BACK IN SEPTEMBER

FOREIGN ENTREPRENEURS IN CHINA WILL BE BACK IN SEPTEMBER.

Hope you will enjoy a summer break too!

My First Day in a Chinese Company, My First Day as Entrepreneur

Guest post by Shlomo Freund, Founder of Start Up Noodle – Asian entrepreneurs community

I started my China journey as part of a Chinese company. Without the benefits of a relocation pack, I spent a few grueling months trying to secure a position before coming to China, it was harder than I thought it’d be, but in the end I did it! It wasn’t the perfect position, but it was my ticket to China and I intended to make the best of it.

Fast forward, and I’m on a plane on my way to becoming an intern in a Chinese company.

I think the best way to start helping you prepare for a position in a Chinese company, is to share with you my impressions from the first couple of days on the job.

These days, and actually the entire period there taught me a lot about the Chinese mindset, work style, rules and conventions, and also how to successfully handle these and the various cultural differences. Coming from the world of High-Tech where hours are flexible and office atmosphere is quite loose and personal, I faced several challenges in my new position.

 Soft landing

One very important thing I learned as well, is that there are times that your colleagues will go out of their way to help you with things you didn’t even expect. I did expect my employer to help me find an apartment, but I didn’t expect that my colleague will barge for me and save me a lot of money on the rent. She really made tremendous efforts to help us buy our stuff for the house and barging there as well, getting us good prices.

Time is everything

Although societies in many Asian countries don’t seem to attach much importance to keeping times (take India as extreme example) this does not apply to work places in China. At least when it comes to official working hours Chinese companies are very strict about employees arriving on time.

From my experience they want you to come on time and leave as late as possible. It really doesn’t matter if you stayed late yesterday, that was time you generously contributed to the company (paid or non-paid depends on your contract), today is a new day and you must be in the office on time, if not a little early to show your commitment.

When the work day ends there’s a tendency in many companies to stay over time, and the decision when to go home depends less on the clock and more on when the boss decides to call it a day, it’s not an official statement, but when he’ll walk out the door many will quickly pack up and follow.

I remember that on the first 3-4 days in the office my computer clock was set by mistake to 7-8 minutes ahead of my boss’s clock. I didn’t notice it, coming and going around the set times, keeping my hours with some flexibility. Until after a few days, when I was about to leave, my boss pointed out that I still had 7 more minutes of work left…

My next cultural difference encounter was when during the work day I had to call my wife as we moved to a new apartment the previous day and there was a lot to do. I called her and we spoke for a couple of minutes. Following that I was told that phone calls should be made only on lunch time or after leaving the office, not during working hours…

Western companies are more forgiving/flexible about this and more “holistic” about employee’s needs and their welfare, something that Chinese companies are sometimes lacking.

Time is everything, with some exceptions…

One great thing on Chinese working culture is nap time. It’s acceptable to put down your head on your desk while working, if you are feeling tired. It’s great for after lunch time tiredness we are all fighting with and trying to keep ourselves awake. I saw my colleagues doing it and it really felt okay doing the same. Its something you would never do on a western company.

Instead of that being count as a waste of time, it counts as a way of increasing your efficiency. Let me mention a yoga mattress that was folded at our office corner enabling us to sleep properly on lunch time if we wanted.

The Time is NOW!

One more thing you should be aware of is the urgency factor. You have many tasks on your hands and they all need to be done now, and results are always expected quickly. Plans (like marketing plans, I’ve done and executed) were always asked be on shorter schedule.

Short cuts will be taken, and time tables will not always be reasonable, when I saw fit I tried to advise against taking short roads that’ll only end up becoming long ones, sometimes it worked, sometimes it only left me frustrated, but the expectation for faster results always remained.

Who’s complaining?!

Seems like I’m complaining…no? So, I’m really not. This period was one of my best experiences in understanding Chinese work culture. It was a wonderful lesson about how a Chinese business works, how the Chinese mind works and how to cope with them both.

I assume that when you’ll arrive to China you won’t create your start up or project right away. You’ll need time to explore and understand how things work. So, even though there are always exceptions, I highly recommend NOT skipping this stop in your Chinese experience. You will learn a lot!

Thank you for reading —I’d love for you to reach out over Twitter

 

Shlomo Freund (@StartUpNoodle) is the founder of Start Up Noodle. Shlomo helps entrepreneurs arrive to Asia and China in order to create their own business.
Shlomo created several businesses related to China: China Business webinars and eBusiness Chinese.  This along with a 9 year experience in the internet marketing world makes this China entrepreneurship journey more exciting than ever.

 

Buyer´s Guide to Sourcing in China

Some time back Daniel Su from Global Sources contacted me to let me know about their sourcing platform and all their available resources that they hoped could help this blog´s readership.

I was initially planning to write a post based on their “Buyer´s Guide to Sourcing in China”, but, as I was going through it in order to prepare the article, I realized it was SO GOOD that you should not miss one single line of what it says.

This guide covers the following aspects:

-evaluating suppliers, including really good tips on how to identify a legitimate manufacturer or what to check when auditing a factory

-negotiating with suppliers

-managing production & QC, including some tips on problema solving

-protecting your IP

You may read “Buyer´s Guide to Sourcing in China” here.

I was also pleasently surprise to discover the amount of really good information that they have put together on their site: sourcing frequently asked questions, experts´videos, articles written by sourcing professionals , interviews and surveys. You can find all this here.

I am sure you find all these resources very useful.

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China 101: Market Entry Strategy. 6 Points to Consider

By Andrea Cristancho, Senior Business Development Manager at JLJ Group

China’s business environment is dynamic and particular in its essence. It welcomes business from different nations and demands skills, commitment and long term planning to stay afloat. It can be rewarding for many foreign companies, especially those who conduct the proper research and carefully craft a strategy to execute.

Here are some main points to consider:

1.Regulatory environment.
In China, the Foreign Investment Industry Guidance Catalogue last revised in August 2011 regulates foreign investment. It’s a document issued by China’s National Development and reform Commission (NDRC) and the Ministry of Commerce (MOFCOM), which oversees foreign investment in Chinese companies. Depending on the business activity, the catalogue classifies direct investment as encouraged, restricted, prohibited or permitted. Therefore, one should look into China’s regulatory environment and find out the regulations on their particular business type, licenses required to operate in compliance with the local authorities, costs and duration of the set up process, among others.

2.Market Assessment.
China is a diverse country with unique regional market segments, which should never be looked at as just a single China. In addition cities are divided into tiers cities including tier 1 such and Shanghai and Beijing, and tier 2 cities as Chengdu, Dalian, and Hangzhou, as well as numerous smaller tier 3 cities. When looking at the market, companies should consider target customer and size, generation groups, consumer demands and purchasing behavior, as well as market trends, barriers and key competitors.

3. Location and Distribution Channels.
Whether you decide to go solo, represent your firm, or partner up with a local investor, you would need to spend some time and resources researching your ideal location within China; particularly at the district level and perform some due diligence before choosing your office location. Companies should also be communicating and negotiating with a short list of potential partners, or dealing with a third party provider; while trying to understand cultural differences and working within the demands of the Chinese style. There isn’t only one ideal way, it requires you to find which best fits your business model and is in line with your long term business model and head quarters vision.

4.Internal Assessment.
At the initial pre-entry level, a lot of time and resources are invested on evaluation phase. Most of the time, reports are presented at head quarters or to a board of investors for final approval. At this stage, it is advisable to evaluate how ready is the management and main decision makers of your corporation to invest in China, including financial consideration, IPR, relocation, staffing and management soft issues, and execution planning. In addition, assigning key points of contact is a priority as the approach to china market entry is being developed and communicated across the organization.

5.Entry Modes
Having your business plan and China Market Entry strategy at hand, consider your market approach evaluating the strategic importance for your head quarters and your ability to exploit the market once invested. There are four primary entry modes:

Export Entry.
Using an intermediary agent for the entire process or handling export –in house and a local Chinese distribution partner for import and sales in China. It doesn’t require a large capital expenditure but provides limited control.

Contractual Entry.
Licensing your brand to individuals and companies in China or sub-contracting with local manufacturers. Requires less capital expenditure but again provides limited control.

Equity Entry.
Entering the market by equity includes Wholly Foreign Owned Enterprises (WFOE) such as Manufacturing, Trading, or Service WFOE (examples are consulting, training, restaurants and management service companies), a Foreign Invested Commercial Enterprise (FICE allows greater flexibility in terms of business activities that include retail, wholesale and franchise), or through a Joint Venture or M&As.

Representative Offices.
A Rep Office represents the interests of the foreign investors acting as a liaison office legally established for the parents company. It may conduct market research, develop partnerships and business channels; however, all business transactions are handled by parent company, mainly the issuance of commercial invoices. Rep Offices do not have a minimum investment requirement since they are not considered a Foreign Investment Enterprise.

6.Registration Steps.
Below is the typical process for setting up both Foreign Invested Companies and Rep Offices. The government offices involved in this process includes the Ministry of Commerce, Administrative Bureau for Industry and Commerce, State Administration for Foreign Currency, Taxation Bureau, The Customs Office, and the Statistics Bureau.

In brief, entering the China Market requires experience and long term planning, as any other market, but developing the aforementioned points and assessing your company entry mode should take you closer to success. Therefore, having a solid team on the ground, including your team and your advisors, a solid network of contacts Guanxi will also help you navigate China’s business environment during pre-entry, execution and growth of your business in China.

By: Andrea Cristancho
Senior Business Development Manager
The JLJ Group – solutions for China Market Entry
Andrea.cristancho@jljgroup.com

What do you think?

You may also be interested in this articles:
7 Top Tips for Entrepreneurs Starting Business in China
The Entrepreneurs Dilemma: How Much Money do I Invest…? 
The Entrepreneurs Dilemma (II): How do I navigate through a founding shortfall in China?
Researching the Market before you Start your China Business: A Photography Gallery Story
Getting Hold of the Consumers in China: Education and Networking
China Stories: Choosing the Wrong Company Formation Agent could Kill your Business!
Seeing is Believing… and I mean it!
Doing Business in China: 14 Insights Gained on the Ground
The Power of Networking in China
What Do I Need to Know About Guanxi
Is it All About Who you Know?
Foreign Women in Business
Ten Tips for Doing Business in China

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16 Practical Chinese Negotiation Tips and General Strategies (compiled)

GENERAL STRATEGIES AND 16 PRACTICAL TIPS IN THE THREE STAGES OF BEFORE-DURING-AFTER NEGOTIATION IN CHINA
by Vincent F. Yip, PhD MBA, Management Consultant, and Lecturer, Stanford Continuing Studies ( Palo Alto, California)

Note from Foreign Entrepreneurs in China:  I´m planning to share this very good article in some social media forums so this is a compilation of  part I & II that you have probably read in my previous two posts)

For companies in Fortune 500 or even Small and Medium Enterprises, entry into the lucrative China market is a highly desired process that begins with identifying potential Chinese partners and entering into all-important negotiation. Other than generalities such as maintaining “guanxi” and “face”, any western team intending to go into China for business and commercial negotiations should have as many practical tips on the “dos and don’ts” of negotiating in China. I shall be teaching the Stanford Continuing Studies course “Doing Business in China” we will spend half a session on this important issue of negotiation during the six-week duration. This course begins in late June and the description of the course is in this link:

https://continuingstudies.stanford.edu/courses/course.php?cid=20114_BUS+202

Based on this author’s 30 years of experience travelling, living and working inside China, here is a list, not exhaustive by any means, for use in the three stages of before, during, and after the actual negotiations.

(A) PREPARATIONS:
1. Pick a neutral large city & location;
Background Fact: Do not give into pressure to conduct all negotiations in the small city of the Chinese partner, and suggest doing it in a larger international city with modern conveniences and security. There have been cases where the Chinese side can and has resorted to unethical practices to illegally obtain information from you.

2. Do background research on subject and personalities using Chinese sources;
Background Fact: China has no Moody’s, Better Business Bureau or any trustworthy rating agencies on the track record of a company. Best you find several other local Chinese sources to cross check the reputation of your Chinese partner or opponent in negotiation.

3. Pick your own team (age, seniority, sex, attire) carefully. Be consistent from meeting to meeting;
Background Fact: The Chinese prefer to maintain personal relationship from beginning to end, so keep the team intact. Also, youth and women among your team are not frowned upon in today’s China, but make sure your top leader has a title (make up one if needed) that commands respect from their side.

4. Be realistic about your strengths and weaknesses;

5. Bring gifts for your host, bring your own personal effects/medicine;
Background Fact: Most Chinese cities are quite modern and medical facilities are effective and reasonable, but not all your western medicine is readily available.

(B) ACTUAL NEGOTIATIONS:
6. Pick a neutral venue and a convenient time avoiding the eve of long national holidays of both countries, and allow “float” for overflow of schedule or the Chinese may use time pressure against you;
Background Fact: They tend to wait till the last day to raise critical issues and demands, and force you into making concessions because you are pressured to leave.

7. Stay at an international hotel, watch your belongings and intellectual property;

8. Know the wants and needs of your Chinese side, remember Sun Zi’s premier advice of “know yourself and know your enemy, and you will win a hundred battles”.

9. Do not fall prey to food, wine, & women; do not negotiate when tired or pressed;

10. Speak in your native tongue, use your own translator, write it down when it comes to numerals and figures as mistakes are commonly made right here;
Background Fact: Best to hire your own translator/interpreter and when it comes to numerals and magnitudes, insist on writing them down. Because of the difficulty in translating numbers/magnitudes, gross errors can occur even to the best VIP translators and the consequences are horrific of course!

11. Remember such Chinese negotiation tactics as:
- accusing you of violating guiding principles, guilt trip;

- asking for the moon, outrageous demands;

- threatening to go elsewhere for the better offer;

- divide and conquer & outlasting your patience;

12. Remember national and cultural sensitivities, avoid discussions on human rights and Tibet, for example, and always keep face and give face. Jokes seldom work across culture so best not to crack them openly.

(C) POST NEGOTIATION
13. Thank and praise host, take photographs, exchange souvenirs;

14. Redraft final agreement (must be in both languages), check for accuracy, go over details, and always have a scribe/secretary take care of all documents;
Background Fact: Remember that Chinese is a much more flexible and opaque language, but yet the Chinese copy is the one that prevail in their courts. Make sure then those details you had written down in the English version is correctly reflected in the Chinese version, and submit Appendices if needed.

15. Win or lose, happy or not, a farewell banquet (speeches, toasts and gifts exchanged) is definitely required;

16. A contract is valid only if it continues to be serviced, it is only the beginning of a difficult long road towards a successful project.

General Strategies
Many often ask if it is useful to study Mandarin and the Chinese language before going and my answer is normally to persuade them to instead spend their valuable time reading up on China’s history, culture and psyche. One of the most successful China experts is Dr. Kissinger, the legendary diplomat who helped open up US-China relationship in 1972, and he is not known to speak any Chinese. It is much more important to understand what drives the Chinese, their fears, concerns, and wants and needs, and China’s own “pride and prejudice”.

In general, some knowledge of Confucius teachings that are the underpinning of Chinese culture is certainly useful before hopping on the plane to China. But I would definitely recommend spending a week or two to browse through articles and business/military books on the famous Sun Zi “The Art of War”, as many of its strategies and tactics will surface during the long course of negotiations with the Chinese side.

Here is a parting comment that may surprise you. In the west, wars and military efforts are about display of bravery and valor, but Sun Zi said a successful militarist is never short of treachery and cunningness! Then there is also the Chinese saying that “the business field is just like a battle field”, now combine the two saying and you know why negotiation in China is not for the faint-hearted and unprepared!

By Vincent F. Yip, PhD MBA
Management Consultant,
and Lecturer, Stanford Continuing Studies
Palo Alto, California
Email: vyip101@hotmail.com
Cell: 415-860-0660

What do you think?

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16 Practical Chinese Negotiation Tips and General Strategies (Part II)

GENERAL STRATEGIES AND 16 PRACTICAL TIPS IN THE THREE STAGES OF BEFORE-DURING-AFTER NEGOTIATION IN CHINA
by Vincent F. Yip, PhD MBA, Management Consultant, and Lecturer, Stanford Continuing Studies ( Palo Alto, California)

This is the second part of guest post by Mr Vincent F. Yip. You may read the first part here.
Remember that he will be teaching the Stanford Continuing Studies course “Doing Business in China”.  This course begins in late June and the description of the course is in this link:
https://continuingstudies.stanford.edu/courses/course.php?cid=20114_BUS+202

 16 Practical Chinese Negotiation Tips and General Strategies (Part II)

(C) POST NEGOTIATION

13. Thank and praise host, take photographs, exchange souvenirs;

14. Redraft final agreement (must be in both languages), check for accuracy, go over details, and always have a scribe/secretary take care of all documents;
Background Fact: Remember that Chinese is a much more flexible and opaque language, but yet the Chinese copy is the one that prevail in their courts. Make sure then those details you had written down in the English version is correctly reflected in the Chinese version, and submit Appendices if needed.

15. Win or lose, happy or not, a farewell banquet (speeches, toasts and gifts exchanged) is definitely required;

16. A contract is valid only if it continues to be serviced, it is only the beginning of a difficult long road towards a successful project.

General Strategies
Many often ask if it is useful to study Mandarin and the Chinese language before going and my answer is normally to persuade them to instead spend their valuable time reading up on China’s history, culture and psyche. One of the most successful China experts is Dr. Kissinger, the legendary diplomat who helped open up US-China relationship in 1972, and he is not known to speak any Chinese. It is much more important to understand what drives the Chinese, their fears, concerns, and wants and needs, and China’s own “pride and prejudice”.

In general, some knowledge of Confucius teachings that are the underpinning of Chinese culture is certainly useful before hopping on the plane to China. But I would definitely recommend spending a week or two to browse through articles and business/military books on the famous Sun Zi “The Art of War”, as many of its strategies and tactics will surface during the long course of negotiations with the Chinese side.

Here is a parting comment that may surprise you. In the west, wars and military efforts are about display of bravery and valor, but Sun Zi said a successful militarist is never short of treachery and cunningness! Then there is also the Chinese saying that “the business field is just like a battle field”, now combine the two saying and you know why negotiation in China is not for the faint-hearted and unprepared!

By Vincent F. Yip, PhD MBA
Management Consultant,
and Lecturer, Stanford Continuing Studies
Palo Alto, California
Email: vyip101@hotmail.com
Cell: 415-860-0660

What do you think?

Subscribe to this blog:


 

16 Practical Chinese Negotiation Tips and General Strategies (Part I)

GENERAL STRATEGIES AND 16 PRACTICAL TIPS IN THE THREE STAGES OF BEFORE-DURING-AFTER NEGOTIATION IN CHINA
by Vincent F. Yip, PhD MBA, Management Consultant, and Lecturer, Stanford Continuing Studies ( Palo Alto, California)

For companies in Fortune 500 or even Small and Medium Enterprises, entry into the lucrative China market is a highly desired process that begins with identifying potential Chinese partners and entering into all-important negotiation. Other than generalities such as maintaining “guanxi” and “face”, any western team intending to go into China for business and commercial negotiations should have as many practical tips on the “dos and don’ts” of negotiating in China. I shall be teaching the Stanford Continuing Studies course “Doing Business in China” we will spend half a session on this important issue of negotiation during the six-week duration. This course begins in late June and the description of the course is in this link:

https://continuingstudies.stanford.edu/courses/course.php?cid=20114_BUS+202

Based on this author’s 30 years of experience travelling, living and working inside China, here is a list, not exhaustive by any means, for use in the three stages of before, during, and after the actual negotiations.

(A) PREPARATIONS:
1. Pick a neutral large city & location;
Background Fact: Do not give into pressure to conduct all negotiations in the small city of the Chinese partner, and suggest doing it in a larger international city with modern conveniences and security. There have been cases where the Chinese side can and has resorted to unethical practices to illegally obtain information from you.

2. Do background research on subject and personalities using Chinese sources;
Background Fact: China has no Moody’s, Better Business Bureau or any trustworthy rating agencies on the track record of a company. Best you find several other local Chinese sources to cross check the reputation of your Chinese partner or opponent in negotiation.

3. Pick your own team (age, seniority, sex, attire) carefully. Be consistent from meeting to meeting;
Background Fact: The Chinese prefer to maintain personal relationship from beginning to end, so keep the team intact. Also, youth and women among your team are not frowned upon in today’s China, but make sure your top leader has a title (make up one if needed) that commands respect from their side.

4. Be realistic about your strengths and weaknesses;

5. Bring gifts for your host, bring your own personal effects/medicine;
Background Fact: Most Chinese cities are quite modern and medical facilities are effective and reasonable, but not all your western medicine is readily available.

(B) ACTUAL NEGOTIATIONS:
6. Pick a neutral venue and a convenient time avoiding the eve of long national holidays of both countries, and allow “float” for overflow of schedule or the Chinese may use time pressure against you;
Background Fact: They tend to wait till the last day to raise critical issues and demands, and force you into making concessions because you are pressured to leave.

7. Stay at an international hotel, watch your belongings and intellectual property;

8. Know the wants and needs of your Chinese side, remember Sun Zi’s premier advice of “know yourself and know your enemy, and you will win a hundred battles”.

9. Do not fall prey to food, wine, & women; do not negotiate when tired or pressed;

10. Speak in your native tongue, use your own translator, write it down when it comes to numerals and figures as mistakes are commonly made right here;
Background Fact: Best to hire your own translator/interpreter and when it comes to numerals and magnitudes, insist on writing them down. Because of the difficulty in translating numbers/magnitudes, gross errors can occur even to the best VIP translators and the consequences are horrific of course!

11. Remember such Chinese negotiation tactics as:
- accusing you of violating guiding principles, guilt trip;

- asking for the moon, outrageous demands;

- threatening to go elsewhere for the better offer;

- divide and conquer & outlasting your patience;

12. Remember national and cultural sensitivities, avoid discussions on human rights and Tibet, for example, and always keep face and give face. Jokes seldom work across culture so best not to crack them openly.

Coming soon, post negotiation tips and general strategies.

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China 101: Sourcing from China Survival Guide (Part II)

This is the second part of a guest post by Renaud Anjouran, founder of Sofeast, a QC firm in China, and writer of Quality Inspection Tips blog, a must read blog if you are sourcing from China.
If you missed the first part of this article you may read it here.

China 101: Sourcing from China Survival Guide (tips 16 to 29)

III.Before any payment is made
16. Get pre-production samples that represent your exact requirements (in 90% of product categories, it is not a problem technically for the factory).

17. Ensure the product meets, or is designed to meet, your country´s safety standards.

18. Ensure the supplier knows what you expect in terms of packaging.

IV.If you are developing a new product with a Chinese manufacturer
19. Document product characteristics before approaching a manufacturer. Pay an engineer if the product is complex.

20. Document production processes if you are lucky enough to be in the factory while they are setting the machines up for sampling or a pilot run.

Be aware that if you decide to switch suppliers later on, you are not likely to have that information (points 19 and 20) unless you have taken the precaution of documenting it.

 V.Negotiate Reasonable Payment Terms
21. On T/T (Telegraphic Transfer, or bank wire)
This is he most common payment method. The standard terms are a 30% deposit before the components/materials are purchased, with the remaining 70% to be paid after the supplier faxes the bill of lading to the importer.

If special molds/tools need to be developped before pre-production sampling are approved, you will certainly be asked to pay a deposit accordingly. Make sure the supplier writes that these molds/tools are yours. If large sums are at stake, a lawyer can help you draft a contract.

22. Irrevocable L/C (Letter of Credit)
Try using an L/C with new suppliers (because it’s better not to wire a deposit that might get lost) or for large orders (because the bank fees are relatively low).

Bank fees are higher than a simple bank wire, but you are much better protected. Most serious exporters accept an L/C if you specify reasonable terms (don’t ask for 60+ days of credit).

It is always better to send the draft to your supplier for commenting, before the L/C is “opened” by your bank.

 VI.Quality Control
23. Control your product quality in the factory. Do not count on the factory’s own QC staff. Visit the Factory yourself, or appoint a third party inspection firm.

24. Inspect:
a) when the first finished products get off the lines (to catch issues early).

b) after 100% of the order is finished (to verify the average quality level, and to check packaging).

25. Do lab testing if neccessary. Take advantage of the inspections: pick up random samples at that time. It important not to let the supplier choose the samples by himself.

VII. Final Warnings
26. It is possible for an importer to sue a Chinese supplier successfully. But only in China.

27. The worst is to simply accept a supplier’s pro forma invoice. A slightly better solution is to issue a purchase order with your terms, and to get it chopped by the supplier. Yet this might not be enough if you want to keep the option to sue the supplier successfully.

28. The best solution is to work with a lawyer who is familiar with China’s business environment. He will draft a contract that addresses the major risks you should watch out for, and he will remove any ambiguity. Again, when buying from China, you need to be so detailed and clear that there is no room for interpretation.

29. Be sure to put this entire system in place before you start negotiating with new suppliers.
a) Tell them it is your company’s policy, and your boss/partner requires it.

b) They will be more likely to agree. If you mention a contract after you have spent days with them and they know you are in a hurry to produce, they will refuse.

What do you think? Would you like to share your tips?

You may read more about sourcing tips and negotiating with suppliers in the links below:

* 36 Tips on How to Deal or Negotiate with your Chinese Suppliers
* 21 Steps to Follow when Sourcing from China (part I)
* 21 Steps to Follow when Sourcing from China (part II)
* Sourcing from China: Who are the Happy Buyers?
* Do not Interrupt Me & 6 Reasons Why you Should Not Do It
* 4 Tips to Succeed in Times of Silence

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China 101: Sourcing from China Survival Guide (Part I)

This is another guest post prepared for the China 101 project.
This post has been written by Renaud Anjoran, who founded Sofeast, a QC firm in China in 2006, and has been writing advice for importers on his blog Quality Inspection Tips since 2009.
I would like to thank Renaud for his collaboration.

 China 101: Sourcing from China Survival Guide (Part I)

Thousands of new companies start importing from China every year, but they don’t know where to start and they tend to forget critical safety measures. Here is a “survival guide” that can help buyers eliminate 90% of the risks associated with China sourcing.

I.Finding a Suitable Supplier

1. Getting a nice sample does not mean a supplier can actually manufacture the product. It is only a basis for easy communication about your requirements.

2. Online directories (Alibaba, Global Sources…) and trade shows are only a starting point. Suppliers pay to be listed or to exhibit, and they are not rigorously screened.

3. Run a background check on the companies you shortlist. A “Business Credit Report” costs only 255 USD on Globis, and will help you spot the intermediaries that pretend to own a plant.

4. Check the factory. Look at the products they make, the processes they operate in-house, their other customers, etc.

5. Order a capacity audit, if you can´t visit the factory yourself. Every third-party inspection firm offers this service.

6. Get customer references, if possible in your country. Note that a manufacturer might refuse to tell you about their customers, and not always for bad reasons.

7. Do call those customers! You’d be surprised how often these references are fake… or these customers are actually unhappy!

8. Make sure the factory is familiar with your market´s regulatory standards. Ask a few questions, ask for relevant certificates and/or lab test reports.

9. Consider working with manufacturers of the right size. If your orders are small, very large manufacturers will probably quote high prices and not care about your orders.

10. Monitor small factories very closely. They often have no established management system. So either you trust the boss to personally look after your orders every day, or you keep a close eye on production.

11. Include a clause in your contract that prohibits subcontracting. Production might not take place in the factory you were shown, and in general product quality suffers greatly in these cases.

II.When drafting the contract

12. Clearly define your product, labeling, and packing requirements. Write a detailed specification sheet that leaves no room to interpretation.

13. Specify methods you will use for measuring and testing specifications.

14. Specify tolerances whenever applicable.

15. Specify penalties for non conformities. If you want the option to enforce this contract one day, make sure there is no room for interpretation on penalties.

Coming soon, Sourcing from China Survival Guide (part II), where we will read a lot more tips on:
-what to do before making any payments
-new product development
-payment terms
-quality control
-and some final warnings.

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A China Joint Venture Success Story (Part III). Where To Go Now?

Today I bring you the third part of “A China joint venture success story”, an anonymous guest post by somebody who has been a partner in a joint venture in the manufacturing sector in China for over ten years. Make sure you do not miss the first and second part. You may read them in the links below:
A China joint venture success story (part I)
A China joint venture success story (part II). The lessons I have learnt.

Today´s post will describe this JV´s new situation. After more than 10 years of successful operation, key aspects of the relationship change: different players, different capabilities and new decisions to be made. Let´s read about it.

A Joint Venture Success Story (Part III). Where To Go Now?

We have had an excellent relationship over the past 11 years as we have been very profitable and able to sort out our differences amicably (and there have been some big differences), and accepted each other’s foibles. But the one thing we have not been able to do is to get the JV to change to meet the new and different market realities.
Our GM moved up the ladder some five years ago, as a bright and competent leader should, but he could not break the unspoken rule of the SOE (State-owned enterprises)  and find a replacement for himself outside the organization, even on our insistence.
We ended up with the accountant running the operation. Although managerially able, she has no commercial sense and we are suffering. We therefore will continue with the JV as long as it works for us but have already started up our own plant elsewhere in the same area. I understand, having spoken to a lot of people about our experience, that this is the normal cycle for JV’s and that eventually one partner outgrows the other and the “joint” goes out of the “venture”. We have reached this stage but it was great while it lasted.

 

What do you think? Is this the expected life cycle for a China joint venture?

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If you are interested in this topic you may also want to read the following article:

A China Joint Venture Survival Guide. 22 Facts and Practical Tips