Review of "Secres of business sucesses in China"

Just a few hours ago, in my office, I read an article published in Labelexpo Europe August Issue entitled: "Secrets of Business Success in China", authored by Dr James Chan. This article made me feel that entering into China market is like jumping into a fire pit. I would not say that I totally agree with the perspectives stated in this article. In response, I created this blog to address some of my thoughts. First of all, let me show you the entire article:

Secrets of business sucesses in China

With the approach of labelexpo Asia in Shanghai in December, China investment expert Dr James Chan believes that US label converters need to engage with China and take steps to enter the market.

The Chinese label printing industry grew 15 percent in 2008 despite the economic downturn. China produced 1.5 billion square meters (16.1 billion square feet) of printed labels in all industries including industrial goods, food-processing, electronics, beverage, and biopharmaceuticals.

China created 1,400 varieties of printed labels in 2008, 10 percent more than it did in 2007. There are 10 Chinese printers that possess advanced RFID technology.

The Chinese government is flushed with $2 trillion worth of foreign currency reserves. China has a lot of cash. This is an opportune time to sell American-made products and services.

In the following, I'd like to update the presentation tat I delivered at the 2008 LPIA Fall Management Conference in Las Vegas, in a Q&A format.

1. Will the fast growing China market be big enough to keep domestic Chinese label printers from coming to the U.S. and competing with us?
Nothing will stop entrepreneurial firms in China from entering Western markets. China is both a challenge and an opportunity. American companies that take proactive steps to enter the China market will prosper.

2. What are our strategic advantages in the West?
We are close to our customers. We can respond to their needs more quickly than firms in China. We still have an edge in technology, marketing, and design. however, China is catching up fast. We should take time and effort to study the China market to preserve or further develop our strategic advantages.

3. Can you make money exporting American-made products and services to China?
Selling American-made products to the Chinese is very profitable if you have the right product and are determined to succeed. We've made our China sales representatives millionaires in US dollar terms.

4. Are there ways to fight piracy in the China market?
Any product that works in the China market will be pirated, including products made by Chinese government-owned corporations. If the 'pirates' in China have the chutzpah to copy government-made products, they have no qualms copying anyone else's products.

The 'pirates' have weaknesses. We must rely on our Chinese partners and business associates to help us beat the pirates. Don't go it alone.

5. Do our Chinese competitors have weaknesses?
They have a short-term profit-seeking mindset. They undercut one another in pricing. They have quality and delivery problems. If you lose market share to Chinese suppliers, don't lose heart. Your customers may return to you in a couple of years.

6. What to do get ourselves established in the China market?
Recruit a China representative whom you can trust. We can't get anything done in the China market without someone on the ground who looks after our interests. I call these people 'insiders'. They are crucial to our success.

7. How to reduce risks of getting 'burnt'?
Don't take what people say to you at face value. Rely on your own 'insiders' to vet their information and advise you.

8. What are the organizations that we can join?
Contact your local US Department of Commerce international trade specialists. Work with your local industry associations that have a China program.

9. What should your China strategy be?
A company's China strategy should address the five elements of the Chinese mindset that are essential to success, namely, (1) Confidence, (2) Hunger, (3) Insider, (4) No, and (5) Acceptance. I created the acronym 'the C.H.I.N.A. formula' to make this easy for you to keep in mind.

10. How to work with the Chinese?
The Chinese culture focuses on personal relationships rather than written, legal agreements. Contracts can sometimes be merely written suggestions. Nothing beats having someone you can rely on to get things done.

Oberviously the impression of China market this author is under is still staying at 10 years ago. He needs to update his information instead of supporing consultancy advice to his clients.

CASH HANDOUTS TO JOURNALISTS SKEW CHINESE MEDIA COVERAGE

HSBC and the China Charity Foundation celebrated a decade of working together last month, bringing in the global bank's chairman and renting a room in the Great Hall of the People.
Organisers of the event extended the charity to Chinese reporters: donating Rmb200 ($26.40, £13) each to those who attended, according to people present.

Such payments – called “transport money” by public relations firms – are a ubiquitous feature of media events in China but one, critics say, that skews coverage in an increasingly competitive news market.

“It's awful. It's an embarrassment for Chinese journalism . . . and it's corruption,” says Ying Chan, director of the Journalism and Media Studies Centre at the University of Hong Kong. “It's not that journalists endorse this – people live with it knowing it is wrong.”

The handouts, which journalists call “red envelopes” after the envelopes stuffed with cash given to children on important festival days, are so routine they have become a significant source of income for many Chinese reporters.

Esmond Quek, managing director of PR firm Hill & Knowlton in Beijing, says payments – which can reach Rmb1,200 for television crews, since they have to “lug a lot of equipment around and usually have three crew members” – are at rates agreed with China's Public Relations Association. “The amount given is standard and specifically for transportation,” Mr Quek says.
Other industry executives dispute whether any formal industry agreement exists and a representative for China's Public Relations Association says: “You cannot say we encourage or discourage this practice.”

But no one contests that the payments are common or that, as critics point out, Rmb200 per journalist is considerably more than the average cost of a cross-town taxi in any Chinese city.
Ms Chan at the University of Hong Kong holds multinational companies that allow the payments at least partly responsible. But some companies try to stay aloof.

HSBC says it has a policy of never paying journalists and that it was not involved in organising the China Charity Foundation event. The event, featuring HSBC chairman Stephen Green, was hosted by the foundation and organised by local PR firm, Voice One Communications, which also said HSBC had no role in organising the payments.

Some of China's best- regarded publications, such as Caijing, a business magazine, and the Economic Observer newspaper, ban their reporters from taking the payments.
Other media are proving slow to follow, however, in part because of the need to hold down salaries. Fierce competition means tight margins for many of China's ever more commercially oriented newspapers.

As in other developing economies such as India and Indonesia where similar payments are common, low salaries increase the temptation for editors and journalists to accept straight bribes for other forms of overt corruption.

But in China, its spread reflects the endemic corruption that has flourished amid a Communist party-led embrace of the market economy. While Beijing has loosened controls on business news, the continuing clout of party propaganda commissars obstructs the development of independent industry standards.

The government has sought to clean up some abuses. Rules issued in April ban provincial reporters from taking kickbacks, extorting money for favourable coverage, or offering paid news.

The rules reflected the fact that while corporate payments to journalists can be a corrupting influence on the media, in some cases at least, news organisations may not be passive victims.
In one alleged incident last year, a Chinese real estate magazine called Hongdichan, or Red Estate, wrote an article accusing international property firm Jones Lang LaSalle of mismanaging a Beijing project.

When the company complained that it had not been contacted for comment, the magazine indicated it would run a second critical article unless the firm instructed clients to place advertisements with it, Jones Lang LaSalle and another person involved have claimed. Red Estate denied the incident occurred.

“There was a misconception [at the magazine] that we made decisions on advertising spending, but in fact we do not advertise on our own behalf and do not make decisions for clients on where they place their ads,” says David Hand, Jones Lang LaSalle's managing director in Beijing. “They realised this was not a sensible approach to take with us,” Mr Hand said.
The second article was never published.

This article was originally published in Financial Times by Jamil Anderlini and Mure Dickie 2007-08-06