chongqing285-6Heilongjiang, Shanghai290-2Vietnam295SichuanUnited States300Anhui, Shanxi, TianjinLatvia, Mongolia, Luxembourg309-21Hainan310France331Inner Mongolia330Ukraine345Beijing, Fujian340-2Japan, Moldova360-5Yunnan, Jiangxi365Macedonia, Mauritania, Finland370-5Denmark380Hunan382Albania, Kazakhstan, Germany390-4Xinjiang392Australia, Hungary, Austria, Fiji395-7Guizhou, Guangxi, Hebei397China, Cambodia, Eritrea, UKMexico, Iceland, Switzerland Turkey, Peru415-28Tajikistan, Lao PDR430-43Gansu440Nigeria457Qinghai458United Arab Emirates537Brunei, Nicaragua540JillinMontenegro, Niger, Portugal545-7Sources: World Bank (2011, pp ) and Annex B.4.
11 Table 14.4 Ease of doing business in China – top and bottom five provinces Rank no.Starting a businessRegistering propertyGetting creditEnforcing contracts1ZhejiangShanghaiFujianGuangdong2Jiangsu34Shandong5Shaanxi…26NingxiaShanxiXinjiangAnhui27HenanHunan28GuangxiGuizhouQinghai29GansuYunnan30Note: Hong Kong, Macau, Taiwan and Tibet are excluded from the rankings.Source: Annex B.
12 14.3 Understanding China’s business culture Collectivism versus individualism What can(not) be done in China
13 Remember that:4 is regarded as unlucky, as “four” it sounds similar to the word for death.8 is regarded as very lucky, as “eight” sounds similar to the words for prosperity and wealth. 3 is also lucky, as it sounds similar to the word for “life” in Cantonese.9 is also positive as it sounds like the word for “eternity” or “long term”, while 6 sounds similar to “good progress.”Red and yellow/gold are regarded as lucky, but avoid white, which is associated with mourning.Use images of auspicious animals: dragon, phoenix, unicorn, tortoise (the Buddhist symbol of learning), crane and fish.Images of the Great Wall indicate stability and reliability.Also avoid black borders around names or photos of people, since this is also associated with death.
14 14.4 Managing cultural differences Obstacles to cross-cultural exchanges Tips in cross-cultural negotiations
15 Table 14.5 Eastern versus Western cultures: communication styles Western stylesEastern stylesDirectIndirectBluntDiplomaticPoliteVery courteousTalkativeReservedExtrovertIntrovertPersuasiveRecommendationsMedium-strong eye contactWeak eye contactUnambiguousAmbiguousDecisiveCautiousProblem solvingAccepting of the situationInterruptDoes not interruptHalf listensListens carefullyQuick to dealCourtship danceConcentrates on powerConcentrates on agreed agendaSource: Lewis (2003).
16 Remember that:Senior managers enter into the meeting room first, followed by junior staff;In formal occasions, only senior members on both sides are expected to talk, unless junior members are invited to do so;expect a long lunch breaks;“face” is important;the power of the negotiator may be limited, and sometimes assistants and secretaries to top managers are even more useful.
17 Indicators for the ease of doing business in China AnnexIndicators for the ease of doing business in China
18 Cost (% of provincial GDP per capita) B.1 Starting a businessProvinceProcedures (number)Time (days)Cost (% of provincial GDP per capita)RankAnhui144219.427Beijing373.210Chongqing399.517Fujian12406.77Gansu4714.129Guangdong13286.33Guangxi4616.5Guizhou5026.630Hainan3812.1Heibei9.816Heilongjiang11.918Henan4111.6Hubei3613.615Hunan14.6Inner Mongolia457.911Jiangsu315.82Jiangxi21Jilin8Liaoning69Ningxia5526Qinghai5123Shaanxi4315.225Shandong334Shanghai353.15Shanxi9.320Sichuan19.1Tianjin3.7Xinjiang44Yunnan13.9Zhejiang5.71Note: Each province is represented by its capital city. Hong Kong, Macau, Taiwan and Tibet are excluded. Source: World Bank (2008, p. 38).
19 Cost (% of property value) B.2 Registering propertyProvinceProcedures (number)Time (days)Cost (% of property value)RankAnhui10465.617Beijing593.112Chongqing7289Fujian374.13Gansu787.829Guangdong8353.72Guangxi686.830Guizhou7712.6Hainan16764.823Heibei583.221Heilongjiang556.114Henan11605.127Hubei6.225Hunan536.924Inner Mongolia474.618Jiangsu315Jiangxi5020Jilin4.2Liaoning51Ningxia4.4Qinghai5.319ShaanxiShandong394Shanghai3.61Shanxi625.426Sichuan3.9Tianjin426Xinjiang4513Yunnan6622ZhejiangNote: Each province is represented by its capital city. Hong Kong, Macau, Taiwan and Tibet are excluded.Source: World Bank (2008, p. 38).
20 B.3 Getting credit – creating and registering collateral ProvinceTime (days)Cost (% of loan value)RankAnhui202.814Beijing152.77Chongqing519Fujian2.31Gansu829Guangdong112.43Guangxi473.930Guizhou176.925Hainan5.118Heibei9Heilongjiang133.110Henan163.3Hubei12Hunan3.7Inner MongoliaJiangsu2.12Jiangxi5.924Jilin2221LiaoningNingxia3.627Qinghai3.8Shaanxi428Shandong2.9ShanghaiShanxiSichuan3.2Tianjin6Xinjiang3.426Yunnan23ZhejiangNote: Each province is represented by its capital city. Hong Kong, Macau, Taiwan and Tibet are excluded.Source: World Bank (2008, p. 39).
21 Chapter conclusion: Although the laws and regulations are fundamentally the same throughout the country, provincial and local officials have a large degree of discretion in terms of the enforcement of national legislation. This resulted in the fact that investment climate varies widely across provinces. In this chapter, in addition to demonstrating the fundamentals of doing business in China, we will compare, internationally and interprovincially, four key indicators (starting a business, registering property, getting credit, and enforcing contracts). While these indicators are not a full reflection of the local investment climate, they do suggest that coastal areas scored highest overall on the ease of doing business. At last, this chapter gives some details about China’s business culture.
22 Suggested readingClarke, Donald C. (2007). “Legislating for a Market Economy in China,” The China Quarterly, Volume 191, Du, Julan, Yi Lu, Zhigang Tao (2008). “Economic institutions and FDI location choice: Evidence from US multinationals in China,” Journal of Comparative Economics, Volume 36, Issue 3, pp Graham, John L., N. Mark Lam (2003). “Chinese Negotiation”, Harvard Business Review, Oct 1. Greeven, Mark and Frieder Munk (2010). “Remade in China: Foreign Investors and Institutional Change in China,” Regional Studies, Volume 44, Issue 8, October, pp Greif, Avner and Guido Tabellini (2010). “Cultural and Institutional Bifurcation: China and Europe Compared,” American Economic Review, Volume 100, Issue 2. Hornstein, Abigail S. (2011). “Where a contract is signed determines its value: Chinese provincial variation in utilized vs. contracted FDI flows,” Journal of Comparative Economics, Volume 39, Issue 1, pp Javidan Mansour, and Nandani Lynt (2005). “Changing Face of Chinese Executives,” Harvard Business Review, Dec 1. Liebman, Benjamin L. (2007). “China's Courts: Restricted Reform,” The China Quarterly, Volume 191, pp
23 Suggested readingMagni, Max, and Yuval Atsmon (2010). “A Better Approach to China's Markets,” Harvard Business Review, Mar 1. Potter, Pitman B. (2007). “China and the International Legal System: Challenges of Participation,” The China Quarterly, Volume 191, pp. 699 – 715. Qin, Julia Ya (2007). “Trade, Investment and Beyond: The Impact of WTO Accession on China's Legal System,” The China Quarterly, Volume 191, pp. 720 – 741. Scot, Murray Tanner and Eric Green (2007). “Principals and Secret Agents: Central versus Local Control Over Policing and Obstacles to ‘Rule of Law’ in China,” The China Quarterly, Volume 191, pp Tse, Edward (2010). “Is It Too Late to Enter China?” Harvard Business Review, Apr 01. Vanhonacker, Wilfried (1997). “Entering China: An Unconventional Approach,” Harvard Business Review, Mar 1. World Bank (2008). Doing Business in China Washington, DC: The World Bank Group and Beijing: Social Science Academic Press (China). World Bank (2011). Doing Business Washington, DC: The World Bank Group.