Also when you go into a bar, often they give you a higher price when you order drink or in a shop, a higher price for the merchandise. When people grab you on the street to try to sell you stuff, they also are likely to tell you a price that is much higher than what they charge local Chinese.

So you will ask, why does this happen?

As a laowai, do I look like an ‘easy mark’?  Are the Chinese trying to take advantage of me? You’ll be surprised to know that the Chinese believe that laowei is more generous than Chinese, and this is actually is a way that Chinese will show their appreciation.

Nowadays, many international companies are doing business in China, arranging hotels, flights, business meals, presents, etc. all on the company’s expense. If your company spends more than a few thousand USD per month, and you could be guaranteed savings from 30-40%, would you hire a company and spend 5% to achieve this goal?

Tell me what you think?

By Jeffrey Holtmeier (Jeff@cu-bd.com) & Junying Sun  (jun@cu-bd.com)

Remember, this is the same country that produces many high quality goods from famous world wide clothing vendors, and China is the manufacturing home of Apple, Dell, HP and many other high quality products, so this proves that China has the ability to manufacture 'quality' products if directed properly.

Many times, US companies will outsource production of products on their own to a China vendor, expecting similar quality to what would be manufactured in the US. Often, these US companies will be disappointed in the quality of their products that are made in China because the expectation was not clearly defined in the contract or in the specification, and there is a lack of understanding of the Chinese cultural mindset.

This is a simple example of the significant cultural differences between China and USA that need to be considered before doing business in China. It is best that when a US Company decides to outsource to China that these companies will find a reputable company with Chinese staff on the ground in China to provide that bridge between the deep cultural divide that exists.

AS a national strategy, China is trying to build an economy that relies on innovation rather than imitation. Clearly, its leaders recognize that being the world’s low-cost workshop for assembling the breakthrough products designed elsewhere — think iPads and a host of other high-tech goods — has its limits.

So can China become a prodigious inventor? The answer, in truth, will play out over decades — and go a long way toward determining not only China’s future, but also the shape of the global economy.

Clues to the Chinese approach emerge from a recent government document containing goals for drastically increasing the nation’s production of patents. It offers a telling glimpse of how China intends to engineer a more innovative society.

The document, published in November by the State Intellectual Property Office of China, is called the “National Patent Development Strategy (2011-2020).” It discusses broad economic objectives as well as specific targets to be attained by 2015.

In a recent interview, David J. Kappos, director of the United States Patent and Trademark Office, pointed to the Chinese targets for 2015 and called them “mind-blowing numbers.”

According to a translation of the document provided by the patent office, China’s goal for annual patent filings by 2015 is two million. That number includes “utility-model patents,” which typically cover items like engineering features in a product and are less ambitious than “invention patents.” In the American system, there are no utility patents.

In 2009, about 300,000 applications for utility patents were filed in China, roughly equal to its total of invention patents, which have been growing slightly faster than utility filings in recent years. But even if just half of China’s total filings in 2015 are for invention patents, the national plan calls for a huge leap, to one million, by 2015. By contrast, patent filings in the United States totaled slightly more than 480,000 in the 12 months ended in September, according to the patent office.

China’s patent surge has been evident for years. In October, Thomson Reuters issued a research report, forecasting that China would surpass the United States in patent filings in 2011. “It’s happening even faster than we expected,” said Bob Stembridge, an intellectual-property analyst at Thomson Reuters.

Yet if the trend is not surprising, the ambition of the Chinese plan is striking. The document indicates, for example, that China intends to roughly double its number of patent examiners, to 9,000, by 2015. (The United States has 6,300 examiners.)

 “The leadership in China knows that innovation is its future, the key to higher living standards and long-term growth,” Mr. Kappos says. “They are doing everything they can to drive innovation, and China’s patent strategy is part of that broader plan.”

China’s strategy is guided and sponsored by the state. Should that be a source of concern for the United States, and perhaps a trade issue? Or is the plan likely to resemble past efforts by other governments to give their companies an edge in global competition?

In the 1980s, the Japanese government was widely viewed as the master practitioner of industrial policy, and Japan Inc. seemed poised to overrun one American industry after another, including computers.

As we know, it didn’t turn out that way, partly because of steps taken by the American government and industry. A semiconductor trade agreement was intended to pry open the Japanese market, and I.B.M. invested in a crucial but then-struggling supplier, Intel.

More important, however, Japan never became a force in a particularly unruly, imaginative side of computing: writing software. Generalizations are risky, but it seems that Japan, as a society, has not produced enough of that kind of innovative skill, despite being a formidable patent generator. (In that area, Japan is still slightly ahead of the United States by some measures, though Japan’s patent filing pace is slowing.)

To call Japan’s industrial policy an outright failure would be simplistic. In some industries — autos, machine tools and consumer electronics, for example — it has done quite well.

The Chinese patent strategy document is filled with metrics, right down to goals for patents owned per million people. It speaks of an innovation-by-the-numbers mentality, much like a student who equates knowledge with scores on standardized tests.

“It is a brute-force approach at this stage, emphasizing the quantity of innovation assets more than the quality,” said John Kao, an innovation consultant to governments and corporations.

But it would be a mistake, Mr. Kao said, to assume that China will necessarily follow a path similar to Japan’s. China, he says, is not only much bigger than Japan, but it also has a more individualistic entrepreneurial society, despite its Communist government. Someday, he predicts, China will have its entrepreneurial equivalents of Steve Jobs and Mark Zuckerberg.

DESPITE China’s inevitable rise, Mr. Kao said, the United States has a comparative advantage because it is the country most open to innovation. “American culture, more than any other, forgives failure, tolerates risk and embraces uncertainty,” Mr. Kao says.

Many innovative products and technologies, he says, will be made elsewhere. “But America’s future lies in being the orchestrator — the systems integrator — of the innovation process,” Mr. Kao said. “Look at Silicon Valley. It is a place where smart people from all nations, all languages and all ethnic groups come together. It’s the capital of innovation assembly.”

 NYT January 2011

Also, China increased to 4th in the world for number of millionaires to 477,000, ranking behind USA,, Japan and Germany.

Bentley announced it will sell more than 400 vehicles in China this year, making it the 3 largest market behind USA and UK. Most notable is the rapid increase from zero sales less than 10 years ago, and the average price per vehicle is 4-5 million RMB (USD$770-956,000).

BMW announced that China has surpassed Germany in total vehicles sold, and Audi also announced it will sell more luxury vehicles in China than any other market. .

Sales of Beijing Benz, a JV between Daimler AG and BAIC Group currently account for 30% of the total Mercedes sales in China. Daimler CEO Dieter Zetxche states that by 2015 Mercedes sales will reach 300,000 units or 20% of worldwide sales.

Further, China's middle class consumer is expected to reach 350 million in the next 5 years.

Expansion of your company's market into China's is essential.

Unfortunately, I think this is dead wrong. We've completely missed the role that China plays in the U.S. economy. Last year the U.S. ran trade deficits with 90 countries. China was the largest, but there were 89 others that account collectively for a lot more than our trade deficit with China. We have a multilateral trade imbalance—not a bilateral problem with China. And the reason is we don't save. Our overall savings rate as a nation last year was negative, at minus 2.3% of national income. That's the lowest for a leading country in the modern history of the world.

Closing down trade with China is like rearranging the deck chairs on the Titanic. The Chinese piece just goes somewhere else, most likely to a higher-cost producer, which ends up taxing the American public. What is being suggested by Washington—and a lot of economists who should know better—is a bilateral fix for a multilateral problem. This is bad economics, and it's driving bad politics, and it's extremely dangerous. It will backfire on America and, by the way, the Chinese can retaliate and put trade sanctions on American products made in China. China is America's third-largest—and fastest-growing—export market. And if it really gets ugly, then the Chinese just stop buying U.S. Treasuries. Our interest rates soar, the dollar collapses and we're back in recession.

From Stephen Roach, former Chairman of Morgan Stanley Asia October 2010

In June, Foxconn raised factory worker salaries from 900 to 1,200 Yuan per month ($179), and in October, another increase to 2,000 Yuan ($298) is planned. The legal minimum salary in Shenzhen is 1,100 Yuan per month ($164). The average wage in China's southern factories is 800 Yuan per month ($120) as some cities do not impose minimum wages.

By contrast, the minimum wage in the USA is $7.25 per hour or $1,160 per month and the average US Factory worker salary (as of October 2010) is $2,416 per month (NOT including benefits). Still, a huge disparity if only comparing to one company, Foxconn. 

The question is whether this will impact costs of exports with this rise in costs, which only affect the assembly portion of the cost of products. It does not appear that the move to near $300 per month for 6-7 day work weeks will bridge the gap between US and China manufacturing costs.

Further, Foxconn just opened a factory in Zhengzhou, Henan  which is China's most populous province with 100 million people. Foxconn plans to have 300,000 workers in Zhengzhou where they are paying lower wages in a move away from Shenzhen.

To visit China today as an American is to compare and to be compared. And from the very opening session of this year’s World Economic Forum here in Tianjin, our Chinese hosts did not hesitate to do some comparing. China’s CCTV aired a skit showing four children — one wearing the Chinese flag, another the American, another the Indian, and another the Brazilian — getting ready to run a race. Before they take off, the American child, “Anthony,” boasts that he will win “because I always win,” and he jumps out to a big lead. But soon Anthony doubles over with cramps. “Now is our chance to overtake him for the first time!” shouts the Chinese child. “What’s wrong with Anthony?” asks another. “He is overweight and flabby,” says another child. “He ate too many hamburgers.”

That is how they see us.

For the U.S. visitor, the comparisons start from the moment one departs Beijing’s South Station, a giant space-age building, and boards the bullet train to Tianjin. It takes just 25 minutes to make the 75-mile trip. In Tianjin, one arrives at another ultramodern train station — where, unlike New York City’s Pennsylvania Station, all the escalators actually work. From there, you drive to the Tianjin Meijiang Convention Center, a building so gigantic and well appointed that if it were in Washington, D.C., it would be a tourist site. Your hosts inform you: “It was built in nine months.”

I know, I know. With enough cheap currency, labor and capital — and authoritarianism — you can build anything in nine months. Still, it gets your attention. Some of my Chinese friends chide me for overidealizing China. I tell them: “Guilty as charged.” But have no illusions. I am not praising China because I want to emulate their system. I am praising it because I am worried about my system. In deliberately spotlighting China’s impressive growth engine, I am hoping to light a spark under America.

Studying China’s ability to invest for the future doesn’t make me feel we have the wrong system. It makes me feel that we are abusing our right system. There is absolutely no reason our democracy should not be able to generate the kind of focus, legitimacy, unity and stick-to-it-iveness to do big things — democratically — that China does autocratically. We’ve done it before. But we’re not doing it now because too many of our poll-driven, toxically partisan, cable-TV-addicted, money-corrupted political class are more interested in what keeps them in power than what would again make America powerful, more interested in defeating each other than saving the country.

“How can you compete with a country that is run like a company?” an Indian entrepreneur at the forum asked me of China. He then answered his own question: For democracy to be effective and deliver the policies and infrastructure our societies need requires the political center to be focused, united and energized. That means electing candidates who will do what is right for the country not just for their ideological wing or whoever comes with the biggest bag of money. For democracies to address big problems — and that’s all we have these days — requires a lot of people pulling in the same direction, and that is precisely what we’re lacking.

“We are not ready to act on our strength,” said my Indian friend, “so we’re waiting for them [the Chinese] to fail on their weakness.”

Will they? The Chinese system is autocratic, rife with corruption and at odds with a knowledge economy, which requires liberty. Yet China also has regular rotations of power at the top and a strong record of promoting on merit, so the average senior official is quite competent. Listening to Prime Minister Wen Jiabao of China tick off growth statistics in his speech here had the feel of a soulless corporate earnings report. Yet he has detailed plans for his people’s betterment, from universities to high-speed rail, and he’s delivering on them.

Orville Schell of the Asia Society, one of America’s best China watchers, who was with me in Tianjin, put it perfectly: “Because we have recently begun to find ourselves so unable to get things done, we tend to look with a certain overidealistic yearning when it comes to China. We see what they have done and project onto them something we miss, fearfully miss, in ourselves” — that “can-do,” “get-it-done,” “everyone-pull-together,” “whatever-it-takes” attitude that built our highways, dams and put a man on the moon.

“These were hallmarks of our childhood culture,” said Schell. “But now we view our country turning into the opposite, even as we see China becoming animated by these same kinds of energies. I don’t idealize China’s system of government. I don’t want to live in an authoritarian system. But I do feel compelled to look at China in an objective way and acknowledge the successes of this system.” That doesn’t mean advocating that we become like China. It means being alive to the challenge we are up against and even finding ways to cooperate with China. “The very retro notion that we are undisputedly still No. 1,” added Schell, “is extremely dangerous.”
 

BEIJING – China will impose an anti-dumping duty as high as 105.4 percent on US broiler chicken products, effective from Sept 27, the Ministry of Commerce said on Sunday.

China found that the US industry dumped such products on the Chinese market, hurting domestic production, the ministry said. The tax rate will be 50.3 percent to 53.4 percent for those US producers who cooperated with the investigation and 105.4 percent for those who didn't, it said.

"The final ruling is that the there is a causal relationship between the US dumping of broiler products and the losses suffered by the Chinese industry," the ministry said in Beijing.

China said in April an initial investigation showed the US provides subsidized soybeans and corn to its poultry industry, hurting Chinese producers. On Aug 31, the government imposed five-year punitive anti-subsidy tariffs after upholding a finding that the US broiler chicken products were subsidized.

Imports by Pilgrim's Pride Corp will incur a 53.4 percent anti-dumping duty and imports by Tyson Foods Inc 50.3 percent, according to the ministry.

The anti-dumping investigation has been completed, the ministry said in its statement.

China Daily News September 27, 2010

Ever since our financial meltdown, the US has been accusing China of 'currency manipulation'. These accusations are in spite of the fact that the Yuan has risen nearly 20% from 2005-2008 and the US imported at least as much in those years as we do now.

Somehow this just seems too simple to bother with economists, treasury secretaries, or in particular the financially astute US politicians.

Ready?

-Most exports from China to the US are only ASSEMBLED in China (such as Apple's iPod where the China export value input to an iPod is about $18). Since the Chinese input to this export constitutes no more than 10% of such export, another 20% appreciation in the Yuan would AT MOST increase the price of these exports by 2%. 

-Then, the appreciation of the Yuan may cause China to LOSE these jobs to other countries (Vietnam, India) which will reduce the buying power of Chinese to buy (import) US goods

Therefore, it is not the currency. Labor is the most significant component of most goods exported from China to the US. If wages go up in China then prices of its exports will rise which is what US is hoping to achieve by increasing the value of the Yuan.

Some key differences in business culture between US and China:

• Americans wants do 'do a deal' while Chinese want to 'build a relationship'
• Americans wants to maximize short-term profits while Chinese are long term thinking
• Americans are 'direct' while Chinese will not deliver bad news
• Americans want to move quickly, while Chinese move when they're ready

Guanxi:
Guangxi describes the Chinese dynamic in personalized networks of influence and is the central idea in Chinese business relationship. Knowing someone who can make introductions for you is a very important step in successful business dealings in China.

Earning trust and respect should be considered the first step in business interactions. With a strong Chinese partner, everything is possible.

Negotiations:

• Americans value straightforward, while Chinese are master of oblique
• Be prepared and know all details, because the Chinese always do (Even after bottles of rice wine)
• Chinese may appear indifferent and unemotional during negotiations
• Remain calm and impersonal during negotiations and discussions
• Know that Chinese will negotiate ANY price
• Americans tend to appreciate value, where Chinese are transactional and price driven
• Give in to some issue in your negotiations, as this will benefit you in the long run
• Be copious and diligent in your contract discussions and signing

BEIJING – Most China-related merger and acquisition deals have rebounded strongly in the first half of the year, and set the scene for robust activities for the remainder of 2010 and into 2011, accounting firm PricewaterhouseCoopers (PwC) said on Monday.

Chinese outbound merger and acquisition deals for the first six months of 2010 have reached record levels, up by more than 50 percent over the same period last year, PwC said in a report. A total of 99 outbound deals were announced in the first half of this year, continuing a growing trend that began in the first quarter of 2008.

Natural resources are the main industry target for Chinese investors overseas. Fourteen resource deals were announced in the first half, with the largest being Sinopec's $4.7 billion acquisition of a 9 percent stake in Synacrude from ConocoPhillips.

Another notable investment was China Investment Corporation's double investment in PennWest Energy, aggregated to $1.2 billion in total.

Though Australia is identified as the main target destination, Africa is growing in prominence for Chinese resource investors.

"Although natural resources continue to be the priority industry target for Chinese investors overseas, we are seeing other industries starting to get increased attention, including technology, manufacturing and services industries," said Andrew Li, Transaction Services Partner at PwC. "Meanwhile, investors are broadening their target regions to include the United States, Japan and the European Union."

China's domestic and in-bound merger and acquisition deals also rebounded strongly, reaching peak levels before the financial crisis. Deal volumes increased by 26 percent to 1,884 in the first half of this year, compared to a three-year low in the first half of 2009.

The largest transaction in the first half of 2010 was China Mobile's acquisition of a 20 percent stake in Shanghai Pudong Development Bank for $5.8 billion. Foreign in-bound merger and acquisition activities are still below pre-financial crisis levels, but are trending back.

Financial buyer activities including private equity and venture capital have flat lined, but foreign funds remain committed and domestic private equity and venture capital fund raising in the first half of 2010 reached record levels.

Looking ahead, domestic strategic merger and acquisition activity in China is expected to increase in industries previously only accessible to State-owned enterprises.

Meanwhile foreign investors are expected to re-enter the market at volumes last seen prior to the financial crisis.

As for Chinese outbound investment which has seen record growth, this trend is expected to continue and in an increased number of industries apart from natural resources including automotive, equipment, and high-technology industries.

"The appetite for Chinese enterprises to invest overseas is showing no signs of slowing, and with Chinese enterprises' increasing interest in global markets, technical capability and production expertise, and stable financial returns in mature asset markets.We can look forward to the announcement of many more outbound transactions," said PWC's Xiaogang Wang.

But William Cline, a veteran international economist at the Peterson Institute for International Economics, estimates that a 10% rise in the inflation-adjusted value of the yuan against the currencies of its trading partners would have substantial economic effects. It would reduce China’s current account surplus, which the International Monetary Fund estimates will hit $335billion in 2010 — by $170 billion to $250 billion, he estimates.

Looking at the U.S., Mr. Cline figures, the change in the value of the yuan would reduce by $22 billion to $63 billion the U.S. current account deficit, which the IMF estimates will hit $487 billion this year.

Different economists reach different conclusions, of course. Skeptics doubt that a yuan appreciation would have much effect on the U.S. because imports from China would be replaced from imports from elsewhere around the world.

Mr. Cline acknowledges that the last time the yuan appreciated significantly, by 18.6% between 2005 and 2008, the U.S. trade deficit with China actually widened. (He says it takes time for the appreciation to affect the trade numbers.)

But the importance of Mr. Cline’s numbers may be more political than economic. Democratic lawmakers continue to be unhappy about China’s currency policies and disappointed that the Obama administration hasn’t pushed Beijing harder. The PIIE has long been known as a free-trade advocate and their estimates have become important parts of the debate over trade, giving ammunition to free traders.

Mr. Cline’s estimates could play such a role in a coming legislative fight, but this time as a weapon for trade hardliners. Lawmakers may latch on to the PIIE numbers to demonstrate they aren’t being protectionist.

Congressional aides say any legislation to boost U.S. manufacturing could become a vehicle to attach crack-down-on-Beijing rules.

China Real Time

Chen Pointed out that : “Sales of consumer goods rose in 2009 to Rmb12,530bn, contributing more than half of gross domestic product. This year China’s domestic market will grow by Rmb2,000bn ($295bn, 193bn, 229bn), outstripping exports. The US is set to gain in particular. The independent American Chamber of Commerce in China recently published a report arguing that in the next 30 years the US can achieve “three trillion-dollar goals”: $1,000bn for annual US exports to China, $1,000bn for revenues of US businesses in China producing goods and services for the Chinese market, and $1,000bn for cumulative Chinese FDI in the US. “

Chinese Vice Premier Li Keqiang said that the new direction of energy to lead a new round of industrial revolution and accordingly, should be a great opportunity for USA based alternative energy companies  to consider  entering  the China market and share a piece of this huge cake. Having worked with a large Chinese energy concern,  CUBD can assist US companies to identify new opportunities in China. http://www.robroad.com/industry/index.php/energy-new-power-development/

http://chinabusinessreview.net/public/1007/feuling.html

http://www.chinadaily.com.cn/bizchina/2010-06/28/content_10029940.htm

http://www.aautech.com/foxconn-announces-investment-in-chengdu-and-zhengzhou.html

http://online.wsj.com/article/SB10001424052748703609004575354501318242096.html?KEYWORDS=China+starts+looking+beyond+its+era+of+breakneck+growth

http://www.economist.com/node/16541609?story_id=16541609&CFID=136001590&CFTOKEN=33004485