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Doing Businessin ChinaFORDUMmIES‰by Robert Collins, MBA, and Carson Block, Esq

Doing Businessin ChinaFORDUMmIES‰by Robert Collins, MBA, and Carson Block, Esq

Doing Business in China For Dummies Published byWiley Publishing, Inc.111 River St.Hoboken, NJ 07030-5774www.wiley.comCopyright 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 permitted 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 978-646-8600.Requests to the Publisher for permission should be addressed to the Legal Department, Wiley Publishing,Inc., 10475 Crosspoint Blvd., Indianapolis, IN 46256, 317-572-3447, fax 317-572-4355, or online at http://www.wiley.com/go/permissions.Trademarks: 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, Dummies.com 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 book.LIMIT OF LIABILITY/DISCLAIMER OF WARRANTY: THE PUBLISHER AND THE AUTHOR MAKE NO REPRESENTATIONS 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 CREATED OR EXTENDED BY SALES OR PROMOTIONAL MATERIALS. THE ADVICE AND STRATEGIES CONTAINED HEREIN MAY NOT BE SUITABLE FOR EVERY SITUATION. THIS WORK IS SOLD WITH THEUNDERSTANDING THAT THE PUBLISHER IS NOT ENGAGED IN RENDERING LEGAL, ACCOUNTING, OROTHER PROFESSIONAL SERVICES. IF PROFESSIONAL ASSISTANCE IS REQUIRED, THE SERVICES OF ACOMPETENT PROFESSIONAL PERSON SHOULD BE SOUGHT. NEITHER THE PUBLISHER NOR THEAUTHOR SHALL BE LIABLE FOR DAMAGES ARISING HEREFROM. THE FACT THAT AN ORGANIZATIONOR WEBSITE IS REFERRED TO IN THIS WORK AS A CITATION AND/OR A POTENTIAL SOURCE OF FURTHER INFORMATION DOES NOT MEAN THAT THE AUTHOR OR THE PUBLISHER ENDORSES THEINFORMATION THE ORGANIZATION OR WEBSITE MAY PROVIDE OR RECOMMENDATIONS IT MAYMAKE. FURTHER, READERS SHOULD BE AWARE THAT INTERNET WEBSITES LISTED IN THIS WORKMAY HAVE CHANGED OR DISAPPEARED BETWEEN WHEN THIS WORK WAS WRITTEN AND WHEN ITIS READ.For general information on our other products and services, please contact our Customer CareDepartment within the U.S. at 800-762-2974, outside the U.S. at 317-572-3993, or fax 317-572-4002.For technical support, please visit www.wiley.com/techsupport.Wiley also publishes its books in a variety of electronic formats. Some content that appears in print maynot be available in electronic books.Library of Congress Control Number: 2007926402ISBN: 978-0-470-04929-7Manufactured in the United States of America10 9 8 7 6 5 4 3 2 1

About 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 international 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’ BusinessCommittee.Rob 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 China.Rob obtained a joint MBA degree from the Kellogg School of Managementat Northwestern University and the Hong Kong University of Science andTechnology.Rob and his wife, Sarah, have three children and reside in suburban Chicago.The family is active in supporting Chinese-related educational initiatives. TheCollins family has hosted numerous Chinese exchange students in Hong Kongand the U.S.You can e-mail Rob at robcollins@aol.com.Carson Block, Esq, is the founder and Managing Director of YBS InvestmentConsulting, which is based in Singapore. In this role, Carson advises high networth individuals and families on their investments. He also advises companies and investment firms on China-related investments. Prior to foundingYBS, Carson practiced law in Shanghai with Jones Day, a U.S.–based law firm.In 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 W.A.B. Capital, a Los Angeles–based investmentboutique.Carson obtained his Juris Doctor (High Honors) from the Chicago-KentCollege of Law. He earned his BS in business (finance) from the University ofSouthern California.Carson speaks Mandarin Chinese. You can e-mail Carson at carson@ybsinvestment.com.

DedicationRobert 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. Sarah, you are the greatest gift that life has given me.As 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 world.This 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. G.R., you’re an incredibly talented young man with all the makings 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 passion.Carson Block: I dedicate Doing Business in China For Dummies to 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 graduated from college, he provided the backing that allowed me to go to Shanghaiand try my hand at business there. Without his support for my China endeavors, neither this book nor my China career would have been possible.Authors’ AcknowledgmentsSo many wonderful people contributed to Doing Business in China ForDummies. They’re outstanding professionals in their fields, and they’vemade this a significantly better book.We’d like to particularly acknowledge a small group of people who spent significant 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, Lokey.We would also like to thank the following people for their valuable contributions: 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, Michael

McNabb, 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. Yong Wang, Zheng Xie, Kent Yeh, Jia (Holly) You, Liming Yuan, andWinston Zhao.Many thanks to Alissa Schwipps, Senior Project Editor at Wiley Publishing,for keeping us on the straight and narrow, and Danielle Voirol, Copy Editor.And thanks to our literary agent, Carol Susan Roth, for her support andguidance.Lastly, we would like to thank Richard Pringle for introducing the co-authors.

Publisher’s AcknowledgmentsWe’re proud of this book; please send us your comments through our Dummies online registrationform located at www.dummies.com/register/.Some of the people who helped bring this book to market include the following:Acquisitions, Editorial, and MediaDevelopmentSenior Project Editor: Alissa SchwippsComposition ServicesProject Coordinator: Heather KolterCopy Editor: Danielle VoirolLayout and Graphics: Claudia Bell,Stephanie D. Jumper, Laura Pence,Alicia B. SouthTechnical Editor: Dennis B. KelleySpecial Art: Liz KurtzmanSenior Editorial Manager: Jennifer EhrlichAnniversary Logo Design: Richard PacificoEditorial Assistants: Erin Calligan Mooney,Joe Niesen, Leeann HarneyProofreaders: Aptara, Todd LotheryCover Photos: Catherine Mar/Special HelpAcquisitions Editor: Michael Lewiswww.judoeffect.comCartoons: Rich Tennant(www.the5thwave.com)Indexer: AptaraStephen 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 Services

Contents at a GlanceIntroduction .1Part I: Building Your Foundation .7Chapter 1: So You Want to Do Business in China .9Chapter 2: Brushing Up on China Business Basics .23Chapter 3: Getting Acquainted with the Powers That Be:China’s History and Leadership.41Chapter 4: Planning for Success in China.55Part II: Starting Up in China .71Chapter 5: Traveling to and around China.73Chapter 6: Getting Business Going through Successful Negotiation .97Chapter 7: Setting Up Shop .113Chapter 8: Understanding Government Relations with Your Business.139Chapter 9: Building a Local Team in China .155Chapter 10: Getting Your Mind on Money .175Part III: Conducting Daily Business .197Chapter 11: Understanding How China Works (and Doesn’t Work) .199Chapter 12: Sourcing from China .219Chapter 13: Manufacturing in China .233Chapter 14: Selling in China .251Part IV: Building Successful Business Relationships.275Chapter 15: Fostering Fruitful Friendships: The Art of Guan Xi.277Chapter 16: Saying and Doing the Right Things: Chinese Business Etiquette.289Chapter 17: Managing Risks in China.311Part V: The Part of Tens .335Chapter 18: Ten Clauses You Want in Your Contracts .337Chapter 19: Ten Fun Ways to Spend Your Downtime in China .343Chapter 20: Ten Ways to Stay on the Path to Profitability .349Index .355