Doing Business in China - the-eye.eu

1 By Robert Collins, MBA, and Carson Block, EsqDoing Businessin ChinaFORDUMmIES 01_049297 6/25/07 8:38 PM Page i02_049297 6/25/07 8:39 PM Page viiiby Robert Collins, MBA, and Carson Block, EsqDoing Businessin ChinaFORDUMmIES 01_049297 6/25/07 8:38 PM Page iDoing Business in China For Dummies Published byWiley Publishing, River , NJ 2007 by Wiley Publishing, Inc., Indianapolis, IndianaPublished by Wiley Publishing, Inc., Indianapolis, IndianaPublished simultaneously in CanadaNo part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form orby any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permit-ted under Sections 107 or 108 of the 1976 United States Copyright Act, without either the prior writtenpermission of the Publisher, or authorization through payment of the appropriate per-copy fee to theCopyright Clearance Center, 222 Rosewood Drive, Danvers, MA 01923, 978-750-8400, fax to the Publisher for permission should be addressed to the Legal Department, Wiley Publishing,Inc.

2 , 10475 Crosspoint Blvd., Indianapolis, IN 46256, 317-572-3447, fax 317-572-4355, or online at : Wiley, the Wiley Publishing logo, For Dummies, the Dummies Man logo, A Reference for theRest of Us!, The Dummies Way, Dummies Daily, The Fun and Easy Way, and related tradedress are trademarks or registered trademarks of John Wiley & Sons, Inc. and/or its affiliates in the UnitedStates and other countries, and may not be used without written permission. All other trademarks are theproperty of their respective owners. Wiley Publishing, Inc., is not associated with any product or vendormentioned in this OF LIABILITY/DISCLAIMER OF WARRANTY: THE PUBLISHER AND THE AUTHOR MAKE NO REP-RESENTATIONS OR WARRANTIES WITH RESPECT TO THE ACCURACY OR COMPLETENESS OF THECONTENTS OF THIS WORK AND SPECIFICALLY DISCLAIM ALL WARRANTIES, INCLUDING WITHOUTLIMITATION WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE. NO WARRANTY MAY BE CRE-ATED OR EXTENDED BY SALES OR PROMOTIONAL MATERIALS. THE ADVICE AND STRATEGIES CON-TAINED HEREIN MAY NOT BE SUITABLE FOR EVERY SITUATION.

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4 Some content that appears in print maynot be available in electronic of Congress Control Number: 2007926402 ISBN: 978-0-470-04929-7 Manufactured in the United States of America10 9 8 7 6 5 4 3 2 101_049297 6/25/07 8:38 PM Page iiAbout the AuthorsRobert Collins, MBA,is a senior executive with a major Fortune 500 financialservices company. Rob is also a former senior consultant with a leading inter-national Business consulting firm. He has more than 20 years of commercialand Business development experience in international markets. Rob is anactive member of the Mayor of Chicago s Shanghai Sister Cities gained a strong understanding of Chinese Business and managementwhile living and working in Beijing and Hong Kong, China , for more than 12years. He managed one of the earliest representative offices in China . Whileworking there, Rob was an officer with the American Chamber of Commercein obtained a joint MBA degree from the Kellogg School of Management at Northwestern University and the Hong Kong University of Science and his wife, Sarah, have three children and reside in suburban family is active in supporting Chinese-related educational initiatives.

5 TheCollins family has hosted numerous Chinese exchange students in Hong Kongand the can e-mail Rob at Block, Esq,is the founder and Managing Director of YBS InvestmentConsulting, which is based in Singapore. In this role, Carson advises high net-worth individuals and families on their investments. He also advises compa-nies and investment firms on China -related investments. Prior to foundingYBS, Carson practiced law in Shanghai with Jones Day, a based law this role, he advised foreign clients on China foreign direct investment andmergers and acquisitions. Before joining Jones Day, Carson was an equityanalyst and partner in Capital, a Los Angeles based investment obtained his Juris Doctor (High Honors) from the Chicago-KentCollege of Law. He earned his BS in Business (finance) from the University ofSouthern speaks Mandarin Chinese. You can e-mail Carson at 6/25/07 8:38 PM Page iiiDedicationRobert Collins: I dedicate this book to my lovely wife, Sarah. Over many,many years, she has provided me with unwavering support that has enabledme to produce, among other things, the most contemporary work on doingbusiness in China .

6 Sarah, you are the greatest gift that life has given young newlyweds, we moved to a far-off place called Beijing, China , in1983. We were truly pioneers. Together, we witnessed the beginning ofChina s powerful transformation into the modern book is for my children, too. Thanks to your tremendous commitment tothe Mandarin Chinese language, you re well positioned to participate in whatChina has to offer. My delightful daughter is a treasure in more ways than Ican express. , you re an incredibly talented young man with all the mak-ings of great success. And Z-man, born in modern China , you just simply rock!And last but not least, I dedicate this book to my parents, Mike and Evelyn,who consistently encouraged me to pursue my Block: I dedicate Doing Business in China For Dummiesto my father,Bill. When I was a teenager and college student, he gave me the opportunitiesto travel to Asia and to study Chinese (including in Beijing). When I gradu-ated from college, he provided the backing that allowed me to go to Shanghaiand try my hand at Business there.

7 Without his support for my China endeav-ors, neither this book nor my China career would have been AcknowledgmentsSo many wonderful people contributed to Doing Business in China re outstanding professionals in their fields, and they ve made this a significantly better d like to particularly acknowledge a small group of people who spent sig-nificant time assisting us with this book. Our warmest gratitude and thanksgo to Jay Boyle, Expat CFO; Beth Bunnell, Honeywell; Elizabeth Harrington, E. Harrington Global; and Xiangyun (Gilbert) Zeng, Houlihan, would also like to thank the following people for their valuable contribu-tions: David Atnip, Chad Blackwell, Catherine Chen-Oas, Cheryl Chong,Matthew Estes, Lefan Gong, Christopher Gray, Kevin Gromley, Max Gu, AshleyHowlett, Nicole Kwan, Ted Lee, Jim Leu, Stephen Markscheid, Michael01_049297 6/25/07 8:38 PM Page ivMcNabb, Jeff Moore, Daniel Oas, Jennifer Qi, Sean Regan, Andrew Rice,Andrew Ruff, Lee Satveit, Walter Schmid, Oded Shenkar, Paul Stepanek, AnitaTang, Benson Tsai, Samantha Tsai, Cheng Wang, Jack Wang, Peter Wang, RickWang, Dr.

8 Yong Wang, Zheng Xie, Kent Yeh, Jia (Holly) You, Liming Yuan, andWinston thanks to Alissa Schwipps, Senior Project Editor at Wiley Publishing,for keeping us on the straight and narrow, and Danielle Voirol, Copy thanks to our literary agent, Carol Susan Roth, for her support and , we would like to thank Richard Pringle for introducing the 6/25/07 8:38 PM Page vPublisher s AcknowledgmentsWe re proud of this book; please send us your comments through our Dummies online registrationform located at of the people who helped bring this book to market include the following:Acquisitions, Editorial, and MediaDevelopmentSenior Project Editor: Alissa SchwippsAcquisitions Editor: Michael LewisCopy Editor: Danielle VoirolTechnical Editor: Dennis B. KelleySenior Editorial Manager: Jennifer EhrlichEditorial Assistants:Erin Calligan Mooney, Joe Niesen, Leeann HarneyCover Photos: Catherine : Rich Tennant( )Composition ServicesProject Coordinator: Heather KolterLayout and Graphics: Claudia Bell, Stephanie D.

9 Jumper, Laura Pence,Alicia B. SouthSpecial Art: Liz KurtzmanAnniversary Logo Design:Richard PacificoProofreaders: Aptara, Todd LotheryIndexer: AptaraSpecial HelpStephen R. Clark, Christina Guthrie, SarahWestfallPublishing and Editorial for Consumer DummiesDiane Graves Steele, Vice President and Publisher, Consumer DummiesJoyce Pepple, Acquisitions Director, Consumer DummiesKristin A. Cocks, Product Development Director, Consumer DummiesMichael Spring, Vice President and Publisher, TravelKelly Regan,Editorial Director, TravelPublishing for Technology DummiesAndy Cummings,Vice President and Publisher, Dummies Technology/General UserComposition ServicesGerry Fahey,Vice President of Production ServicesDebbie Stailey,Director of Composition Services01_049297 6/25/07 8:38 PM Page viContents at a GlanceIntroduction ..1 Part I: Building Your Foundation ..7 Chapter 1: So You Want to Do Business in China ..9 Chapter 2: Brushing Up on China Business Basics ..23 Chapter 3: Getting Acquainted with the Powers That Be: China s History and 4: Planning for Success in II: Starting Up in China .

10 71 Chapter 5: Traveling to and around China ..73 Chapter 6: Getting Business Going through Successful Negotiation ..97 Chapter 7: Setting Up Shop ..113 Chapter 8: Understanding Government Relations with Your 9: Building a Local Team in China ..155 Chapter 10: Getting Your Mind on Money ..175 Part III: Conducting Daily Business ..197 Chapter 11: Understanding How China Works (and Doesn t Work) ..199 Chapter 12: Sourcing from China ..219 Chapter 13: Manufacturing in China ..233 Chapter 14: Selling in China ..251 Part IV: Building Successful Business 15: Fostering Fruitful Friendships: The Art of Guan 16: Saying and Doing the Right Things: Chinese Business 17: Managing Risks in V: The Part of Tens ..335 Chapter 18: Ten Clauses You Want in Your Contracts ..337 Chapter 19: Ten Fun Ways to Spend Your Downtime in China ..343 Chapter 20: Ten Ways to Stay on the Path to Profitability ..349 Index ..35502_049297 6/25/07 8:39 PM Page vii02_049297 6/25/07 8:39 PM Page viiiTable of ContentsIntroduction.