Recruiting in China

SHANGHAI, Oct. 29 (Xinhua) -- As automobile consumption soars, China's auto market will see fierce competition among both domestic and foreign brands in the next few years, said a latest ACNeilsen report.

The fierce competition primarily lies between some traditional auto giants, who have been losing some of their market shares in China in the past two years, said the report by the world most authoritative market research company.

According to ACNeilsen's report based on surveys in Beijing, Shanghai and Guangzhou, known as China's three commercial hubs from north to south, the market share of Volkswagen suffered the sharpest decline.

The market share of the German brand has dropped from 35 percent in 2004 to 23 percent in the three cities.

The report said the market share of Shanghai General Motors increased by one percentage point to 7 percent during the past two years.

ACNeilsen said the largest winners in China's auto market are Japanese cars, because they are designed and developed closely catering to market needs and their marketing strategies are also successful.

From 2004 to this year, the market share of Toyota in the three cities rose from 1 percent to 7 percent. Honda also managed to seized 6 percent of the market, but its market share was less than1 percent in 2004.

Chinese home-made cars are also acquiring larger market shares in China, said the report.

In Beijing, Shanghai and Guangzhou, China-made Chery cars accounted for 5 percent in the auto market.

BEIJING (Reuters) - Chinese officials estimate the migrant population has reached 150 million, doubling over the past decade as poor rural residents flocked to cities to take part in the country's economic boom, state media said on Sunday.

The figure for migrants now amounts to 11.5 percent of the population of China, the world's most populous nation, Xinhua news agency reported, citing Wang Guoqiang, deputy director of the State Population and Family Planning Commission.

More than 80 percent are rural migrants seeking jobs and would make up the majority of the floating population for a long time, Wang told a national conference in Shanghai.

In Shanghai one third of the city's population of 5.81 million people were from other places, Xinhua cited statistics from last year as showing.

Farmers from vast rural China have flocked into cities since market reforms started in 1980s, contributing to the country's economic boom by staffing construction sites, factories and restaurants.

But they have met barriers in getting social benefits such as health care and education for their children.

It is not surprising at all when many foreign investors complained when they do business in China. Many wondered why their years of experience in the business world could not be applied in China immediately. Doing business is about building mutual trust and benefit amidst establishing relationship with people. If you do not understand your counterpart well, it will be quite difficult to establish good cooperation with him/her. An old Chinese saying goes: know yourself and your enemy well and you can fight a hundred battles without any fear of defeat. This greatly emphasized the importance of knowing and understanding your counterpart.

Modern economic model differ greatly from the traditional one, whereby people in the past ‘fight’ till the last man standing. Today, people seek to achieve a “win-win” situation, and pursue long-term trade cooperation under a fair and healthy competition environment. Understanding factors such as China’s history, humanity and culture will be the key to investors’ success in China. As Western thinking and China’s traditional values do differ, encountering the culture differences is therefore inevitable, thus a better understanding of the cultural differences is necessary when doing business in China:

1. Learn how to handle Guangxi (relationship)

In China, Guangxi (relationship) is a complicated field. Establishing relationship with others does not mainly deal with achieving own self-interests or personal goals. A special feature of doing business in China will be that Guangxi (relationship) in China will have to include relationship with the government body, investors, partners and even relationship with your own staff. China government plays a large role in administrating the investment in China. This is because China is a socialist state; the economy is still largely controlled and managed by the government, so when doing business in China, it is important for foreign investors to learn to coordinate with the China government. At the same time, seeking a suitable local partner may be a shortcut and helping hand in developing your business in China market.

2. How to prevail over competition

China, at the moment, can be said to be a big, open market, and the ability to prevail over competition is a very important issue today. Investors should fully realize and maximize one's advantages. Some investors are afraid that the China’s imitation products will hurt the sale of their products. Even though this symptom is worrying, however in a free and competitive market, it will always be one that has the superior quality that will not be afraid of competition and will prevail eventually. China market is constantly undergoing standardization, and the China government has vowed to protect the quality of the market.

The Vice-Minister of the Ministry of Foreign Trade and Economic Cooperation had previously stated in his speech that being a member of the World Trade Organization, China government will continuously rectify and standardize the economic structure of the market, and will persistently crack down illegal acts of producing counterfeit products. Technology level in China is still relatively lagging behind, thus foreign investors should fully make use of their advantages in technology and expertise to produce high-quality products and services. One should not be over worried about the negative impact brought about by new counterfeited products. Continuous development of one’s technology and emphasizing on innovation will be the key to success.

3. Route for Investment

There are three options to take when make investments in China, mainly: wholly foreign-owned enterprise, Chinese-foreign cooperative enterprise and Sino-foreign joint venture. Which option to take will have to depend on factors such as the investors' investment direction, investment environment, and the amount of investment to be undertaken. Generally speaking, wholly foreign-owned enterprise require examination and approval from many government bodies and this process can be quite hassle and time-consuming. Government procedures for establishing Chinese-foreign joint venture and contractual joint ventures will be even more and the process will require even more from more government bodies. Thus Sino-foreign joint venture appears to be the ideal investment option as less governmental procedures and authorization time will be required. Possibility of encountering hiccups will be smaller.

There are three different business incorporation vehicles which can be utilised to do business in China. These are:
1. The utilisation of a representative office
2. Seeking a Chinese joint venture partner
3. Establishing a Wholly Foreign Owned Enterprise (WFOE)

Representative Office (RO):
A representative office is just a subsidiary of a foreign company in China. If your are looking for a company, which needs a local presence to manage services or coordinate outsourcing business activities or research developing Chinese market, then a representative office is useful and inexpensive vehicles for establishing a presence in China. Main purposes of a representative office are conducting market research, monitoring purchasing activities, marketing and sales administration for sales conducted between China and your parent company etc. Representative offices cannot write bill for service or sales to their clients in China. However, you can act like a liaison in matter of ordering, shipping, collecting money and so on.

Joint Venture:
Joint venture is business where a foreign firm goes into businesses with local Chinese partners. Joint venture is usually established to exploit the market knowledge, preferential market treatment, and manufacturing capability of the Chinese side along with the technology, manufacturing know-how and marketing experience of the foreign partner.

Wholly Foreign Owned Enterprise (WFOE):
These are 100% foreign owned companies, originally developed for the specific purpose of encouraging foreign investment in manufacturing for export in Special Economic Zones (SEZs) in China, and they were prohibited from selling to the Chinese domestic market. Since a recent change in regulations, from 1 December 2004, WFOE's can now trade within China, and can sell wholly foreign manufactured goods in China. The capital requirements for such companies have also been dramatically reduced.

In China, Guangxi (relationship) is a complicated field. A special feature of doing business in China will be that Guangxi (relationship) in China will have to include relationship with the government body, investors, partners and even relationship with your own staff, so when doing business in China, it is important for foreign investors to learn to coordinate with the China government, especially establishing good relationship with government bodies dealing with foreign trade and economic cooperation.

Governmental procedures for foreign investors in establishing investments in China is extremely complicated, thus if one is unfamiliar of the procedures, one will delay his/her business opportunities. Therefore it is important for one to be familiar with the investment procedures before carrying out his/her investment in China. A safer and more appropriate way will be to seek help from local organizations familiar in the same field of business or consultant firms who are able to provide professional advice and assistance. Willpower and patience may be essential for an investor to be successful, however it is necessary for one to require help from professional bodies to ensure that success will be achieved.

Seeking a suitable local cooperative partner can be a shortcut one undertakes when developing the China market. Many investors had established Sino-foreign joint venture, Chinese-foreign cooperative enterprise, etc. as a stepping stone to enter the China market, thus which investment mode to choose one will have to accord with the enterprise's characteristics and has to be the most suitable for developing the enterprise’s business and assisting its march into the China market. Some investors who had made investments in China for many years proposed to small and medium-sized enterprises to take one step at a time when making investments. They should not be too ambitious initially. It will be best if they establish cooperation with local partners so as to reduce their investment risk. Even though China’s investment environment is constantly maturing, domestic regional developments imbalances still exist, therefore building cooperation with local companies will be the most ideal way to protect foreign investors’ interests and investments.

China’s labour market very much appeals to many foreign investors. This is because on one hand, labour cost is low, and on the other hand, through 20 years of reform, China’s workforce has become matured and their skills have been constantly upgraded, especially in the coastal cities. Educational development is undergoing at a tremendous pace in China, thus it is no longer difficult to hire high quality labour force in China today. Many successful foreign investors have even credited their success in China to their China’s local staff. One big problem that is causing headache to foreign investors is how to maintain good relationship (Guangxi) with the local staff. First of all, top management should cultivate the company’s vision and values into the employees because what the local people are taught under China’s educational system may crash with the foreign management system. Thus only by letting the employees understand the company better can allow the company to function better.

Chinese emphasize very much on courtesy and face-saving. This has to do very much with China’s traditional culture, and courtesy can be seen in every aspect in the business world. Being courteous to government official, cooperative partner and staff is thus essential. Senior president of China’s Siemens Company has rated courtesy as the top importance while summarizing his China’s experiences. Besides displaying courtesy on general commercial affairs, respecting traditional customs and practices is also vital. Chinese people are very hospitable, but their self-esteem is very strong and they pay very much attention on how other people view them and their attitude towards them. This phenomenon can be seen greatly in Northern China, which is associated with ‘face-saving’.

While doing business with the counterpart or partner, it is essential to give face or respect to the partner or the other party, so that in this way strong cooperation can be fostered and the business will be able to grow and last. Many foreign corporations have strict requirements on their staff in their home country, however in China, this management method may backfire. Past experiences have shown that this kind of strict management method may not be suitable for the Chinese’s gentle personalities. Employees’ morale will be affected and they may lose the willingness and motivation to work in the company. Thus handling organizational relationship in China context is a necessary skill for foreign investors to acquire in order to handle interpersonal problems in the Chinese way. It is important for foreign investors to be flexible in their management and be sensitive to China’s culture in order to devise an ideal management system best suited for their companies’ organizational culture.