Chinese companies also have been making electric motor applications, like electric bicycles, golf cars and forklifts for more than 20 years, we thought that the biggest issue as it is normal in China would be to find a reliable qualified manufacturer, to do this we focused our search in the Wuxi area as there is a very large concentration of Motorcycle and Scooter manufacturers. Technology, designs and even molds are shared amongst most companies in the area and even some as far as Guangzhou. Frames, body moldings and basically all components are designed to be used on motorcycles and Scooters both gas and electric.

We investigated the usual sources, search engines like 163.com and the “gold” members in Alibaba, MadeinChina, Toto as well as the local retailers in Shenzhen and Shanghai to assemble a list of manufacturing companies to visit and qualify for the investors in South America. Unfortunately, even though the Internet sourcing sites are trying to qualify vendors we find that well over 50% of the vendors listed in these sites, including Alibaba, either are unreachable, don’t exists or simply are trade companies claiming to be manufacturers. The rule of physical visits to factories is imperative in any serious sourcing even though getting to the correct address, phone numbers and a contact names are still very difficult to get in China.

We visited six different manufacturers which also turned up typical results of manufacturers that claim to own the molds, designs, for the same products that we saw  in several different factories. We finally settled on a company who has been in the  Scooter business for 14 years. We visited the factory and had meetings over the course of one week and concluded with a signed agreement for exclusive representation of their products in South America. We bought 4 samples of different models for testing, development of marketing  materials, user manuals and warranties.

The Distributor in South America started to have initial meetings with local retailers armed with our samples and drafts of the marketing documentation. The feedback from a few of the retailers prompted us to investigate some modifications to improve speed by 10%, which led to additional meetings with the Manufacturer. During the testing of “bigger wattage” motors we started to notice some discrepancies between the speedometer readings and the rated speeds, which we blamed on the exchange of motors, however upon using a GPS unit to attain accurate speed readings, we found that in fact the real speeds were quite lower that manufacturer stated speeds or the speed shown on the speedometer of the Scooters.

The use of a GPS unit led to a huge surprise on our part, as it turns out that the speedometers in the scooters read 60 km/h, when the real (GPS measured) speed showed 40 km/h. We tested the original models in their original configuration and even changed GPS units to ensure that we were getting an accurate reading and the testing yielded the same results. We immediately scheduled a meeting with our manufacturer in their offices to discuss our findings. Much to our surprise they laughed when we brought up the testing and the results. We were dismayed by their reaction, but as it is the case in many conventional Chinese business situations, dealing with a complaint or discrepancy laughter or smiles is quite common.

After a little conversation they clarified in a very matter of fact way that they knew about this fact. We stated that in America or even South America this discrepancy between the speedometer displayed speed and the actual speed of the vehicle could lead to not only dissatisfied customers but potentially to law suits. The Manufacturer quickly assured us that this is standard practice in China; “all gas and electric motorcycles and scooters, have their speedometer adjusted to show higher speed”. They assured us as if this fact would make it all OK.

In fact we did actually take a GPS and conducted some testing even of some of the Chinese manufactured Gas Scooters now being sold in the USA and indeed it is true all the scooters we tested regardless of manufacturer (Chinese) or weather they are Gas or Electric are off (move slower) by at least 15% of the speed showing on the speedometer. In our conversation with the manufacturer they clarified to us that in China it is common practice to “give” the customer what they want, even if it is only perception.

Then they explained that if the actual speed of the scooter was for example 47 km/h they would add the “chinese” additional 10 which would make it 57 km/h and since 57 km/h is near 60 km/h they would round it up to 60 km/h. Then adjust the gearing of the speedometer and of course all the marketing materials to say that they Scooter attains 60 km/h. Fortunately for us this manufacturer is a trust worthy company who was willing to own up to the truth (even though after the fact) and then work with with us to manufacture a product that will show actual speeds on it’s speedometer.

This is yet another example of the difference in how business practices are interpreted so differently in China from many places in the western world. As a conclusion if you or your company are in search of manufacturers in China the rue is physical visits, double check all stated specifications and inspect product prior to shipping to your destination. I will write in a different post regarding conflict resolution with a Chinese manufacturer.

Granted, I clearly understand that many countries have developed a “pay-back” attitude towards the USA based on it’s treatment of their citizen’s wanting to travel to the US. In some cases the US requiring people to set an appointment a year in advance for a personal interview with a US Immigration officer and having to show proof of having enough collateral (homes, business, bank accounts) in the home country to ensure that the person would have to be a fool to want to stay in the US illegally.  Then quite often being denied the tourist visa despite jumping through all the hoops.

In addition to the “special” treatment of USA passport holders by the Chinese Visa Authorities (more expensive and longer process than for citizens of other countries) you will quickly realize that prices for many things are much higher if you are an American or have the misfortune of being perceived as one. This begins with shuttle buses from the airport and from other border entry points and is prevalent in everything else from food to shopping anywhere.

My Chinese friends affectionately call me “money face”, but they are not talking about my face, they are talking about the prices that are quoted whenever I or even they inquire while shopping with me for just about anything.

Chinese vendors have a very clear understanding of the exchange rate and they also know that everything in the USA and Europe costs a lot more than in China. They know that even if they charge you 5 times more than they would charge a Chinese person; you will still smile and think that you are getting a bargain compared to USA or European prices.

In some cases you will have no choice; for example a plain black cup of coffee generally speaking will cost you from $4 to $12 USD depending on the location of the establishment. You may say OK, if the coffee is good!… but remember, Chinese are tea drinkers and know little to nothing about Coffee, so you may get worse than truck stop coffee for these prices; I have!

But the most serious and unpleasant situation is that many Chinese hotels simply do not welcome Americans (or the like), some hotels in China are exclusively for Chinese citizens. The idea that as an American you can come to China and travel in an “ad-hoc” manner or on a tight budget very quickly becomes nearly impossible. I actually have been refused entry at a hotel on the basis of being a foreigner even after my friend made the reservation online. Now granted these are not 5 or even 3 star Hotels. Again, remember that common perception is that if you are an American (or look like one) you will only stay in 5 or 4 star Hotels, you won’t mind paying $12 dollars for a cup of coffee and of course you will buy a Rolex knock-off on the street for $200 USD.  Chinese perception of Americans is very Hollywood based.

I have not been able to get a clear answer on the hotel issue, I have been told simply that these hotels “are only for Chinese citizens” and I also have been told that the reason is that “no-one in the hotel can speak English”, even though I was accompanied by people who speak Mandarin at the time.

Unfortunately this makes travel in China as an “adventurer” somewhat impossible. You can certainly travel in China as a American and on your own if you stick to the 4 and 5 star hotels which will cost you in the range of $150 to $400 + USD per night.  You can also take tours designed for foreigners with tour guides who speak English. Beware that tours for foreigners are designed to be shopping centric, out of a one day tour, you may get 60 minutes to tour the Great Wall and the balance of the time being shuffled to “factory” or “museum” tours which are in fact, 5 or 10 minutes of looking at some art and 30 – 40 minutes of a selling presentation. Yes, the tour guides get a commission on all sales from these tour stops and will often pressure you to buy!

Of course you can also hire a private bilingual guide for as little as $50 USD per day and be able to choose where and when you want to go opposed to the group tours shuffling you at their pace. It is also very important to note that many tour sites or museums are only replicas as much of the original Chinese artifacts were either moved out of the country or destroyed by the Communist movement.

Many young Americans have packed up two pairs of jeans, a few translation and guide books and toured Europe and south America on their own experiencing the countries at the local level and spending very little money. However, China is not near that option yet, this is partly due to language and safety reasons but also largely due to the remnants of Communist styled government policies in China.

I did manage to sneak into a Hotel reserved strictly for Chinese citizens by waiting outside the hotel while my friend concluded the registration, and the result was… that I did not want to stay in the hotel after all. I have done my share of business travel staying in 4/5 star hotels, but I also have done my fare share of travel while avoiding tourist traps and getting as close to the local experience as possible. Unfortunately this hotel turned out to be a little too local for my taste. (see pictures)

This Hotel - Exclusively - only for Chinese citizens

The cost was approximately $15 USD/night. I did not stay in the hotel, I only took the pictures, then moved to a different hotel. However, the experience did shed some light on the possibility that these hotels reserved for Chinese citizens, may simply lack an official certification which would allow them to host foreigners.

On the positive side I have discovered a very economical hotel chain similar to the La Quinta or Hampton Inns in the USA, called 7 Days Inn Hotels (see photos) rates for this hotel start as low as $25 USD, rooms are clean and the hotels are safe.

Chinese hotel chain - 7 Days Inn - very nice, inexpensive hotel.

I do have to caution you that some of the locations of this chain may refuse to let you stay on the same premise of the hotel not being for Americans. However in any of the major cities there should be no problem, but always keep in mind that life will be much easier if you do have someone with you who speaks Mandarin and can read basic simplified Chinese. While the 7 Days Inn hotels have signage in English and the room information sheets also have English, the website does not support English, the staff will likely not speak a word of it and surrounding restaurants and transportation may not be foreigner enabled.

In all cases it is highly advisable if you intent to travel on your own in China, that you carry Yuan (RMB) in cash, dollars will be difficult to change in areas that don’t have branches of the main banks and also your credit cards will be worthless anywhere outside of downtown Beijing or Shanghai or the International Hotels like Shangri-La, Hilton, Hyatt or similar. You must also beware that everywhere you go your Yuan bills will be closely inspected for counterfeits and is likely that you will get some of them possibly even from the bank, so don’t be alarmed when someone rejects a bill from you, even the same bank where you got it. The most common bill is the Y100 which of course is the most popular counterfeit, but it is only $14 dollars you will loose if you wind up with one of them as you will have no other recourse.

As a whole Chinese are fascinated with westerners, the further you get from downtown Beijing or Shanghai the more people will literally stop, point and stare at you. Many young girls will smile nervously then say “hello” and many service people will try on you their best “welcome – please sit down”. Don’t be surprised to have many of them point a cell phone at you to get your picture. If the people you meet manage to speak a little English they will quickly declare their desire to be your friend, but it is more likely that you will make friends in the course of doing business than in a plan of tourism.

Chinese are very reserved with outsiders, even if you are friends it is not likely that you will ever be invited to their home. But, when it comes to shopping and touring you too will be identified as “money-face”.

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Luo Pan Compass used in Feng Shui beliefs

First I want to show a brief technical description of Feng Shui as written in Wikipedia in an effort to set the stage for the story. Feng shui (traditional Chinese: ??; pinyin: f?ng shu?) is an ancient Chinese system of aesthetics believed to utilize the laws of both Heaven (astronomy) and Earth (geography) to help one improve life by receiving positive “qi” (chi). The original designation for the discipline is Kan Yu literally: Tao of heaven and earth. The term feng shui literally translates as “wind-water” in English. Traditional feng shui practice always requires an extremely accurate Chinese compass, or luo pan, in order to determine the directions in finding any auspicious sector in a desired location or exact directions in which various objects, rooms, materials etc. are to be placed.

Map of China before 1921

I have not been able to verify or validate the geo-political truth about this story, but in a very funny way I am not surprised at all by the possibility of truth after some of my experiences of life and business in China.
According to this story up until 1921 China’s geographic map resembled a tree leaf similar to that of a Maple. The story goes on to tell that this is the reason why Japan whose geographic map resembles a silk worm kept attacking China and vying for control of it’s large land span. The story according to the Feng Shui belief takes root in the significance of shapes, position and the implication between geographic location and “astral plains”. The story depicts a green leaf regardless of it’s size as very vulnerable to a silk worm who must eat as part of it’s natural position in nature.

China - a green leaf and Japan a silkworm

The story tells that this is the reason why China was willing to let go of part of Mongolia in 1921. Again, I emphasize that this is a “funny” story and not a historical fact; but nonetheless it must be a lesson for us westerners in how Chinese think about many things. The story says that upon letting go of “outer” Mongolia, China’s geographic shape came to resemble that of a chicken… and yes you guess it! The Chicken can eat the Silk Worm, therefore the Silkworm became “neutralized”.

China - after 1921 separation of "outer" Mongolia

The story does not stop there, it goes on to say that the reason that China has never been willing to acknowledge Taiwan as an independent country is because the Chicken then would only have one leg and it would cause it to be unstable. The other leg being Hainan, the chinese Hawaii south west of Hong Kong. Interestingly, this story/theory can actually be easily translated to current socio-political implications between China and Taiwan. The Taiwanese with their American technology have become the leading edge of China’s technological development.

China - the chicken and Japan the silkworm

As a final topic, the story also addresses China’s unwillingness to let go of Tibet after many decades of it trying to succeed as an independent country, in-spite of the prevailing Chinese popular opinion that Tibet is nothing more than a wasteland full of poor people. Apparently Tibet is very important to China, according to the story if Tibet left China, then the Chicken would not have… a rear end, thus rendering the chicken unable to function.

China - Why Tibet can not be allowed to succeed

Again, the first time I heard this story I only smiled, but as I increase my understanding of Chinese culture is become evident to me that it is not important if the story is true or not. What is important about this story is the inside that it provides into Chinese culture and the justification for decisions and influences that affect daily life and business in China.

Chinese people embrace consumerism.

The topic of “China needs the USA” is a very hot topic these days both in North America as well as in China and while there are clearly politicized and nationalistic threads to it, there is also a cold reality in play. Even if China was to overreact and “close their doors” as they have done in the past, they will still need raw materials and food from other regions in the world due to the continued growth in population and large cash reserves. The demand for raw materials and some food grains will remain and grow, unless China’s tight controlling central government is willing to stop the momentum in growth of it’s middle class, which at this stage of the game will likely cause a national uprising or even a civil war.

There is absolutely no question that the new affluent Chinese population likes that materialistic consumerism that bring comforts and more importantly “face” to their life’s. As I have posted before, the Chinese culture values “face” a lot more than they value wealth it self; “face” being the representation of social standing in the community, how a Chinese person is perceived by family and friends. Much like in any other culture materialistic assets are a great way of representing your status in society, this is not any different in China. Driving a Mercedes Benz or a BMW have become quickly the symbol of success, even far more than the home you live in.

The Chinese dream... an automobile.

Add to this the fact that “face” also comes from being able to invite many friends and family to eat foot and you have a demand beyond comprehension for raw food grains and consumable item’s raw minerals. This is why today if you ask Chinese people their opinion on the global economic crisis and their dependency on the USA for their income, they are quick to respond with confidence; “we don’t really need the USA, … we need Peru! Yes, your reaction may be the same as mine… what? did you say Peru?

You may recall last year after the Bush administration held the G20 Economic Summit in  Washington DC, Mr. Hu Jintao (China’s President) boarded his 747 jet and headed for South America, with an open checkbook and 600 Chinese business men, bearing gifts and a clear message: “We are here to buy!”. Why? you may ask, after all November was the official sounding of the “we are in trouble” bell for the world. By November 2008 the world knew that an economic recession was inevitable and China was certainly feeling the effects, so why the shopping spree?

China’s central government returned from the South American trip and announced that they would implement an internal Economic Stimulus Package equivalent to $US 586 billion. This commitment was accompanied by the internal publicly stated goal of retaining an 8% GDP for 2009. The clear implication of these commitments is that China will continue to draw on the world’s resource production to be able to sustain this growth, even at a slowed rate.

China is committed to development of infrastructure in 2009.

Translated in numbers this would mean that the 2007 projection of growth of 9 million automobiles per year will change to only 5.9 million cars if we apply the GDP in a none scientific manner.  For comparison sake, the USA auto industry has forecast a slow down to 10 million automobiles sold in 2009 in it’s domestic market. However it is likely that Chinese will drive this number higher as the attitude of the newly affluent is to spend the money not to save it. These figures may seem fairly unimportant for China, until you factor in the fact that China does not have the infrastructure to handle even a 5.9 million auto increase in it’s roads or cities. In fact a slow down to 5.9 million maybe just what China needed in order to allow the time that it will take to develop highways, roads, tunnels, bridges, fuel distribution and yes… parking for all these cars.

Opposite to the American population’s reaction to hard times, which is to become conservative in spending and to save for rainy days, China does not have a savings culture because it’s population has never really had the extra income to put away and in the pass banking systems did not offer this option. Add to this the communist-socialist approach and the result is a population that has relied heavily on government subsidies in order to live when there is no income. The emerging middle class struggles between parents that grew up in the communist era in China when money had little value as housing and food distribution was government controlled and the new western-lifestyle hungry youth. Chinese want to spent money and they want to spend it quick, most of them hold a car at the top of the list of things to buy now!

Consumerism continues to grow at breakneck pace in China and the message from the central government; which is now commonly shared is that China will be OK no matter what. It is public opinion that China is now focused on it’s internal customer and many companies are now retooling the products and their approach to fuel internal consumption.

Peru's Mountains contains large, high quality mineral deposits.

This is why even at the ground level, you find that Chinese have learned a relatively new word for most peoples vocabulary; this word is: “Meeru” (Peru). Peru has entered the Chinese economic panorama at the same level that Brazil and Australia already enjoyed; a primary supplier of raw materials for China. The country will continue to need suppliers of affordable raw materials if it is to sustain their economy even if the growth was reduced to 50%. At the moment China has the cash to secure it’s future and taking advantage of the economic crisis is cashing in on opportunities to seal long term inexpensive contracts for supplies of Iron Ore, Copper, Aluminum and some grains from South America and Africa.

The timing of the change in focus for China couldn’t have come at a better time, when US popularity in South America is at the lowest point it has been in decades. Many South American countries welcome the Chinese approach to Trade Agreements at a time when many of their own developing economies find them selves in a very fragile situation due to old dependencies of the US economy. Future will tell how well South American laborer population accepts new Chinese bosses. There is certainly a long list of disasters that have come out of the foreign investment funded development in South America. But, suffice to say that raw materials are a lot more than just a foreign profit center for China, quite the opposite internal growth will be closely tied to China’s ability to negotiate affordable large supplies of raw materials with South America and Africa, replacing or devaluing current agreements with Australia, Canada and other developed countries.

I will close this post with a data chart which was compiled by the Earth Policy Institute, which greatly depicts why China is executing it’s plan to secure sources for raw materials to ensure a successful future. Many Chinese investors listen closely to Jim Rogers (of Quantum Fund) on financial advice, Mr. Rogers advised last summer in an interview that this would be the time to buy and stock pile raw material investments, he added that when the world economy begins to recover the first item to experience demand will be raw materials. Through out Asia, many people have taken Mr. Rogers advice to heart adding fuels to the already evident plan from Beijing to assert it’s position in South America and Africa raw materials production.

Projection of China's voracious need for raw materials.

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Traditional Chinese business meeting - Tea set up.

1. Relationship first! Chinese people as a whole value relationship much more than American people do. In business the initial effort is usually 80% – 90% focused on developing the relationship. In fact, the objective of a business meeting is to develop a relationship (in Chinese terminology; a “cooperation”). Opposite to the American approach of “closing” the deal. American business culture has common phrases like “business is business” and “we don’t have to be friends to do business”, implying the order of importance. Chinese practice the opposite, we have to be friends to do business.
2. “How is biz?” Another big difference! It is not only quite inappropriate, but can also be considered “rude” to ask, how is your business? or even more offensive ask for sales figures. Chinese business people will only volunteer this information to a close friend or people they have a very close relationship with. Opposite to the American presentation (sometimes required) of a detail company profile prior to initiating any negotiation.
3. The Business Plan. In Chinese business generally speaking the request of a business plan will incite a response like, oh… you don’t trust us? In China the majority of business is done over days of dinners, lunches, drinking tea and wine and talking about life in general. Business will develop out of these encounters aimed at developing trust and relationship sprinkled with business details now and then. Opposite to the methodical American approach, concept, features, requirements, sales, marketing, costs of goods, financial statements, etc. Many Chinese people will literally invest millions of dollars without nothing more than a handshake, it is all about trust.
4. The “Face” Game. Chinese culture and particularly business revolves around the value of your “face” to others. “Face”; defined as how others may see you; as in your level of status in society or your ability to command respect and trust from others. For American business people this is extremely difficult to deal with as it flies directly in the path of disclosure and transparency. For Chinese, the very fact that you would be asked for details takes away from you “face” value. A simple example of this concept is the fact that Chinese people will likely never allow you to pay for a meal or entertainment as this is done by the person with the most “face” in the situation.


Traditional - Chinese Formal Business Meeting Room

5. Family Business. In America the word “Nepotism” is not a complementary statement, in fact you can land in the middle of legal issues for favoring a family member for your business rather than a more qualified stranger. Not in China! It is possibly one of the strongest unwritten rules of business, a business owner will carefully select family members and close friends for the most critical positions in a business. This is party due to trust and partly due to the “face” issue, qualifications are largely overlooked.
6. Sales= Alcohol+Karaoke. In Chinese business sales is hardly regarded as a profession and most often is only looked as a sort of functional entertainer. While it is true that America has a great deal of this type of sales, it is also regarded as “undesirable” by most companies, particularly if you look at it in the Chinese business context. China’s smaller businesses (under $50 million in sales) have primarily two types of sales people; very young people (mostly women 20-24 years old) and older men (40-50 years old). The expectation of these sales people is almost 100% to work on cultivating relationships, so they must be very good at hosting. A good host in Chinese terms is one that has the ability to conduct the rituals of eating food, drinking alcohol and entertaining at KTVs (karaoke bars) with all the finesse of giving the client a VIP treatment (big “face”). Opposite to American counterparts Chinese sales people are not really expected to know much about the product or the company they represent.


Tea serving at business meeting - traditionally done by a manager or someone designated to conduct the serving.

7. Marketing is a dirty word. In Chinese smaller companies the word Marketing is most often interpreted as a “multi-level marketing scam”. There is very little understanding of the function of marketing or the need for it. In fact advertising is done completely in a “shot-gun” approach, it is invasive, in your face and breaks every rule known to American marketers as the do’s and don’ts of promoting your products or services. The fact that marketing is an unknown concept in most realms in China is no surprise if you add the first 6 points of this post. This gives reason for a great deal of the “copy” mentality, if it sold well for Nike or Sony or Ping, it will sell well for our company! There are also a large number of products that are designed, developed and manufactured without knowing if there is even a market for them.
8. Introductions. It is very common in Chinese meetings that you may sit with a group of people that will never be be formally introduced. On counter view American common business rules not only require introducing the people attending a meeting, but also describing their relevance to the topic of the meeting. This is quite uncommon in many Chinese business meetings and as a result it maybe difficult to identify who are the key players. However, if you are able to speak/understand mandarin and are familiar with the nuances of addressing someone by name, you will likely be able to deduce order of importance by the title (similar to Mister or Chief) attached to the person’s name, if they are ever introduced.
9. Concluding a meeting. This difference probably is the most frustrating to both Chinese and Americans when doing business together. Chinese business is largely inconclusive, open ended and uncommitted. American business is NOT finished until there is a conclusion, if there is no deal, no next step; it is considered an unsuccessful meeting! In Chinese business it is considered rude to try to force an answer or a conclusion. This issue quite often can derail a negotiation as American business people have it ingrained to achieve an “end”, while Chinese are focused on developing a relationship or a “cooperation”.
10. Starting a Business/Company. In China it is almost a requirement to have 100% of the infrastructure for a business or company developed even before getting a business license. This is somewhat a cultural issue and somewhat a regulatory one. Local governments will actually inspect and take photographs of the intended business location prior to issuing a license. The expectation is that you have to largely look like the business which you are applying for; that is to say if you are going to manufacture shoes, you are expected to have a shoe factory set up, machines, people, offices, etc. This fact coupled with the absence of a business plan or market study makes it an absolutely incomprehensible logic for American business people. However, it is important to note that culturally Chinese people have an extreme level of confidence and belief in their own capabilities and venture into anything with an ad-hoc approach of making things happen as they go. This is counter parallel to American business culture which also has a deep belief in the innate ability to accomplish, however, backed by data and facts prior to taking step one.

As I have said before in other posts, this is my perspective and in order to present the concepts I have to generalize to certain extend. There are definitely exceptions and things are changing at a phenomenal speed in China. Many Chinese are now returning from studying business in the US or Europe and are bringing back with them western ways of doing business into the evolving Chinese business environment. There is also a great deal of demand for American business know-how and some companies are beginning to value American consulting services, particularly when it comes to quality manufacturing methodologies and structured business management.

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Luo-Ho District Mall in Shenzhen, China

Why not? Thousands of people do. A few years ago when I started looking at China for business opportunities I started to look with my American corporate business trained eyes, after some research I learned that there are many ways in which foreigners can do business in China. I say after a while because getting precise information on rules, laws and regulations can be as difficult as getting directions in Chinese-English on how to get from point “A” to point “B” in downtown Beijing.

China is literally writing commerce law as we speak, many laws are not only not existent yet, but the ones that exists are left to interpretation at local levels and many lawyers are actually ex-army people who are given an honorary degree. Most Chinese citizens simply laugh when you ask about incorporation laws, tax laws, banking rules, etc. Now make no mistake, the central government has it’s ways of making sense of all this chaos. For example banks are required to report an all bank transactions involving foreign entities to the central government, thus making very difficult for foreigners to do anything different than what the current rules will allow with the added complexity of the local interpretation. This later fact can lead to disasters if the central government interpretation differs from the local one.

So how can you do business in China? Here is a brief list of the different ways, I will expand on each one of them on future posts, for now this post only gives a perspective on the last one.

• Investing in Chinese companies stock (class B shares)
• Creating a Joint Venture with an existing Chinese business
• Starting a Wholly Owned Foreign Enterprise (not allowed to sell products in China)
• Starting a Foreign Invested Commercial Enterprise (a new modality of a WFOE which is allowed to sell only certain specific products in China)
• Or simply go shopping!

Investing, JVs and WFOEs can be very convoluted and extremely slow to happen. You will spend at least 50% of the time unraveling conflicting directions from each level of government offices and local advisors/consultants. These larger scale options will require millions of dollars and also largely restrict your ability to take the money back out of China to only profits and for possibly up to 20 years. But, the “go shopping option” is simple and many folks from around the world make a living or at least a supplemental income while traveling to China on shopping sprees.

All you need to do is get a tourist visa for China, which is very easy to do. If you are a citizen from just about any country the cost will be $35 USD and if you happen to be a US citizen then it will set you back $130 USD, we are “special” (LOL). I highly recommend that you get your visa before coming to China, if you don’t, then you will have to enter via Hong Kong and not only the price will double for your visa, but you will have to wait at minimum 24 hours (one hotel night in Hong Kong, which could add another $250USD to your expenses, hotel and transportation).

If you are coming to Shenzhen, then traveling to Hong Kong may be actually the best financial option, flights to Hong Kong from the USA are as much as 50% less than traveling to China’s main land. The shuttle from Hong Kong to Shenzhen will only cost you about $30 US dollars and if you take the shuttle, they will actually drive you through immigration and customs, you only relax and enjoy the ride. If you take the bus, it will cost only about $15 US dollars, but at the Chinese border you will have to get off, leave your bags on the bus, go through Hong Kong immigration (exit), then go back to the bus for a few hundred feet, get off the buss and drag your bags through Chinese immigrations, customs and then as you exit face hundreds of cab drivers trying to take you to their cab while you are trying to find someone from the bus company to take you the rest of the way.

The bus company will give you a sticker which you are supposed to wear in a visible spot, but as you exit the cab drivers will try to grab it from you, you must not let this happen as this is the only means for the bus company to know that you paid to go the hotel or wherever else you are going. Once you come out on the Chinese side, the Hong Kong bus and driver will have changed to a Chinese company, so you will not know who is who.

I also recommend that you do your homework, know what products you are looking for and have a good idea of price targets for your re-selling market. By the way, bring only a very small carry on with your clothes, you can buy suit cases across the border for $20 – $30 dollars, these are not high quality, but it will be better than you hassling with large empty suit cases on the way into China or paying the $25 that many US airlines make you pay now for the second bag.

The Shangri-La Hotel viewed from the Luo-Hu Mall

If you are fairly conservative, not too adventurous person, then you probably should only go to the Luo-Hu District in Shenzhen, you can stay at the traditional Shangri-La hotel across from the Luo-Hu shopping mall, expect to pay around $135 USD per night, it is actually a low rate for this very nice hotel where many of the staff speak English. Or you can look for cheaper rates for hotels that are just few blocks from the Luo-Hu shopping mall, Trip Advisor has  a good selection of them, the critical thing is that you search for Luo-Hu (luohu district), because Shenzhen is a very large city. If you are not careful you can wind up an hour way from the Luo-Hu mall, still in Shenzhen, but in an area where no one speaks a word of English and nothing is written in English either.

Now for the business of shopping! In the Luo-Hu mall you will find just about any thing you can imagine, cell phones, golf clubs, hand bags, shoes, clothing, GPSs, pottery, chinese medicines, toys, etc, etc. Of course all the brand name stuff will be only replicas (copies) you will see brands, like Gucci, Rolex, Nike, Sony, Ping, LV, Armani, etc. Nothing will have a price as everything is negotiable. You will be accosted by “shopping guides” whom speak 10 or 20 words of english, like “hello looky hear” or “DVD movie” or “Rolex watch cheap”, you must be very careful here, in spite of the visible security, there a number of undesirables and a few poor folks that given the opportunity would disappear with you wallet or belongings, but on the other hand if you have your wits about you you will have a great deal of fun here.

A sampling of most consumer products made in China.

Bargain, bargain, bargain, as I said before pricing is not set and varies depending on your face, I am often called “money face” by my Chinese friends, the meaning of this is that whenever we go shopping together all of the sudden the prices for everything curiously doubles in this type of malls. However, you can play the game, remember do your home work, know what these products sell for in your country, many people operate on at least 50% less than back home rule. Carry a calculator, since many of these people only know the basic 20 words, they use calculators to show you the price for the items, usually in Yuan (RMB – Chinese currency). The guides are usually paid a commission by certain stores, so they will steer you to these stores. While using one of these guides can be generally OK, I would advise against it, you will be safer and be able to bargain better on your own.

The products.
As I said Luo-Hu is a good place if it is your first time shopping in Shenzhen or if your nature is not to venture too far. There are much better bargains if you venture deeper in the Guangdong Province, but you will also need a Chinese guide who is bi-lingual, as the difficulty and risks also increase dramatically. Feel free to write to me via my contact page if you want additional help on how to effectively get to the manufacturers or at least the wholesalers, as it is a much better deal altogether.

A word of caution about Luo-Hu. “Not all that glitters is gold”, while there are many good products here at good enough prices for you to take back home and at least make a 25% – 40% profit, there also a lot of “dud” products. So test everything prior to buying, they don’t mind this. There are plenty of USB drives labeled 8GB when in deed they only have 1GB of storage space, I actually found a USB drive labeled SONY  512GB for sale at Luo-Hu, the incredible thing is that their laptop confirms that is 500GB, but in fact it is not, the manufacturer hacked the software to fool Windows into seeing it as a 512GB drive.

The "fake" 512 Giga Byte USB storage device.

You must test Cell phones, DVD players, GPSs, turn them on, check out if they have the ability to switch to English or your desired language, test if they are compatible with your country’s electricity, check if the software (GSM/GPRS) is compatible with you country’s cell phone or GPS providers, if possible buy a local SIM card and have some one call the phones you are looking at buying.

If you are buying shoes or clothing, bring a tape measure and a size guide, Chinese are not only built differently than people in many western countries, but also quite often label clothing only a small, medium, large and extra large and this sizes only conform to some guide that the manufacturer uses not to western standards. If you are a little savvy about the clothing business, there are a number of tailors in the mall that will custom make clothing at a fraction of what you would pay, at least in the USA and Europe. I had a friend buy a traditional long wedding dress, custom made for $125 US dollars, it took one week to produce.

I will expand on these topics in future posts, but feel free to contact me if you are interested in setting up either formal visits to manufacturers or for some specific pointers.

Confident and ready for the New China

They are learning English, they are able to surf the internet, they are confident, they are curios and they are very proud to be Chinese! There are many subtleties of the Chinese culture that are now becoming more clear for me, as I get deeper into the Chinese culture of today and as I become more accepted. Of course many things are improving because I can speak a few basic sentences in Mandarin and understand quite a few, in return people also open up a lot more to me.

I suppose that it is no surprise to find that the older generation still gawks at me as if I came from another planet, but young (I mean children) people readily will approach me to try out their best “hello” in English. Many of the older generation Chinese still believe blindly that Europe, the USA or Australia are the promised land. I mean this in the sense that they believe these countries are the panacea to poverty, sickness and lack of opportunity for the poor. The “Hollywood” view of the world.
The generation in the middle for the most part feels that being in China right now is a good option, however given the opportunity would love to visit these lands were the streets are paved in gold, everyone has a mansion and three cars and there is no poverty. However, they rarely talk about wanting to live outside of China, in many instances because they are terrified of having to learn English. As an interesting point that many of us westerners are not aware of, the vast majority of Chinese younger than 60 years of age are fully bilingual and in many cases trilingual. For country, business and education sake they all have to learn Mandarin when they enter elementary school, but for family and tradition sake they have to learn the parents “country language” or in some cases two, one for mother and one for father. In essence this family language is the birth language and is what is spoken at home with the family.

They are ready to try their English on any foreigner.

Young Chinese women in their teens have been targeted by exporting businesses to be their customer service, sales, translators and negotiations representatives. Occasionally you find a young man in this type of job, but generalizing the young women are more fluent and also less afraid to engage in conversations in English beyond the required. Most notable of the young Chinese (late teens early twenties) is that they very often sing while doing their jobs, no matter how mundane their job is. When asked why they sing, they reply because they are happy, I actually doubted this, so I asked a few older people why someone making $200 USD in one month, no car, family 20 hours away, sharing a bedroom with 4 or 5 other people, would want to sing? I was told two reasons, one they have a job and two they have a future.

Children 7 to 12 years old, I have call them the “new” Chinese because they are noticeably very different. They exude confidence and often will engage a foreigner in conversation at the supermarket or anywhere. This young Chinese boys and girls are growing up with internet access, some foreign television and an extreme influx of influence from Japan, Korea, Hong Kong and Taiwan. You could say that they are getting a flavor of the western world “second hand”. I actually though that Chinese children would be like most children in other countries and that they would express their wishful desire to live in the USA, England or other foreign countries, but I found quite the opposite, they speak respectfully of foreign countries, but have an exuberant and very firm love for China and no desire to leave it.

They are very proud to be Chinese

I have been able to speak to a few children and although it is not a scientific poll, this children believe that they have a bright future in China, they love their culture (old and new), they are proud of their country and will openly state how lucky they feel to be Chinese. It is true that the central government in Beijing does a phenomenal job at marketing their “open-transparent” government, maybe only rivaled by new president Obama’s approach to politics. On a daily basis people are informed via all media of every project that has been approved, meetings on this and that and almost what Mr Hu Jintao ate for lunch that day. The Chinese army has its own TV channel and has a regular schedule of entertainment with singers, choirs, opera and documentaries, all produced and presented and performed by the military.

The interest in old Chinese culture is actually on the rise, many Chinese are still discovering many cultural facts that had disappeared decades ago, so the final face of China maybe something no one can predict, even the Chinese government. But, China is changing and is happening very fast and this is well before this “new” Chinese generation reaches the point of effecting change. It will be very interesting to see the effects of the new “open China” once this generation that was born in it reaches adulthood.

From iPods to the latest Nokia phones - Copies.

Before coming to China I had many friends ask me to figure out what products we could sell to the fast growing consumer population in China. Much to my dismay and everyone else’s, my answer as I started to report back was; nothing! absolutely nothing!.. they have everything, every brand , every product, even in the poorest of neighborhoods!

Well, at least a copy of everything!

It is absolutely true that the Chinese government is trying very hard to control and implement systems to monitor the infringement of design and utility patents, copyrights and intellectual property, but it is also true that it is an uphill battle. The “copy” manufacturers  are not selectively focused on American brands, in fact they copy one another all the time. I have looked at many innovative products in China which are not copied from the Japanese or the USA or European manufacturers, but from their own neighbors in Dongguan or Shanghai or a few blocks away.

I happened to get a lesson on a cultural aspect that we in the West are not aware of or choose to ignore. This post is not about defending violations of copyrights or patents, but more of bringing a perspective that goes beyond the headline grabbing “piracy” scream. The lesson came via a documentary produced by CCTV, which followed a ceramics professor in the region of Shaanxi. The documentary was showcasing a method which this professor had perfected for reverse engineering clays, glazes and kilns for ancient Chinese pottery. With his method the professor was able to recreate “perfect” copies, that not even carbon dating could pick out as copies. The professor was honored and presented with an “emeritus – curator” status at one of Beijing art museums.

This is obviously not the only instance of Chinese culture honoring someone who’s talent for making a copy is just as revered as the original artist, after all it was the Chinese that invented the printing press, which quite simply is a mechanism to make many replicas of an original! And by the way, it was Germans that copied the technology and perfected it to what we know today as highly technological printing presses.

Can the Chinese turn the copy culture into their own highly developed technical products? I believe this is not only possible, but inevitable. I am old enough to remember when toy robots made out of tin with terribly silk screened graphics and batteries that operated blinking lights were flooding the world courtesy of the country that today makes high end brands like Lexus and Sony. For those of you who were not alive then, Japan was producing these trinkets only 30-40 years ago.

Gaming consoles and any MP3 or Cell phone imaginable!

So is it too far fetched for China to do the same?
The answer is no, it is not far fetched! In fact, given what I am able to see at factories and in retail stores in China, I would tell you that it will not take 30 or 40 years, Why? Because of their very ability to reverse engineer anything from an aircraft carrier to a cell phone. Recently a high level official in the Chinese Navy confirmed that China had purchased 3 aircraft carrier hulls from Russia, for the purpose of studying them, loosely translated: reverse engineer them!

The "new" LV cell phone. An original?

Ahhh. Enter the “new Louis Vuitton” cell phone!!! I am sure that many companies very likely don’t know that they have a product line like the cell phone featured here. OK, so it is blatantly using the LV mark to sell phones, but let’s look a little beyond this and talk about the engineering, design, creation of molds and yes, the features that accompany this phone.

• Two SIM cards (Means you can have to different cell numbers ring in one phone)
• FM radio
• MP3 player
• Touch screen
• Calendar, Contact management, etc.

First we must understand that unlike Nokia or LG or Motorola, many of these products are actually made by handful of small companies banding together. Large global corporations may outsource some components of their products but along with this have very strict quality, design and compliance rules as well as strict audits to ensure the final product is worthy of the brand name. The makers of these “copy” products are in essence mavericks that have a little money and a lot of guts. The core manufacturer will invest in the molds for the exterior shell and provide the mold manufacturer with a “sample” of what he wants made. The mold manufacturer has a 3D scanner that will render CAD drawings of the “sample” supplied and also provides young CAD operators that can help the investor/core manufacturer decide on the cosmetics desired, like the LV, Gucci or iPhone look.

The molding process although somewhat unorthodox is not much different than what a large brand name company would do, is the inside components were it gets sketchy. The investor or core manufacturer will then approach friends of friends who can manufacture the circuit boards and display (electronic components that make the cell phone operational). Many of these components are adapted from other products and made with copies of chips that have been taken out from some name brand products. The core manufacturer then decides what name the phone will carry which can vary from Golden Dragon to Apple iPhone, Gucci or whatever.

The software is quite often developed by a “hacker” who is able to recode an existing cell phone operating system so that it works with the hacked circuit boards. This is why quite often some of these phones which make their way out of China, do not work with local cell phone companies abroad or loose much of their functionality. This being said, we all have to admit that this is not a simple process and those who are involved in it are learning every day to make their products better. This leads to an eventual development of their own solid technology like it has for many Chinese companies that evolved into their own competitive brands and not copies.

It is not only likely, but probably inevitable that these Chinese “maverick-manufacturers of copies” will eventually have enough money to hire one of the many young Chinese that are graduating from MIT in the USA to design products from the ground up. Just like the Japanese, it is inevitable that the Chinese mavericks will be able to turn industries up side down, like Seiko did to the watch industry, Toyota to the auto industry or Sony to the television industry.

My personal belief is that the effects of China on globalization are only half way through the cycle, considering that China has a clear goal of reducing it’s rural population to level bellow the 25% mark. The Xinhua News Agency reports that census for 2007 put this percentage at 56%, this means that in addition to India’s push to enter global supply of electronics and autos we can look forward to the added effect of another 300 million Chinese entering industry in China!

Retired Chinese play checkers.

I have now been traveling in and out of Asia for the last four years, of these four I have spent 13 months, actually residing and doing business in China. I have to admit that coming here I thought that I would have a very open mind, after all, I once was an immigrant in the USA and have traveled and done business in many countries… but, much to my surprise found my self falling into many “generalizations” and prejudices.

At a basic level Chinese people are no different than people in Des Moines, Iowa; they all want good health, family, a good school for their children and a prosperous future. They all long to be fruitful at their job and be able to enjoy their hours of relaxation. It is how their cultural roots make them go about achieving this that is very different from the west. Almost on a daily basis I am reminded that I am not in Kansas anymore!

Last year I was looking to invest some money in a Concrete Mixing business in China through my Taiwanese partner, after doing my careful research into this business (American style) I though it would be a great business opportunity, concrete in China? Is like selling air human beings.

I wanted to meet the principals in the company, so we traveled to Humen, north of Shenzhen for the meeting. In traditional Chinese business style (not Western/or Chinese corporate style) we started by sitting around a “coffee” table, very ornate and outfitted with a tea set, heating elements and a washing basin, all built into one. One of the men proceeded to wash all the utensils in hot water, then pulled a pasty black disk and tore a chunk, which he crammed into a tea pot and then poured hot water in it. Fascinated by the ritual I was  not paying attention to what my translator was saying to me.

After we all were served the “black” tea, I was informed by my translator that this was an informal meeting, that the general manager of the new operation had not been hired yet. With my fast American business mind set I replied asking, why was this fact significant to me? She then informed me that my objective of discussing the business plan, sales projections and start up date could not be achieved in the meeting. By now the “tea” ceremony and the back and forth smiles were beginning to fade as my face probably was beginning to show my restlessness and need to address the objective for the meeting. …well, when will the GM be hired for the operation? I asked.

It was the answer I got that had me somewhere between laughter and dismay. As a side note I have grown used to the fact that quite often when I ask a question as simple as can you produce this product in black? I will then witness a sometimes very dynamic 20 minute discussion (almost argument) to have the translator look back at me and say “yes”. Which is the reason that I am bound and determined to learn Mandarin, enough to at least follow the conversation, but that is another post.

Back to my dismay, disbelieve and need to burst into laughter. My translator informed me that the GM for the new company could no be hired until five weeks later, because it was “ghost” month, and it would be extremely bad luck for the business to begin operations in this month. I finally gained control over my reactions and asked to make sure I understood. Did you say “ghost”? She reaffirmed, yes! I ask to be excused then went to the bathroom to give my self a few minutes to digest this fact. It would be the first time in my business career that “ghost” got in the way of business.

The significance of this fact is that many people in China believe that this month which begins on the 15th day of the 7th lunar month is not a good month to launch a new business, get married, move your home or business or go swimming. To an American Business man this may seem very nonsensical at first glance, until you realize that you are not in Kansas anymore, this is part of Chinese culture. Of course this is changing and has already at large Chinese corporations additionally not all Chinese subscribe to the believe.

However for us westerners this is a reality that exists and may get in the way of a business deal. It is important to note, that even large corporations in China depend on many small industries to supply components just like the US and it is more likely that these small industries will embrace their cultural believes for many years to come if not forever.

In a future post I will cover my perspective on managing supply chains in China which is  a fairly new topic, and even at the large corporation level personal relationships quite often take precedent over business rules. Every day I am reminded that we are so very differently the same, I have now developed many friends and business associates with whom I can joke about these differences.

Cultural Revolution

Well, after reading many blogs about many things, some great and some well, not so great… I decided that I would launch my own. My goal is to be one of the “good-ones”. So, I will begin with a straight forward introduction to the purpose and reason for the blog.

If you are interested in reading about me and my background you can click on the “About” tab. In a very brief summary, I am an American-Business man and as such I will follow a few simple business rules in this blog, hence my urge to state a “purpose” and a “reason” to launch the blog.

The PURPOSE is to help “newbies” on the subject of doing business and navigating through life in China. I will endeavor to bring as clean and neutral of a perspective as I can, with the clear “caveat” that it is “my personal perspective”. The REASON is because I feel that there is room for an additional blog that looks at China from my perspective. I was born in south America, but relocated to the USA when I was 17 years old, finished my schooling and began my career in Printing and Communications. I made my way through various roles in Sales and Marketing until I became Vice president of Digital Technologies at the largest Printing and Media Communications company in the World.

I entered the global market, well before the word “globalization” was even fashionable, although I am only half a century old, I had a cup of coffee at Starbucks when it was a “one-store” company in Seattle and I attended meetings at Microsoft for production of the DOS software. These references are part of the foundation that gives birth to my perspectives looking at China’s growth and current swing from being heavily dependent on the US and other countries for it’s economy to an internal “self-sufficient” economy.

My first post is titled “so Differently the same”, because I want to explore the perspective that we “Americans” are so different from the Chinese and vice versa. I highlight Americans, because that is what I am, but the cultural shock of arriving in main land China (even only a few miles from the border or Hong Kong) is applicable to most western countries including Europe and Australia. Yes, I know once you are in China basically there is China and the “outside” countries, which are broadly categorized as west. I will try to be blunt in my approach to subjects as my intent is to present perspectives on life, business and views of China and from China, however I will also try  clarify statements when they represent a view that may be prejudiced or a generalization.

Lastly, I want to also set the stage for my readers with three different expectations that I have of my blog. One, I clearly understand that I will most likely incite not only positive responses or comments, but on occasion probably some negatives opinions, it is OK, I have done business now for over 25 years and in 11 countries, I have thick skin. Two, If anyone asks me to say my which is my, I always respond “is tied” (LOL), then I clarify is tied with number two. OK, so my native language is Spanish, however today I speak, read and write English better than I do Spanish so they are tied, suffice to say that I am a business man who can write not a writer by trade. Third, this is a commercial blog, there will be advertisements from companies or products or services that have relevance to the blog. I will try to keep these as noninvasive as possible.

I look forward to your feedback, questions and certainly if you need one-on-one help I can be reached through my contact page. Also if you would like to advertise on my blog it is best done through Google Adworks/Adsense. I will eventually launch a page for leads or mart like advertising.

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