Doing Business in China Xylina Wu Director of Business Development, Greater China May 7, 2010
Presentation Outline China Overview China Business Environment Business Models MA-China: MOITI s Services 2
China Overview Fast Facts 3 rd largest country in the world by area; Population: 1.3 billion people / 20% of the world population; Capital: Beijing; Official Language: Mandarin Chinese; 23 provinces, 5 autonomous regions, four municipalities under the central government and the special administrative regions of Hong Kong and Macau; Over 90% population are of Han ethnicity, and there are 55 ethnic minorities; Currency is Renminbi (RMB):1 Dollar = 6.82 Yuan Shenzhenn
China Overview Fast facts 10% average GDP annual growth for 30 years; Economy grew to 33.54 trillion RMB (4.91 trillion USD) in 2009, -3 rd largest in the world; Top trading nation; The world's largest exporter; 130 billion USD capital inflow In 2007, 1/10 of the global FDI, #1in developing countries for 17 years; 851 billion USD retail annual sales value in 2007, the second largest in Asia behind Japan; The third largest luxury goods market in the world behind Japan and the United States, and is expected to become the second largest market for luxury goods by 2015; Top 5 Trading Countries Description ANNUAL 2007 ANNUAL 2008 ANNUAL 2009 TOTAL 13,836,761,937,102.00 15,622,220,194,062.00 9,209,630,356,249.00 China 1,496,380,552,682.00 1,663,312,736,069.00 973,406,618,446.00 Germany 1,278,377,731,305.00 1,393,063,742,889.00 937,997,868,144.00 USA 1,121,449,135,606.00 1,225,200,112,063.00 630,398,137,332.00 Japan 753,420,805,823.00 795,965,783,547.00 406,003,439,185.00 France 547,543,623,768.00 588,927,689,705.00 397,612,297,796.00 www.wisertrade.org
2 nd Tier Cities: Top Growth Markets Harbin, * Central Xian, Wuhan Agricultural, textiles Machinery * West Chongqing * Aautomobile * Medical Equipment Xiamen IT * North Qingdao Vehicles Nanjing * North East Jilin, Heavy Industry Dalian Pharmaceuticals Beijing, Tianjin Intellectual, government Mobile phones Light industry Aircarft/Spacecraft Zhuhai Medical Device * East Shanghai, Shuzhou, Wuxl Electronics, telecom. * South Pearl River Delta, Guangzhou Consumer electronics Light industry, textiles
China s 6 Prominent Biomed-Regions * North East Jilin, Liaoning Pharma, TCM * Central China s 3 genome centers: Beijing Shanghai Hangzhou Xian, Wuhan Pharma * West Chongqing TCM * North Beijing, Tianjin Pharma, TCM Medical Devices * East Shanghai, Hangzhou Pharma, Biotech TCM Medical Devices Components * South Pearl River Delta, Guangzhou Biotech, TCM Medical Devices
China Overview Changes in 30 Years 2Ashburton A Street Market in Beijing in 1978 World Expo in Shanghai, 2010
China Business Environment Social Characteristics General Structure of Chinese Government 5 layers of Chinese government Central Government Provincial Government City Government County Government Township Government
China Business Environment Social Characteristics Current Central Government General Secretary of the Communist Party of China's Central Committee Hu JinTao Political Bureau of the 16th CPC Central Committee Wu Bangguo,Wen Jiabao,Jia Qinglin,Zeng Qinghong Huang Ju,Wu Guanzheng,Li Changchun,Luo Gan President of the People's Republic of China Hu JinTao Vice-president of the People's Republic of China Zeng Qinghong Premier of the State Council of the People's Republic of China Wen JiaBao Vice-premiers of the State Council (4) Li Keqiang, Hui Liangyu, Zhang Dejiang, Wang Qishan 9 Ministers (22)
China Business Environment Cultural Characteristics Confucianism: a Chinese ethical and philosophical system adopted by emperors of different dynasties to rule the country Confucius ideology: Humanity Ritual Loyalty Filial Piety Relationships The Gentlemanship The Rectification of Names Relationships: Social harmony the great goal of Confucianism therefore results in part from every individual knowing his or her place in the social order, and playing his or her part well. Confucius: There is government when the prince is prince, the minister is minister, the father is father, and the son is son. 10
China Business Environment Cultural Characteristics Social Hierarchy Group vs. Individual Country Organization Family Individual Government over Individual Superior over Subordinate Father over Son Older Brother over Younger Brother Man over Woman
China Business Environment Cultural Characteristics China Way: Official Agreement Relationship Localization Successful Business When in Rome do as the Romans ---Microsoft: Change strategy following initial failure ---Motorola: pure Chinese company
Business Model Administrative Measures on Foreign Investment in Commercial Sector Company Style Application Duration Business Scope Register Capital Joint Venture 6 months trade and counseling, within the limits permitted by law lowest: RMB 30 thousand (Corporations Law) Rep Offices 25-30 working days no trade, contact work only None Wholly Owned Foreign Offices 6 months trade and counseling, within the limits permitted by law lowest: RMB 30 thousand (Corporations Law) New Rules for WOFE Office: Effective December 11, 2004 Qualified WOFE is permitted to engaged in commission agency wholesale retail franchising Terms of operations 30 years in Eastern / Southern China 40 years in Central/ Western China
MA-China: Partnerships and Alliances (Protocol) MOU with Heilongjiang Province Beijing Office Beijin Shanghai Guangzhou MOU with Hebei Province MOU with China Investment Promotion Agency Shanghai Office Letter of Intent with Zhangjiang Hi-Tech Park Sister State with Guangdong
MA-China Trade Shows China Medical Equipment Fair April, Shenzhen Conventional Center Invest in USA, CIFIT September, Xiamen, China China Hi-Tech Fair Oct., Shenzhen Conventional Center China Overseas Investment Fair Nov, 3-4 2009, Beijing
MA-China Trade Mission December 1-8, 2007 Mission statement: to explore opportunities to strengthen collaboration around clean energy, life science, education and transportation
MA-China Inbound FDI Gateway to MA---single point of connection Work closely with Industry Councils, Chambers of Commerce, Universities, Legislators, Professional Service Firms, Foreign Consulates---in state /abroad Site Selection Tax Incentives & Grant programs Financing Options Workforce Training Fund
MA-China MA-Technology Center Promote brand awareness Attract foreign investment to Massachusetts Provide a beachhead for Massachusetts companies to enter into the booming China market in a fast, safe and cost-effective way
MA-China Other Services Offer timely, unbiased advice Basic due diligence Basic market research Trade counseling Agent distributor searches
Take Home Message ANYTHING x 1.3 BILLION IS A BIG NUMBER China is a great market filled with profit potential for companies with suitable products and services Reasonable expectation Have an exit strategy
Massachusetts International Office of Trade and Investment MOITI: MA s window to the world Xylina Wu Director of Business Development, Greater China xylina.wu@state.ma.us http://www.mass.gov/moiti Daniel Ding Director of China Office danielding@masschinaoffice.com.cn http://www.mass.gov/moiti