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The year end festivities are in full swing.

Besides the Baijiu, there’s a good chance that Champagne and wine will flow in large quantities.

I’d say enjoy the moment with friends, business partners and family but be aware of driving a car in China while the alcohol is rushing through your veins.

China has a ZERO tolerance to alcohol when sitting behind the wheel!

 

The risk is real that you get caught & if that happens there might be serious problems in the air.

If the alcohol test reveals you’re slightly drunk: 6 of your 12 yearly allocated points on your license will be taken away. On top of that you’ll have your license retracted for 1 to 3 months. If you’re a 2nd time offender in the same year, you’ll loose your license for 3-5 years.

However if the test reveals that you’ve been imbibing yourself to a level where you’re practically rolling out of the car, Chinese justice will be pretty severe to the driver who had a fun night out.

As an expat you’ve still a choice of sorts: Receive a 1 week notice to leave the country and NOT come back for at least 2 years or face up to two weeks in a Chinese jail.

It doesn’t matter if you’re working in China or not: the Chinese Justice system is pretty strict on this point.

One foreigner, ex-customer thought that since he was based in China & his career would take a dive if he had have to leave China, decided that the jail option was pretty obvious.

Thinking that he would be treated differently from the local detainees he took the brave decision to live behind bars for 15 days. Sadly enough for him, he was not really prepared for what would come next. This wasn’t a place where only drunken drivers ended up. A whole compilation of criminals crowded the prison.

What happened to him in the rooms, showers & corridors left him with scars for the rest of his life.

Soon after leaving prison, he flew out of China never ever to come back.

At least he had a choice that so many other drivers didn’t have.

We hope you’ll act responsibly and don’t endanger your & other people’s life.

Remember don’t drink & drive, ‘cause you might loose more than you wish for.

PS:

  • – In case you drive under influence & kill someone, chances are pretty much in favor of  you going to jail for a long period of time.
  • – In case of several casualties while drunk driving will pretty much bring you to the gallows.
  • – By now I hope you’ve been warned enough.

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A couple of years ago a European paint manufacturer, (let’s call them Alfa Paint) set up shop in The Middle Kingdom. Although the company’s price was at least 70% higher than the local equivalent, customers still took notice. 

As Chinese home ownership was growing fast, business boomed. Smart Marketing strategies, specifically fine-tuned to the Chinese proud homeowners, created such a buzzzzz, that distributors and Do It Yourself chains were almost literally fighting to get the Alfa-Paint brand on their racks.

A text book Pull-Push effect was created in a matter of months.

Pots and cans filled with the colors of the rainbow flew off the production line.

Production couldn’t keep pace with demand. Soon more staff were hired and the production lines expanded. For the shareholders of Alfa Paint  the Chinese Miracle was real!

Admiring the success of the European brand, their Chinese counterparts got into the action too. One of them took a huge shortcut & decided that the best way to get a piece of the pie was to Copy Comform the packaging & brand while filling up the tins with a local brew of paint. Let’s call them Alfa Paynt

Since Alfa Paynt was only a local player, their products only got onto the shelfs in their home province. For their scale of operation they did a brisk business.paint bubble2 And with a discounted price of 50% compared to Alfa Paint, shops and distributors were happy to buy from Alfa Paynt.

But since Alfa Paint’s business was growing with leaps and bounds, their Fat Managers didn’t really care. The overseas shareholders, enboldened by the results were pushing them to take more market share, discover new venues to sell and make Alfa Paint an household name.

Basically there was no time to worry about Alfa Paynt & anyways it appeared to be a small player who didn’t have the financial arm to break into the whole market in a big way.cartoon Paint

Some Alfa Paint managers considered them an annoyance, others were openly proud that their brand was being copied, Alfa Paint R&D managers had tested Alfa Paynt’s product & was found inferior.

They knew that a time would come where customer complaints would grow and Suppliers would not want to deal with the copy cat product & go for the real Alfa Paint. Nobody in Alfa Paint even made the effort to find out who was distributing or manufacturing the Alfa Paynt….

The Alfa Paint factory was running with a staff of around 500 when new government regulations came into effect on the content of the paint’s ingredients & which ones would be blacklisted by the end of the year.

For Alfa Paint this wasn’t too much of a problem as those were also in line with the components used in Europe. Alfa Paint was ready to switch at a moment’s notice . The company, always having been a proud proponent of protecting the environment adjusted the production, months before the government’s deadline.

Alfa Paynt however wasn’t so fortunate or were ignorant of the new guidelines, or….. Anyways, they just continued what they’d been doing. Why change the winning formula ?

A couple of months into the new year, shit hit the fan. A spot check was done in a large DIY shop & samples of the cans labeled with Alfa Paint were taken to an independent AQSIQ laboratory for testing of product quality. AQSIQ = Administration of Quality Supervision, Inspection and Quarantine).

Within days Alfa Paint’s General Manager was informed that their product was not conform with the new regulations & the factory was requested to close down. At the same time all products taken from the racks (all over China !) and a country wide announcement was made that Alfa Paint’s products were harmful to humans. Sales stopped immediately. The China dream turned into a nightmare for the Shareholders.

Now 1 year later the factory is still closed as Alfa Paint has to proof that Alfa Paynt is the culprit. And 500 staff are still temporarily unemployed.

Lesson of the day: If you know your product is being copied, act as quickly as possible. Inform Chinese authorities of the situation. But don’t be complacent. Don’t waste precious time. Know what is going on in the market, because sales figures are only part of the equation.

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The other day a law firm XYX from Sweden contacted us for an opinion on a car accident that happened to one of their clients in China.

Mike , together with his translator were on the way to a factory meeting somewhere between Jinan & Qingdao.

For this travel he booked a car for the day that would bring them from the safe confinements of the Jinan city walls into the the countryside 3 hours away. It was spring & farmers on the road were all getting into gear to tend to their fields.

Somewhere on a straight lonely country road bordered with trees,   the driver fell asleep…..& hit another car at 70km/h. Mike & the driver got badly injured, while the translator only got some minor bruises. It took another 3 gruesome hours before paramedics could tend to the injured.

car-accident

With the assistance of his travel insurance company Mike was flown out of China 24 hours later.

After a revalidation period the insurance company asked Mike to get all papers in order to claim from the insurance of the car owner.

It’s here that our lawyers discovered that the 3rd party insurance for the car was only covered for an amount of up to RMB 10,000 (USD 1470 or Euro 1000). One can easily imagine that this was bearly enough to cover the cost of repatration & recovery at home…….. Now Mike is facing off with his insurance company…

An advice we’d like to give anyone renting a car for a long distance:

1) Make sure the car is in a new state or well maintained.

2) Preferably take a taxi driver for the day. they’ve got proper insurance & will hopefully drive with more skills. Or as an alternative mayby your business partner or friend can recommend a driver.

3) If possible try out the driver for a short trip before committing for a long distance journey.

4) Make sure the driver is well rested. Too often will a driver be at the wheel for 24 hours on end. Not really an ideal start of a long-distance trip.

5) In case you feel the driver is reckless, ask him to slow down or drive more carefully. If that doesn’t help, please ask him to stop & get out of the car. If you’re in the middle of no-where get off at the next city or village but GET OFF. Don’t be naive & think that accidents only happen to others.

I once had the bad luck that my faithfull driver couldn’t commit to pick me up at Beijing airport & sent someone else instead. I unfortunately disgarded the above rules ’cause

Two pretty ladies in miniskirt were driving a huge Jeep. On departure I already fell something was amiss. The driver lady never changed gear & stayed in 2nd the whole way…. At a speed of 40 km’h we traveled the 15 km highway into the city…..

While other cars were hurling past us at 120 km/h……. & nearly missed us on several occasions. Nobody was expected such a slow moving vehicle on the high-way.

Finally I asked the driver what was going on: She shily replayed that “she never drove a car before but because my ‘faithful’ driver had asked her for this favor she couldn’t refuse……”

So please try to be safe on the Chinese roads at all times !

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Surprise……
This blog has been blocked in China since today & I only started 4 days ago… ;(
Not really sure what’s going on. Content wise we’re China lovers so can’t really see where’s the problem.
Maybe some American Mole wanting to score some points…. Anyways I’m glad to see we’re back up and running through some proxy server.
But I assume it might, from time to time sputter to a stand still. therefore my sincere apologies if I can’t give you any feedback on the messages I receive.
As an afterthought I was rather hoping the book “Business Republic of China” would be banned. At least that would generate publicity & sales.
Meanwhile check out in bottom of this page for a lexicon made for the book Business Republic of China.
Or copy-paste this on your browser: http://www.blacksmithbooks.com/china_business_crib_sheet.pdf
Cheers !
Enjoy Business Republic of China

A concise lexicon for the unversed barbarian

Laowai: “Barbarian”, Most probably YOU !; Those who don’t belong to the inner circle of the Chinese community. The antidote could be Laonei; Laozhong .

Baijiu: Rocket fuel alias rice wine or another alcohol fermented concoctation

Guanxi: Relationships that oil the wheels of commerce.

Karaoke: Dark stuffy place of leisure to sing, drink and relax; sometimes also used as bonding tool during meals.

Panda huggers: Unconditional China lovers

Dragon slayers: Unconditional China haters

Old China Hand: A barbarian is crowned this way when a Chinese party requests/ in urgent need of a favor from him/her; a barbarian who happens to have lived for quite a while in the Middle Kingdom or an intrepid Sino-freak that unconsciously stumbles into this metaphor.

Tian An Men: Political center of China.

bamigoring, nasigoreng, lumpia and krupuk: Indonesian food. No relationship whatsoever with Chinese food.

Friendship: an allegory e.g. in “Friendship hotel”

Chongqing: Possibly the most beautiful & exciting city in the world, where the sun is shy, the air is intense and the dust tastes of adventure.

Sichuan: The mythical four-river province; The mother of all provinces; The promised land.

Face: Something one can loose or …. gain. The art of giving face is way more difficult than making one loose face.

JV: Joint-Venture; in China often turns into a Joint-Adventure because of cultural business misunderstandings between the Chinese and Western parties involved.

Language barrier: A daily occurrence between two different cultures.

Xiahai: “Jump into the sea” Basically giving up the safe confines of a job in a State Owned company and start one’s own private enterprise. This brand of jumping was extremely popular in the eighties and nineties.

Ganbei: When two or more glasses meet around the dinner table. “Cheers”, “Bottoms up”, “Schol”

Honored guest: Well it says exactly what it is: an honored guest no strings attached, unless the barbarian mind really wants to see ghosts of deception.

The sound of silence: A most valuable negotiation tool

Privacy: In China slightly different concept compared to the West.

Danwei: Work unit that besides a job also provided housing, schools and medical care. Till the economic reforms were well underway it would have been virtually impossible for a Chinese citizen not to belong to such a work unit.

RMB: Renminbi; Chinese currency, People’s money; Unit :Yuan;

The Long March: The heroic retreat of the communist leadership and 87,000 Red Army soldiers in 1934 while on the run from the grip of the Kuomintang army. One year later after 9000 km across rivers, through mountainous terrain, marshes and several battles they reached the Yan’an base in Shaanxi province. Less than 10,000 survived this perilous expedition; Name for a family of Chinese space launch vehicles.

Business with Chinese characteristics: The main reason why it’s so much fun and gratifying to sell equipment, source products or run a business in China.

Gong An: Public Security; Police; Often sitting in the office sipping tea & smoking cigarettes waiting to be pressed into action

Pinyin: Is the most commonly used romanization system of the Chinese characters in Mandarin (Hanyu Pinyin). But since this system was developed on the Mainland, Taiwan wouldn’t want anything to do with it. As a result chaos reins with Tongyong Pinyin,Yale, Mandarin Phonetic Symbols II and Wade-Giles fighting for attention on street signs and places.

Er nai: Modern day concubine. Often to be found in the presence of the successful and wealthy. In money terms a lot more costly to maintain than the legally wedded wife.

Liberation truck: Jiefang truck. The 1st truck built in the PRC and based on a Russian design. The 1st version can still be admired on the one fen note.

New China: After the founding of the People’s Republic of China on October 1st 1949, a reform movement was put in place to eradicate China’s old customs, superstitious beliefs, land ownership, inequality between women and men, illiteracy, prostitution, gambling, etc….and a New China rose from the ashes.

3Q: SMS phonetics for “Thank You” in Mandarin Chinese

Forbidden City: Residence of twenty-four Emperors from the Ming Dynasty till the end of the Qing dynasty. Based in the center of Beijing. Only the royal family, concubines, servants and eunuchs roamed this vast complex. The common man was allowed to enter on royal invitation only.

Zhongnanhai: A compound sitting next to the Forbidden City and fromwhere the Central Government rules the PRC.

Jiaozi: Chinese dumplings; Ravioli.

SEZ: Special Economic Zone. In China an area that provides investment incentives to foreign companies in the form of tax benefits, tax holidays and infrastructure. Presently those zones have lost much of their uniqueness, as only those investments encouraged by the Central Chinese government will receive this red carpet treatment. However with some help of the local government officials some of the local taxes might be waived.

Soft sleeper / hard seat: Take a hard seat on a train from Beijing to Chongqing. Feel, enjoy and become one with the masses. For the return journey, book a soft sleeper. Compare and understand.

Frog in the well: Probably the ugly green frog my publisher dreams of kissing and will with a bit of luck metamorphose into a rich and sexy princess.

‘To get rich is glorious’: Soon after Deng Xiao Ping articulated those words in the fall of 1992 to instigate economic reforms, millionaires started to pop up all over the country. Glorious yes but not always innocent or without risks.

Overseas Chinese: People born in China or of Chinese descent who live outside Greater China.

Greater China: PRC + Taiwan + HK + Macao

People’s Daily: Efficient propaganda machine & mouthpiece of the Central Government.

Underground bank: Bank located in a subway

Four modernizations: By the end of the seventies Deng Xiaoping brought forward a new socialist reform plan to modernize industry, science, agriculture and defense. An alternative to the centrally planned and command driven economy that had created much of the country’s political and social instability. This new revolution in turn kick-started the present day “economic miracle”. A new movement has meanwhile taken roots: “harmonious society”

Feng shui: Wind and water; An ancient Taoist practice of studying and following the natural currents/shapes of the Earth to ensure proper alignment with them so that “Positive Energy” is not disrupted.
If you’re in a desperate mood, a Fengshui master might assist in turning your unprofitable business back on track by: Putting your office furniture in the write position will stop the money flow out of the doors. Having the right amount and color of fish in your office aquarium will fend off business disasters, etc….

‘You do not understand China’: A mild form of coercion. Slip of the tongue; Too bad if someone tells you this. Try to keep your dented pride in check; He/She might know you better than you think. Often used during an argument, debate or negotiation.

Iron rice bowl: Symbolizes Lifetime employment, housing and social security in the centrally planned economy. For most, this bowl has meanwhile been broken by the labor market reforms.

Sea cucumber: Slippery sea creature that is part of Chinese cuisine. It’s flavorless, of rubbery consistency but said to have aphrodisiac capabilities.

SOE: State Owned Enterprise

Princeling: A well-connected son or daughter of a higher cadre in the Communist Party.

XO: Extra Old Cognac. An alternative to Viagra; A must drink for seniors thriving in Karaoke bars with the hope of impressing a babe or two. XO could be the foundations to build up an ernai relationship.

One billion customers: Part dream, part obsession, part nightmare

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The company chop is king in China. It basically means that in China a  company seal on a document has the same value as a handwritten signature acknowledging the contents of a contract in the West & turning it into a legal paper.

One of our customers faced an UFO (Unidentified Financial Obligation) because of sloppy handling of the company’s stamp. One of their employees, when (s)he got hold of the precious company seal ,turned a bit enterpreneurial & dutifully chopped a couple of blanco A4 sheets with the cherry red company stamp…… with the idea “To be used at a later date”. That “later date” turned out a couple of months later when (s)he got fired.

Shortly afterwards when the company owner thought everything was settled, a lawyer defending the employee turned up at the company’s doorsteps with a document that in short stated: “In case Mr/Ms xxxx is fired the company will be obliged to pay her/him a compensation equivalent to 2 years salary” The document back dated and duly signed by the employee next to the company’s red seal……….

Aliens in Beijing (Face Bar)

Since this company hadn’t specified anything in the company’s by-laws how legal documents should be signed off & by whom, the owners had no other recourse but to haggle a bit and ultimately pay up.

chop

Many other variants of UFO’s turn up on companies’ desks & those alien to the significance of the company seal expose themselves unnecessarely to the legal concenquences this could have for the shareholders. Sadly enough those UFO’s can sometimes turn out to be a real & eminent threat to the going concern of the company.

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Everybody has most probably had a good laugh at the scam letters coming out of Nigeria, promising millions of dollars in case you’d provide the writer assistance in retrieving the treasures of a lost or dead relative.

Similar scam(s) operate(s) in China but….. is/are more sophisticated in a way that it tries to suck only a couple of thousand of dollars or euros from you.

crook

How does it go:

It starts like a legitimate business deal where a potential Chinese buyer is interested to buy your goods.

The following scenario(s) will unfold and should raise the alarmbells:

– A potential order that is much larger than any other order you’ve ever received. Because of the size of the order you’re requested to fly to China to negotiate the deal. Most often the contract negotation will take place in a small town or city far from Beijing, Shanghai or Guangzhou’s bright lights. You’ll be wined and dined. Maybe you’ll even get the honor of a ‘police’ car with blaring sirens opening the road for you from the airport or train station to the hotel.

You’ll be meeting a wide range of so-called officials who are  either assisting the buying party or will be the end user of your products but…… to get them to pay contract value, a small  money will first have to be paid by your company to the Chinese party…. basically to grease the deal. they might press you to make this payment (e.g. USD5000 – 10,000) while still in China…… Guess what: once this payment is made & you’ve been promised that the L/C or the contractual down payment will reach your company’s bank account on your return home, you’ll never hear from them again.

For those buying parties who’re not really interested in wasting time wining and dining you, will try to do the following:

– they’ll ask you to pay notary fees for making the contract official. Cost price in the range of USD 3000-5000. It goes without saying that once this money is paid all parties won’t any longer be reachable. They’ll maybe try to make the contract look legit with Tax numbers & Chamber of Commerce numbers. Which in China don’t really exist.

Another way to get your blood boiling is by offering you goods through eBay that are attractively priced.

Those can be laptop computers, Carbon Fiber racing bikes, Antique Chinese furniture, etc……. To make it look serious you’ll often have to buy 5 to 10 sets in one go.

Once the payment is made and the box of “goods” arrive at your doorsteps there’s a chance that the laptop computer is from the ninetees, the bikes, rusted Flying Pigeon bicycles and the Antique furniture….. a used IKEA cabinet.

Even worse : E.g. you order a container of garlic, peanuts or …. but you don’t make the effort to check at the shipping end what really goes in the container. You think you’re safe ’cause you made  a 30% down payment & will pay the rest upon arrival of the shipment. ……Surprise….. when you check the goods at destination you’ll find a container full of rotten apples and pears. Often this type of shipment occurs from smaller harbours where it’s easier to forge shipping documents, etc…

On several occasions have we been asked to go after those “bad” guys. Unfortunately the cost to follow up will often be a multiple of the money lost…….. because it’ll take so much time and effort to identify those parties involved.

Please don’t be naive & do your home work. Don’t jump on any opportunity that seems to be too good to be true. We can only urge anyone who wants to sell or buy goods in China to make sure you’re dealing with an honest party who’s really interested in buying your goods or selling a quality product.

Meanwhile enjoy your time doing business in China because there are real opportunities! Just watch out for the bad guys.

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I’ve been receiving lot’s of feedback from readers who got into reading my book “Business Republic of China”. (BRC)

Some have been pressing me to go for a blog….. So here it is.

Since my partner & I set up a law firm & Consulting company in 1995, we’ve seen many tears of desperation from our customers.  Those tears could often be avoided if a bit of homework would be the start of the China business adventure. Unfortunately history repeats itself: Western Companies jumping onto the China wagon eager to either sell to a billion customers or profit from the ‘low’ production costs China can present.

Or in case of a Chinese bold entrepreneurs…..

Chinese companies trying to get favors from government officials in overseas markets or firing the representatives of a local union without much of an afterthought.

Many cases reach our desk & can be interesting case studies of what should or should better not be done to get you a healthy return on investment. For the sake of keeping everybody happy, names, locations, industries will have changed.

  I’ll try to keep it as entertaining as my book BRC.

Doing business in China is often perceived as a complex puzzle with opaque rules of play that are much fun to read, talk or ….write about. In reality the brainteaser is not that hard to crack. Since the doors were timidly opened several decades ago, China has matured, the jigsaw pieces have become much less and way easier to put together.

From a western perspective certain steps along the way are indeed done differently in this part of the world. I learned this the hard way and had to grapple with the fact that cultural sensitivity is the main key to raise the “shroud of mystery”. Getting rid of our own cultural ethnocentrism however is easier said than done. Cross-cultural misperceptions remain the chief catalyst for endangering a business success, starting the blame-game, preventing a healthy return on investment or faltering into new markets. The business basics are identical in China as anywhere else in the world. It’s more often than not how the cultural coating permeating the local business environment is digested by investors and managers alike that will define success. The same is valid for a Chinese businessman who wants to invest in Spain, Japan or Nigeria.

Soaking up another business culture can’t be acquired by only sitting on the sideline reading books or attending crash courses. It’s in the field that you’ll be able to really grasp, adjust and adapt. Having said that don’t try to be more Chinese than the Chinese and always keep in mind that your Chinese counterparts have home advantage.

With common sense, a good product, a bit of luck, an open mind and a level head anyone can succeed in China.

All the best with your Chinese endeavors & enjoy the ride!

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