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The New Way of Doing Trade with China


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The New Way of Doing Trade with China.

by Tips for Business Success in China

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The New Way of Doing Trade with China

  1. 1. Tips for Business Success in China.Information from the Front Lines of Doing Business in theWorlds Fastest-Growing Economy.
  2. 2. CONTENTS 02 GETTING OFF THE PLANE 06 SELECTING CHINA SUPPLIERS 12 NEGOTIATING CONTRACTS AND AGREEMENTS 20 KEEPING YOUR BUSINESS SAFE 32 BUSINESS ETIQUETTE 42 CHINA MARKETS 46 CULTURE AND CUSTOMS 64 TIPS FOR LIVING IN CHINA 82 BASIC CHINESE PHRASES 86 THE BEAUTY OF MADE IN CHINA 96 WHATS MADE-IN-CHINA.COMAffiliated to Published by Focus Vision MagazineADD: 8-12F, Block A, Software BLDG., Xinghuo Road, New & Hi-Tech Development Zone, Nanjing, China, 210061TEL: +86-25-66677777 FAX: +86-25-66670000 E-mail: mag@made-in-china.comSenior Designer: Lu Zhimin Photos by China Foto Press
  3. 3. GETTING OFF SMART SOURCING IN CHINA / 10 / 2011 GETTING OFF THE PLANE 3THE PLANE 1. What should I do if my baggage 5. Is there any cell phone rental ser-Baggage Damaged has been damaged after the flight? vice at the airport? Go to the baggage service counter in the terminal Yes, you can rent a cell phone together with a SIMBaggage Delayed or Lost at the arrival airport and report the damage imme- card at many international airports in China. But it’sRenting a Cell Phone diately. The damage of the checked baggage will be a little expensive if you stay in China for more than a compensated according to the depreciated value of week. You can also buy a SIM card from China Mo-Taking a Shuttle Bus the baggage or the repair cost of the baggage, with bile or China Unicom, who provide GSM and CDMA RMB 100 Yuan/KG (or equivalent currency) to the service system. If you use Japan or Korea cell phone,Applying for Visa on Arrival maximum. you need to buy a 3G card from China Unicom.What should I do? 2. What should I do if my baggage is 6. How to take a shuttle bus at the delayed or lost? airport? Contact the staffs at the baggage service counter Every international airport has shuttle bus service. as soon as possible. Any findings will be communi- Taking the airport shuttle bus is usually the cheapest cated immediately to the passenger. If you are unable to make a claim at the airport, you have seven days to Every international airport has shut- file a claim in writing to the airline on tle bus service. Taking the airport damaged baggage and 21 days to shuttle bus is usually the cheapest file a claim in writing to the airline for way to get to the downtown. lost baggage. way to get to the downtown. It will cost you RMB 3. What should I do if I left my suit- 15 to 30 Yuan per passenger according to different case in the cabin? airports. There are also several routes. You can get the information from ticket counter at the airport or Go to the airport service counter instantly, and the check the signboards to find your right destination. staffs will assist you to handle this. 7. How to take the airport express 4. Can I store my baggage at the air- train to the downtown? port? Subway is connected to the downtown at some of Yes, of course. You can go to the baggage coun- China international airports, for instance Shanghai ter in exit and entry halls. Please show your flight Pudong International Airport, Shanghai Hongqiao ticket and valid certification before registration. The International Airport, and Guangzhou Baiyun In- charge is RMB 20 Yuan to 50 Yuan per day according ternational Airport. You can take Airport Express at to baggage size. Beijing Capital International Airport or Hong Kong International Airport.
  4. 4. 4 GETTING OFF THE PLANE SMART SOURCING IN CHINA / 10 / 2011 SMART SOURCING IN CHINA / 10 / 2011 GETTING OFF THE PLANE 5 8. How to take a taxi at the airport? about three suitcases of regular size (1.7m length x 14. I will travel between 0.7m width x 0.5m height) in a baggage compart- Residents of most countries can enter Hong Kong and Main- Taxis are available outside of every terminal. It usually ment. costs you more than RMB 100 Yuan to the down- Hong Kong without applying for a land China multiple times. Do I need a multi- town. If you decide to take a taxi, make sure the visa in advance and are allowed to driver uses the meter. Never get in an unmarked taxi ple entry visa? 11. Can I apply for visa on arrival? stay for 90 days. cab, or you will be charged more than you should. Yes, you do need a multiple entry For people who would not obtain a visa in advance visa. Each time you enter China from there are certain emergency situations which will technical consultation in China; Hong Kong or Macau, you need one entry. 9. How to tell a cab driver where to permit them to get a visa on arrival. These will always require an invitation letter from an accredited Chi- Passengers who come to China due to a last-minute go when he or she cant speak Eng- nese organization which explains the emergency, change in the composition of a visiting group and lish? with consent of the Chinese side after the visas are 15. How to get my China visa in (mostly related to business purposes which from Ask someone to write down the address in Chinese, the Chinese perspective it is important that you are granted; Hong Kong? and show it to the cab driver. admitted without delay) or you must be in a real Passengers who come to see patients in critical con- A China Tourist and Business (F) visa can be obtained emergency situation. easily in Hong Kong. It can be obtained with the ditions, or to undertake funeral matters; The Rules of visa Issued at Entry Ports are not appli- help of a travel agent but at least 3 full working days 10. Is there any difference on Hong Passengers for direct transit who cannot leave China should be allowed for this procedure. cable to the nationals of United States and France. via original flight or other alternative vehicles within Kong International Airport’s taxi ser- vice? Passengers as follows can apply for visa on arrival: 24 hours; Requirements to obtain a visa in Hong Kong: 1 re- cent passport photo, passport which needs to be Yes, there is a little different from Mainland China. Passengers who are invited at the last moment by a Passengers who are invited to China but do not valid at least more than 3 months. Chinese host to come to China for a trade fair; have enough time to apply for visa at local organiza- Taxis in Hong Kong are colour-coded according to tion of China, with letters certifying the approval by Obtain visa at Office of the Ministry of Foreign Af- their operating areas. Separate rows are designated Passengers who are invited to submit a tender or to designated authority for applying for visa at the port. fairs of The PRC. for different types of taxi: sign a formal economic or trade contract; 5th Floor, Lower Block, 26 Harbor Road, Wanchai Urban taxis (Red) serve all destinations throughout Passengers who will supervise the inspection of Hong Kong including the airport except Tung import and export commodities or to participate in 12. What’s the valid duration for visa Tel: ++852-25851657 OR ++852-25851680 OR Chung Road and roads in south Lantau. a check-and-accept operation in accordance with on arrival? ++852-25851794 contracts; At most 30 days. Obtain visa at CITS (H.K.) New Territories (N.T.) taxis (Green) serve only the New Territories and specific roads in Lantau. Passengers who are invited to assist equipment in- CTS (H.K.) can obtain tourist visa type only. stallation or urgent repair of a project; Lantau taxis (Blue) serve all destinations in Lantau 13. Can I apply for visa on arrival in CTS (H.K.) Kowloon branch office Address: 1/F, Alpha and the airport. Passengers who are invited to deal with claim issues Hong Kong? House, 27 Nathan Road, Tsimshatsui, Kowloon in China; Baggage charge may be levied on every piece of Residents from most countries can enter Hong Tel: 2315 7106 working hours: 09:00a.m.-17:00p.m. baggage that is carried inside the baggage com- Passengers who are invited to provide scientific and Kong without applying for a visa in advance and (Monday-Saturday), partment, and every piece of bag- are allowed to stay for 90 days. A visa can be issued gage with total dimensions (length upon arrival. 09:00a.m.-12:30p.m./14:00-17:00p.m. (Sunday & + width + height) exceeding 140cm For people who would not obtain public holidays) that is carried inside the passenger Residents from 65 countries, including the United a visa in advance there are certain States, Japan and European countries, can enter Ma- compartment. In addition, there is no limit on the number of baggage emergency situations which will per- cau without applying for a visa in advance. A visa will carried by passengers inside a taxi in mit them to get a visa on arrival. be issued at the border control, and it allows to stay Hong Kong. A taxi can normally carry for 30 days.
  5. 5. SELECTING CHINA SMART SOURCING IN CHINA / 10 / 2011 SELECTING CHINA SUPPLIERS 7SUPPLIERS 1. How to be a great buyer? First of all, check the information of the supplier. Try such as When sending an inquiry to a supplier, make sureFind Reliable Suppliers Online to know the capital, registry date & expiry date, third- you state your request in detail. Let the supplier party professional qualification certification of audit, know: exactly what you are looking for, the quantityFactory or Trading Company etc. Anything which can prove the supplier is reli- you require, your location, expected price range,International Trade Fairs in China able and trustworthy is important. delivery time requirements, and etc.Buyer Service from Second, according to the suppliers scale, date of found, productive capacity, number of employees, 3.How to find reliable suppliers on-So many suppliers in China, sales, mechanical equipment, annual turnover, line?how to find the right one? main clients, major markets, you can well know the strength of enterprises. Provide clear requirements regarding product qual- ity, material specification, and dimensions etc. Ob- Third, make sure the supplier understand what you tain quality certificates including material composi- are saying and what you need. It should have good tion reports, independent quality reports and other communication skills and enough experience on evidence of testing and inspection. Obtain samples international trading. for assessment. If possible visit the factory. Provide Fourth, make sure the supplier could offer you good suppliers with detailed feedback about the product services. Find out whether the and how they can improve their service. supplier has a professional team to help you solving technical problem, give 4.What’s the difference be- you professional com- tween a trader and an origi- ments on your prod- nal manufacture? uct promotion and market, and whether Price: Sometimes factory can offer com- it has a professional petitive price. Sometimes trading com- after-sale service team pany can offer competitive prices due or overseas repair cent- to its ability of brokering larger quantity ers. of products, hence obtaining a lower cost of goods from the factory. Finally, price is not the most im- portant thing. Be wary of a supplier who Quality: Sometimes factory can offers an especially high or low price. Buyer is easy control the quality first hand. to be tempted by such offers, but they are often at- Sometimes trading company is tempted by scammer. In business, there is word of able to understand and apply better quality control "you get what you pay for" is often painfully true. management to ensure products meet world-class standards. Knowledge of technology and products: Factories 2. How to source online? have expert knowledge of the technology and Educate yourself about how to source online by products. When you want to develop new tech- reading resources offered from nology or customize your products, factories can Every day new suppliers register on B2B websites understand your needs better than trading compa- nies.
  6. 6. 8 SELECTING CHINA SUPPLIERS SMART SOURCING IN CHINA / 10 / 2011 SMART SOURCING IN CHINA / 10 / 2011 SELECTING CHINA SUPPLIERS 9 Communication: Sometimes factory staffs are not quantity. You are suggested to buy from wholesaler draft laws and regulations governing domestic and quality, the largest scale, the most complete variety familiar with other cultures and their associated whose price is also very competitive, in some cases, foreign trade, economic cooperation and foreign of exhibits, the largest buyer attendance, the broad- ways of doing business. An established trading will be even cheaper than buying directly from fac- investment, devise implementation rules and regu- est distribution of buyers’ origin and the greatest company may already have talents that understand tory. lations and so on. business turnover in China. and practice international business conducts and On the website, you can find bilateral and multilater- can better connect with overseas clients. al agreements between Chinese government and 8. Is price the most impor- foreign governments/organization, the dumping Gifts & Home China Autumn So if you are thinking about whether tant thing when I select and anti dumping news, quota information, regula- to choose factories instead of October 20-23, 2011, Shenzhen Convention & Exhi- suppliers? tions and policy of different industries, regulations trading companies, the answer bition Center, Shenzhen is "it depends". There is an old saying in China: and policy of different regions, industry association "Cheap things are not so list, etc. Reed Huabo’s China Gifts and Home Fair is the larg- good." If you are hoping to est trade show of its kind in Mainland China. Held in Homepage: 5. How to confirm find products that are "Italian Shenzhen during the best buying seasons in April designed, German quality, and and October every year, the fair offers the widest a China supplier is a Chinese price." It must be a joke. selection of business gifts, premiums and consumer manufacturer not a China Customs When it comes to international products, and attracts tens of thousands of buyers trading company? trading, everything boils down to a from across the country. You can check the policy and regulation, IPR en- You can look at the factorys competitive advantage: can it forcement, import and export statistics and guide to suppliers brochure to tell compete on quality and price? If the price is formalities on china customs website. trading company from factor y. I f a right and the quality is good, then you can move on China Yiwu International Commodities Fair to consider other factors such as delivery terms and Homepage: supplier offers products from lighting to warranty terms. fault.aspx?tabid=3972 October 20-23, 2011, Yiwu International Expo Cen- floor mat then electronics, it is probably trading company. You can also check out the introduction tre, Yiwu City, Zhejiang Province of the supplier, if it has very good research and de- With 5,000 booths in an exhibition area of 120,000 velopment capacity, maybe it’s a factory. Factories 9. Should I buy from a China sup- Invest in China (FDI) square meters, the fair will attract more than 2,600 normally locate in suburb area or rural area, if your plier with little experience of inter- FDI is a good resource for foreign investors, and its domestic and foreign enterprises. Yiwu Fair has supplier is in Hong Kong or Taiwan without any national trading but whose price is the best place to find both English version and Chi- become one of the largest, most influential and pro- Mainland address, its probably a trading company. lower? nese version laws and regulations. You can also get ductive commodities fairs in China. It is estimated Youd better deal with suppliers that have already information of opportunities, economy, investment that over 120,000 professional traders will visit the done exports before, which would save your time statistics, national development zone, and other fair, including 18,000 foreign traders and 80 trade 6. How to make sure my supplier is and energy to communicate about export terms services from the website. groups from overseas. an authorized reseller? and related export procedures. Homepage: Contact the owner of the brand to confirm if they are an authorized reseller. PTC ASIA 2011 10. Internet resources to help you 11.Recommend trade shows in China October 25-28, 2011, Shanghai New International source in China China Import and Export Fair Expo Centre, Shanghai 7. How to buy small quantity from Ministry of Commerce China when China factories set high China Import and Export Fair (also renowned as the The PTC ASIA and CeMAT ASIA 2010 again tri- MOQ? Ministry of Commerce of Peoples Republic of Canton Fair) has become "China’s No. 1 Fair" and umphed as one of the leading exhibition platforms Chinas mission is to formulate development strate- a well-known exhibition in the world. The Canton for the international power transmission/fluid Factories will ignore your inquiry if your quantity is gies, guidelines and policies of domestic and foreign Fair is a comprehensive tradeshow of international power and materials handling industry, helping to too small, which can’t reach their minimum order trade and international economic cooperation, trade, boasting: the longest history, the highest build new momentum for the industry.
  7. 7. 10 SELECTING CHINA SUPPLIERS SMART SOURCING IN CHINA / 10 / 2011 SMART SOURCING IN CHINA / 10 / 2011 SELECTING CHINA SUPPLIERS 11 China International Building Decorations and Building Materials Exposition Shanghai Intl Printing & Packaging Products Trading Fair aims to building six platforms for China’s printing CAN I GET ANY BUYER SERVICE industry to exchange the services trading, informa- March 5-8, 2012, China International Exhibition Center (New Venue), Beijing tion, talents, science & technology and enterprise image. It was the first specialized printing and pack- FROM MADE-IN-CHINA.COM? As the leading trade event for the building industry, aging products fair in China. Yes, of course. Buyer Service Department serves its members as a B2B portal and has Build+Decor has always been an ideal platform for dedicated itself to providing professional support and assistance to clients and connecting international buy- the exhibitors to present their latest products, inno- ers with Chinese suppliers. vations and solutions to the professionals, including The China International Optoelectronic Exposi- the contractors, wholesalers, dealers, architects, etc. tion (CIOE) Tailored Services: Tailored Service Phrase 2 Tailored Match Meeting September, 2012, Shenzhen Convention & Exhibi- Tailored Service Phrase 1 Tailored Sourcing Service This is a new service offered by MIC Buyer Service tion Center, Shenzhen Department. Through it, international buyers could China Electronics Fair When international buyers need to source Chinese meet their selected Chinese suppliers and have face CIOE is a worldwide renowned exhibition, which suppliers and products, Buyer Service Department April 11-13, 2012, Shenzhen Convention & Exhibi- to face discussions with them. Many buyers includ- presents the most advanced optoelectronic tech- tion Center, Shenzhen offers sourcing and exact matching services. Gener- ing Daiso Japan, World Linked Asia, and many other nologies and innovations. CIOE was established in ally, the recommending list will be sent by email professional buyers consider it as their indispensable China Electronics Fair (CEF) is the largest and most 1999 in Shenzhen. This event has been held annu- within 3 working days. service. comprehensive exhibition of electronics and infor- ally for the past twelve years at the Shenzhen Con- mation industry in China. With its debut in 1964, CEF vention and Exhibition Center. As the worlds largest Optoelectronic expo, it has been an UFI-approved Buyers Events in the First Half of 2011 has grown up with China’s fast-growing economy event since 2007. March 9, 2011 Shanghai The Rubber and Plastic Industry Salon and witnessed the transition and development of China’s electronics and information industry from April 14, 2011 Beijing Chinese-Brazil Business Match Meeting planned economy to market economy. April 17, 2011 Guangzhou High-end Business Reception China International Furniture Expo 4th UK-China International Medical Equipment Symposium-New Generation April 17, 2011 Shenzhen September, 2012, Shanghai New International Expo Solutions to Wound Management and Orthopedic Repair Conference Guangzhou International Lighting Exhibition Centre, Shanghai April 20, 2011 Wuxi The Third China-Korea Green Economic Cooperation Forum June 9-12, 2012, China Import and Export Fair Com- April 21, 2011 Shanghai Chinese-Brazil Business Match Meeting As the leading furniture trade exhibition in Asia and plex, Guangzhou one of the Top 3 international furniture exhibitions April 22, 2011 Dongguan Tailored Match Meeting for Daiso Japan of the world, Furniture China is held annually in June 21, 2011 Nanjing Investment Forum for Modern Manufacture Industry Forum Guangzhou International Lighting Exhibition is September in Shanghai including a comprehensive June 29, 2011 Shanghai Tailored Match Meeting for Blackwoods Asia’s largest influential lighting event. Organized by set of popular themes: Home Furniture, Office Fur- Guangzhou Guangya Messe Frankfurt Co Ltd, the June 23, 2011 Shanghai Tailored Match Meeting for MIC member buyer niture, Furnishings, Kitchen & Cabinet, and Furniture show is attracting 2,600 exhibitors from 30 countries June 30, 2011 Nanjing The Sixth Jiangsu Cross-border Retail Sourcing Conference Manufacturing & Supply. and regions, including nine new countries, Den- mark, Egypt, Finland, Kenya, Latvia, Malaysia, Syria, In October, we will hold more events in China as well. To become our member, you will get the first notice Thailand and Turkey. from us. How to join us? 12. How to source on Made-in-Chi- Learn more about Buyer Service Department, Shanghai Intl Printing & Packaging Products Search products and suppliers by keywords, or send please visit: Trading Fair inquiries to suppliers. You can post offers as well. Registration is free. July 6-9, 2012, Shanghai New International Expo Tel: 86-25-6667 7777 Fax: 86-25-6667 0000 Email: Centre, Shanghai Facebook Link:
  8. 8. 12 NEGOTIATING CONTRACTS AND AGREEMENTS SMART SOURCING IN CHINA / 10 / 2011 SMART SOURCING IN CHINA / 10 / 2011 NEGOTIATING CONTRACTS AND AGREEMENTS 13 NEGOTIATING Differences in Business Negotiating Styles When YES Means NO CONTRACTS AND Identify Who Makes the Final Decision Body Language in China AGREEMENTS How to avoid being lost in translation?
  9. 9. 14 NEGOTIATING CONTRACTS AND AGREEMENTS SMART SOURCING IN CHINA / 10 / 2011 SMART SOURCING IN CHINA / 10 / 2011 NEGOTIATING CONTRACTS AND AGREEMENTS 15 ing personal lives to build guanxi. The Chinese peoples main goal in most negotiations is to The Chinese are very risk averse. They think the slow establish a relationship for future business opportunities. process of negotiations will secure their deals. Guanxi is more important in these cases. (4) The importance of hierarchy 1. How are Chinese business nego- Gift-giving is necessary too, which is considered an There is a strong emphasis on hierarchy in China tiating styles different from western important way of showing courtesy. Gifts should society and Chinese business culture. Much of this business negotiating styles? always be exchanged for celebrations, or thanks for emphasis on hierarchy can be traced to the phi- assistance. It shows you care about your Chinese losophy of Confucius, which is the root of Chinese Different cultures have different values and morals, counterparts. culture and has influenced Chinese peoples lives for their unique methods of doing things are applied to hundreds of years. the way they handle business. (2) High-context communication The Chinese are often more sensitive towards rank (1) The use of guanxi and seniority. Age and experience are given much In the West, relationships grow out of deals. In China, High context culture and the contrasting low con- more credit than in Western culture. The Chinese deals grow out of relationships. Unlike western busi- text culture are terms presented by the anthropolo- will share opinions with their colleagues. They will ness relationship which remains professional and gist Edward T. Hall in his 1976 book Beyond Culture. discuss together like the Americans, but it is always aloof even after a long time, Chinese business rela- In a high context culture, many things are left the senior executive who makes the final decision. tionship inevitably becomes a social relationship. unsaid, letting the culture explain. Words and word choices become very important in higher context Ensure you bring a senior member of your organiza- The Chinese not only prefer to work with persons communication, since a few words can communi- tion to lead the negotiations on your behalf. The they know and trust, but also think they have the cate a complex message very effectively to an in- Chinese will do the same. (3) Never make quick decision obligation to do business with their friends first. In group (but less effectively outside that group), while addition, Chinese guanxi can indirectly link you to in a lower context culture, the communicator needs The Americans think time is money and a good new acquaintances and information resources with to be much more explicit and the value of a single decision is a quick decision. Meetings start and end 2. How to identify who makes the the meeting of new people. word is less important. on time, with an agenda and a plan of action. There final decision? is no time for socializing. For westerns, no matter how much experience Chinese cultures rely more heavily on high-context The senior member of the Chinese organization, or you have in western business management, the communication, while Western countries includ- A Chinese entrepreneur can make a relatively quick the final decision maker, would be the first one who right “Guanxi” in China will make all the difference in ing United States, Canada, Australia and European decision. But most decisions take much longer. is introduced to you, the first one who speaks, and ensuring success. The inevitable risks, barriers, and countries tend toward low-context communica- Deadlines are viewed as a moving target and not the one who sits in the middle of the Chinese coun- set-ups will be minimized when you have the right tion. as an absolute commitment. Unlike the Americans, terparty. “guanxi”working for you. they view quick decisions as a form of incompe- There are clear implications for Chinese business tence. They prefer slow and methodical decisions You can find it from the title of their business cards The Chinese’s main goal in most negotiations is to communication. The Chinese might not give you making process. They will spend considerable time too. establish a relationship for future business opportu- direct answers. You need to find the implications on bargaining, drafting agreements, and even shar- nities. Guanxi is more important in these cases. in his/her reply. For example, “Yes” in China can be a way of indicating that one understands or acknowl- To build guanxi needs time and resources, not only edges a proposal, but not agree with it. If the pro- money. Small talks before negotiations would be posal is unsatisfactory, the Chinese response is likely The Chinese will spend considerable time on bargaining, the best way to break ice. The more you share your drafting agreements, and even sharing personal lives to to be indirect, consisting of such statements as "Im personal life, the closer you are in your business rela- tionship. Sometimes, a lot of time is spent discussing not sure", "Its under study", or "we will think about it." build guanxi. matters outside of business.
  10. 10. 16 NEGOTIATING CONTRACTS AND AGREEMENTS SMART SOURCING IN CHINA / 10 / 2011 SMART SOURCING IN CHINA / 10 / 2011 NEGOTIATING CONTRACTS AND AGREEMENTS 17 3. Why are Chinese people re- polite in China. Chinese people won’t say "no" to a nowned for being tough negotia- proposal. They have a thousand ways to say "no", but tors? they wont use the word "no". Chinese businessmen are renowned for being They will say "perhaps", "Im not sure", "Ill think about tough negotiators because they may deliberately it", or "Well see" instead. If you hear that your pro- make negotiations painful and lengthy for their posal "is under study" or has arrived at "an inconven- counterparties. It can be very difficult, complex and ient time," it probably means "no". This deliberately longwinded for a Western person to figure out how ambiguous communication is designed to let the to get it right with Chinese negotiators. Westerner know that the real answer is “no” but the relationship is worthy of preservation. Sometimes you have told the Chinese side that you are at your bottom line, but they are unwilling to take you at your word. 5. Does YES always mean YES in Because in Chinese business culture, Chinese busi- China? nessmens primary aim in negotiations is “conces- sions”. Always bear this in mind when formulating No. Sociologists call Mandarin Chinese a “high con- your own strategy. You must be willing to show text” language to indicate that there is more to the compromises and ensure their negotiators feel they message than just the words being spoken or writ- have gained major concessions. ten. You have to pay attention to the situation, envi- ronmental factors and history to understand the real It is very important to know the commonest basic meaning. For example, when you are speaking at a “No big problem” usually means “There are still problems”. components of your counterpartys culture. Its a meeting with Chinese people, a Chinese business- sign of respect and a way to build trust and credibil- man might say "yes" which probably means "Ive ity as well as advantage that can help you to choose heard you", it does not mean "I understood, compre- the right strategies and tactics during the negotia- hended and this is what I will do". 6. Whats the meaning of “No big 8. How to impress Chinese counter- tions. Nodding is the same. Sometimes a Chinese nods problem” or “The problem is not seri- parties in negotiations? his/her head just to suggest that he/she is listening ous”? You can learn to speak a few Chinese phrases, espe- 4. How to say NO in china? to the speaker, but not to mean he/she agrees with It usually means “There are still problems”. Always cially some "chengyu" (proverbs). They usually have the speaker. investigate the situation fully to obtain facts. four characters and have a whole story behind them Maintaining balance and harmony is an important to support the meaning that you want to express. aspect of Chinese thought. Chinese do not want to When asked a direct question by a Westerner, a Chi- Make sure you use a chengyu at the appropriate “lose face,” and they also do not want to make you nese might answer “yes”to save the Westerner’s face, time and you will grab everybodys attention and “lose face.” Therefore, they will rarely disagree with but the true meaning is “no”and he/she might act as 7. Is Guanxi important in negotiations? gain substantial respect. you in public. Negative replies are considered im- if he/she has said“no.” Trust and personal connections are at the core of business in China. The Chinese believe strongly in building relationships first and then engaging in 9. What composition should I have Chinese do not want to “lose face,” and they also do not business. It is built on long-term partnership. for my team when negotiating with the Chinese? want to make you “lose face.” Therefore, they will rarely disa- But you should know guangxi is a rental, not a pur- gree with you in public. Negative replies are considered im- chase. It is a series of favors, and you have to give to At first you need to know how many persons from get. Sometimes you do not always control how you Chinese counterparties will participate in your ne- polite in China. will pay back a guanxi debt. It cant transfer. When gotiation. Youd better have the same amount of your guanxi person goes, so does the relationship. team members. The team should include:
  11. 11. 18 NEGOTIATING CONTRACTS AND AGREEMENTS SMART SOURCING IN CHINA / 10 / 2011 SMART SOURCING IN CHINA / 10 / 2011 NEGOTIATING CONTRACTS AND AGREEMENTS 19 Operations Manager with the authority to cut a deal, rency appreciation, and etc. You should do your sign a contract or write a letter of understanding. homework well before having a price negotiation. Financial Analyst, who sends a trained business case (1) Do some research of tax rebate rate, raw material analyst with strong business counsel skills, not an price, and currency exchange rate. accountant who is capable of quick, high level as- sessments, but can follow through with detail later. (2) Do some research of the market. Search the tar- get products on, and figure out Engineer, with experience in the operations you are the price of the market. seeking to establish who also ideally has some busi- ness management trainings and can understand (3) Export companies in China normally quote a rea- business case assessments. sonable price and price is relatively transparent. You can’t expect to cut the price down by something Lawyer, as an adviser as contract terms can be con- like 50% or more. fusing at best to the rest of the team. Procurement Specialist, trained in international part and product sourcing if this is an essential compo- 11. Are contracts sometimes flexible nent of the endeavor. in Chinese business culture? Chinese traditional statues in Wangfujin Street, Beijing. Their gestures mean "thank you for coming." Marketing Specialist, trained in international market- Yes, sometimes the stronger your relationship with ing and with some business research background. the other party, the more likely the contract will be Respect- using both hands (when one would be Girls will hold hands or walk arm-in-arm in China. It followed as written. It is important to not solely rely enough) in offering something to a visitor or anoth- doesnt mean they are lesbians. Professional Negotiator, who is essential if the team on the contract to protect you. Establishing a strong er person. You can even hold your teacup with two has little or no experience, and optional if you have a relationship and having proactive involvement in Many people in China consider it rude to show the hands while someone else fills it with tea to show strong experienced team. product QC is the key to getting the product you extra appreciation. When somebody pours tea for inside of their mouth. Thats why so many Chinese desire. you, tap the table to show "thank you." girls cover their mouth in a cute way while they Local Interpreter, who can help you communicate laugh. well and give you guide of Chinese business culture. Thank you for your help- cupping one fist with the Other skill sets as needed for the specific project. 12. Body language in China other hand before the chest. Shame on you- forefinger of one hand extended, 13. How to negotiate with the Chinese? Greeting- head nodding, smile, hand shaking. The Chinese seldom kiss on the cheek when they meet. tip touches one’s own face several times quickly; The Chinese are famous for their negotiation skills. 10. What should I prepare for a price Hug is for really close friends or relatives. similar to scratching, but with the forefinger straight. Here are some tips on how to succeed in business in negotiation? China. Come here- hand extended toward person, open Im full- patting stomachs. The Chinese never lay The Chinese are extremely price sensitive. In inter- palm, palm down, with all fingers crooked in a beck- their hands on their necks when they are full, which (1) Build Guanxi. national trade, prices are quoted very reasonably as is a suicide action to Chinese. oning motion. the price in the market is relatively transparent. Price (2) Be sincere and patient. Are you insane?- touch temple. Americans often would be affected by such factors as raw material Good idea/ Youve done a great job- thumb up, use it to express somebody’s cleverness. But it (3) Know the Chinese business culture. and energy price, tax rebate rate, labor price, cur- the other four fingers hold a fist. means there is something wrong with one’s mind or (4) Find the implications from the Chinese commu- one is stupid to Chinese. nication. Do some research of the market. Search the target products The Chinese think it rude to point at somebody with (5) Do research of China market. on, and figure out the price of the market. one finger. When you introduce someone, point at him/her with all of your five fingers of one hand, (6) Make sure you are communicating with the right which also means "please". person.
  12. 12. KEEPING YOUR SMART SOURCING IN CHINA / 10 / 2011 KEEPING YOUR BUSINESS SAFE 21BUSINESS SAFE Protect Trade Secrets and Processes Protect My IP Rights Assure Product Quality Examples of Fraud How to assure a success? 1. How to protect trade secrets and ment of the Peoples Government over the county processes? level supervise unfair competition, except for the supervision made by the other organisations in ac- The best thing your company can do is to only dis- cordance with the provisions of the other laws or seminate trade secrets to those who have a need to regulations. know the information. When outsourcing manufacturers you may con- sider separating your designs, ideas and know-how 2. How to assure product quality? amongst various manufacturers to ensure that no Sometimes a buyer may receive poor quality prod- one manufacturer is able to steal your trade secrets ucts after payment has been made, but the supplier and know-how. This works like a puzzle, distributing refuses to compensate the importer or does not each single piece to another location to eliminate even respond to complaints. Sometimes a supplier the chances of putting the pieces all together. may send high quality samples to the buyer but the The primary law on the trade secrets is Anti Unfair quality of the real end product is very poor. Competition Law. This law is drawn up in order to In order to avoid poor quality, you should undertake safeguard the healthy development of the social- quality and inspection before ordering, during the ist market economy, encourage and protect fair production process and just before the shipment market competition, prohibit unfair competition, leaves. safeguard the legal rights and interests of managers. "Unfair competition", in this Law, means activities made by managers who damage the others legal In order to avoid poor qual- rights and interests, disturb the order of social econ- ity, you should undertake omy and violate the provisions of this Law. quality and inspection The governments in all levels shall adopt methods before ordering, during to prohibit unfair competition and to create the the production process sound environment and conditions for fair competi- and just before the ship- tion. ment leaves. The Bureaus of Industrial and Commercial Manage-
  13. 13. 22 KEEPING YOUR BUSINESS SAFE SMART SOURCING IN CHINA / 10 / 2011 SMART SOURCING IN CHINA / 10 / 2011 KEEPING YOUR BUSINESS SAFE 23 Failure to deliver on time. If the supplier avoids giv- Failure to disclose all relevant information about a ing you substantive product or terms of the sale. information about its company, you should be suspicious. 11. Examples of fraud. Trading with Fake Companies 7. How do I structure the relationship with my China sourcing partner? Doing business with strange companies is a big trade risk. The company you are dealing with could Some companies use a full-service China sourcing be a fake or fraudulent company that could disap- agent and others set up a representative office to pear the moment they receive any money from manage China sourcing operations. You can also you. In order to avoid being cheated by these com- find quality Chinese manufacturers online or on panies, you can order a background check from trade fairs. independent third-party sources including a search for legal registration and credit record. 8. How to make sure goods brought Fake Check Scams into my country meet all national regulatory requirements? There are many variations of the fake check scam, but the common thread is a stranger proposing to Goods that dont meet requirements can be send the victim a check and have the victim wire stopped at the border or result in future legal suits. It 3. Why is it best to see the factory for 5. What should I do if the suppliers is highly recommended to consult a good customs myself? do not deliver goods? broker before placing any orders. Some fraud may not actu- Good relationships (or guanxi in Chinese) play a When failed in communicating with the supplier, ally be fraud but problems crucial role in business in China, so it is advisable to keep a record of contact emails, payment bills and 9. How about after-sale service of occurring due to misun- meet the suppliers before placing an order. other valid documents to report the case to the po- Chinese suppliers? lice and also voice a complaint to local trade com- derstanding and mis- You can inspect manufacturing areas to get an idea mittee or department of commerce. At present, a lot of excellent Chinese suppliers pro- communication and the of raw material quality, workers’ skills, production ca- pabilities and the internal QC process of the manu- vide comprehensive after-sale service, set up repair lack of understanding of centers overseas or authorize cooperation partners facturer. to offer after-sale service. It includes consultation, each others’ culture. 6. When should I be suspicious? products maintenance, accessories replacement, If the supplier avoids giving you substantive infor- etc. 4. What precautions should I take mation about its company, you should be suspi- money in return. It may start with someone offer- before making the final payment? cious. ing to buy something you promoted for sale, pay you to work at home, or give you an advance on a You should use the services of a credit institution They may act excited but vague, emphasizing what 10. What problems do most people sweepstakes you won. Whatever the bottom line that checks the background of manufacturers be- a great opportunity this is for you. The supplier asks complain about? is if someone you dont know wants to pay you fore you make your final payment. Always remem- you for up-front payment. They request payment Failure to send the correct products. by check but wants you to wire money back, its a ber: No final payments unless you are certain you options other than Letter of Credit, T/T or Western scam. will receive the goods. Union. Sending product of inferior quality than the samples.
  14. 14. 24 KEEPING YOUR BUSINESS SAFE SMART SOURCING IN CHINA / 10 / 2011 SMART SOURCING IN CHINA / 10 / 2011 KEEPING YOUR BUSINESS SAFE 25 Beware of sending free samples scams! Once the money is paid, it becomes difficult 14. How to protect my IP Rights? ment of the socialist market economy. to follow up where the money actually went to and This concerns a supplier requesting a sample from China promulgated the Trademark Law in 1982, The Trademark Office of the administrative authority it is impossible to get the money back. the buyer to produce a product according to the the Patent Law in 1985 and the Copyright Law in for industry and commerce under the State Council clients requirements. Sometimes the supplier may (2) Search related government websites for informa- 1990. Over the past 30 years, China also enacted shall be responsible for the registration and adminis- use these samples without delivering the actual tion and help. laws to protect Geographical Indications, Trade tration of trademarks throughout the country. product to the buyer. In such cases, when samples Secrets, New Plant Varieties and Layout Designs of are required for production, the supplier should (3) Ask when you are unsure The Trademark Review and Adjudication Board, es- Integrated Circuits. After its accession to the World pay for the samples and the shipment cost. Once about a supplier or when you need professional tablished under the administrative authority for in- Trade Organization in 2001, China has strengthened the product has been delivered and the sample re- dustry and commerce under the State Council, shall assistance to conduct business with Chinese suppli- its legal framework and amended its IPR and related be responsible for handling matters of trademark turned to the buyer, the money for the sample and ers. (fee based service ) laws and regulations to comply with the WTO disputes. shipment may be returned to the supplier. Agreement on Traded-Related Aspect of Intellectual Property Rights (TRIPs). Patent Law Poor Product Quality You can register your intellec- This Law is enacted to protect patent rights for Sometimes a buyer may receive poor quality prod- tual property right(s) (IP rights) inventions-creations, to encourage inventions- ucts after payment has been made, but the supplier under your countrys law. You creations, to foster the spreading and application of refuses to compensate the importer or does not can protect your Logo(s) and Inventions-creations, and to promote the develop- even respond to complaints. Sometimes a supplier Slogan(s) under the Chinese ment of science and technology, for meeting the may send high quality samples to the buyer but the Anti Unfair Competition Law. Try needs of the construction of socialist moderniza- quality of the real end product is very poor. In order to register your IPR(s) in China tion. to avoid poor quality, you can use Pre-Shipment as well. Small and medium Inspection Services and demand the inspection as a enterprises should therefore In this Law, "inventions-creations" mean inventions, condition to payment. always use written agreements utility models and designs. addressing the issues surround- The Patent Administrative Organ under the State ing know-how, trademarks, IPR, 12. Is there any possibility that some Council is responsible for the patent work nation- non-competition and confi- wide, receives and examines patent applications fraud may not actually be fraud? dentiality. and grants patent rights for inventions-creations Yes, some fraud may not actually be fraud but that conform to the provisions of this Law. problems occurring due to misunderstanding and Trademark Law The authorities for patent work under the people’s miscommunication and the lack of understanding This Law is enacted for the governments of provinces autonomous regions of each others’ culture. Many of these issues can be purposes of improving the and municipalities directly under the Central Gov- avoided by seeking trade information from Chinese administration of trademarks, ernment are responsible for the patent administra- related government institutions. protecting the exclusive right to tion work of their own administrative areas. use trademarks, and encourag- ing producers and operators 13. How to avoid fraud? Copyright Law to guarantee the quality of (1) Use L/C (Letter of credit). Since payment options their goods and services and This Law is enacted, in accordance with the Consti- other than T/T and Western Union are currently maintain the reputation of their tution, for the purposes of protecting the copyright quite limited in China and therefore a Western Un- trademarks, with a view to pro- of authors in their literary, artistic and scientific works ion account is not always a reason to be suspicious, tecting the interests of consum- and the copyright-related rights and interests, of it is still important to recognize that fraudulent sup- ers, producers and operators encouraging the creation and dissemination of pliers have used Western Union accounts for money and to promoting the develop- works which would contribute to the construction