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Archive for the ‘China Business Experiences’ Category

If every five years we note a single trend of what is profitable with respect to business transactions involving China, surely capital markets will be in the running for the next few years.

The amount of money that is being raised for Chinese enterprises doing IPOS in the U.S. and HK, is impressive during a period where others are scraping for funding. 

A with success stories such as Evergrande, when will it end?  And how will it end?  I guess we will have to wait and see.

 

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Credit Risk

While in China, I am always amazed at how a country with such enormous financial capacity can lacks fundamental financial regulations.  The most recent example of this is best illustrated by the introduction of credit cards to China. 

1)  Card holders are paying late or just not making payments.  Credit card debt at least 6 months overdue is up 131% from last year. 

2) Banks are not doing their due diligence before extending credit.  Little documentation is required to get a credit card in China; sometimes all that is requested is a business card. 

3)  Lack of education regarding responsible use of credit.   Stories of young Chinese racking up debt in the amount $30,000 USD (210,000 RMB) before the age of 30 is common. 

So now what?  China’s major cities, Beijing, Shanghai, Guangzhou, Shenzhen will be filled with middle age Chinese drowning in debt.  We might as well write-off the  8% growth projection for 2010. 

And since consumer protection in China is essentially non-existent, the parents of those irresponsible credit card holder will continue to experience harassing phone calls and threats to seize property.    Well, I guess each country has the right to learn the hard way.

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Unfortunately, the U.S. is starving when it comes to entrepreneurism.  People would rather have a steady paycheck than to pursue a business venture inherent with risk. Perhaps our American culture that places such a high value on academic degrees, high-paying jobs, and certain status symbols does not properly reward or encourage entrepreneurs. 

In China however, entrepreneurism is rampant.  The government provides subsidies, tax-benefits, and other economic incentives which promote entrepreneurism targeted to certain sectors.   And even if they didn’t provide such incentives, because the average per capita income in China is about 21,700 元 (roughly $3,200 USD) the Chinese have a different value set when it comes to needs and wants.  (That is not to say that our Beijing and Shanghai friends don’t love to shop — they do.)  But for the rural and average Chinese, a high disposable income is a dream worth dreaming — hence the high levels of entrepreneurship in China. 

Now just to be fair – entrepreneurs come in all shapes and sizes.  A Chinese farmer who spends $1,000 USD to buy livestock is just as much of an entrepreneur as a person who spends $80,000 USD in developing a new makeup line.   An entrepreneur is someone who organizes a business venture and assumes the risk for it, someone who can visualize the skyline while standing amidst the hustle and bustle of a city street.  Someone who can see the forest for the trees. 

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Most people have a talent, skill, or an idea that can be exploited for a profit.  As long as it is legal, why not try it?

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Everyone has a different path to doing business in China. As an African-American female from a small suburb in the U.S., my path was very unique. My first China experience was teaching English in Zhejiang about 10 years ago. At that time I spoke very little Chinese. Then I met my husband, and basically learned Chinese throughout the course of our relationship. I’ve never had a formal Mandarin lesson, I’ve never been enrolled in a Chinese university, and have never any Chinese family members (except for my in-laws).
Yesterday, I spoke with a fellow attorney whom is now based in China and is an American-born Chinese (“ABC”).  He is married to a Chinese woman(南风的)and has lived in Beijing for a few years now.  When we began to speak in Mandarin, he paused. “Wow, your Mandarin is even better than mine!” he exclaimed.  He mentioned how thrilled he was to meet a woman who has no other relation to China than her husband, but has really learned the art of the tones in Chinese.
It made me think of how different our paths were, but we both ended up doing something China-related. Our experiences — totally different. My perspective on how to approach a deal or arrive at a creative solution for a client is based upon my experiences and upbringing. Likewise, his approach as to how best meet a client’s need is based upon his “ABC” experience and upbringing.  This is the kind of diversity that creates a well-rounded China team.  People with different educational, cultural, and national backgrounds that have the requisite China experience are imperative in making a well-rounded team.

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When attention was first drawn to China as an economic power about 15 years ago, the focus was on Beijing and Shanghai.  U.S. businesses fled to enter into those particular markets and pretty much ignored the rest of the country.  Now that those markets have become saturated, U.S. investors are beginning to pay attention to other areas like, Shandong, Shenzhen, and Sichuan.  Further away from the hustle and bustle of the big cities there are untapped opportunities for those who dare to venture into those localities. 

As newcomers  thriving on the NYSE, companies from cities other than Beijing and Shanghai are certainly an area to keep an eye on over the next 5 years.  There will be climbers and those that don’t fare too well.  Regardless of what happens, the development of the previously ignored provinces is sure to be exciting!

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