The Blog:

The Chinese Grow Closer to French Wine 4/19/2011

china wine importsChina was the world largest consumer and importer of Bordeaux wine in 2010. That is astonishing to me, considering that French-style red wine has only recently began to draw a significant following amongst Chinese consumers.

According to the Bordeaux Wine Council, China imported 33.5 million bottles of Bordeaux wine last year. That is $475 million USD worth of French wine tingling the palates of Chinese wine lovers. China in fact, has become much more of a wine-oh country in the last six or seven years. They now import over $1 Billion USD worth of wine, which is more than four times the amount imported in 2004.

If you have your own label, (I wish I did) I would highly consider formulating a market entry strategy to break into what could quite possibly be the world’s largest wine market very soon.

China is also in the midst of a large wine expo, called the “2011 Wine China Exhibition” located in both Beijing and Shanghai. The events began on April 17th and will continue through April 20th, ending in Shanghai. Wine from all over the world will be celebrated, tasted and enjoyed. If you are interested in learning more, here is the exhibition’s site. I definitely plan on attending one of these years.

China Wine Import Stats

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China Pumps up the Orange Business 1/4/2011

china orange productionA new study has been launched by the Florida Citrus Commission to study China’s growing stake hold in the orange juice and citrus businesses. As part of China’s initiative to “Develop the West,” a national effort has been launched to coordinate and increase citrus production. China already leads the “fresh citrus” export market according to the executive director of the Florida Department of Citrus. In the last decade, China has ramped up fresh citrus production by 170% (including oranges and pomelos/grapefruits).

Orange juice is a commodity of specific concern for Florida production because of China’s previous success at dominating the apple juice market. In the early 1990’s, China launched a national effort to expand apple and apple juice production. They began about even with the U.S., owning nearly 20% of world apple production. China now produces seven times more apples than the United States and owns about 50% of global apple production. China supplies the majority of the world’s apple juice exports and two-thirds of the American apple juice market.

China’s share of the global citrus production has increased 900% between 2002 and 2007. However they are still less than 1% of the global market. Only time will tell if the OJ surge will be as successful as the apple initiative. Let us know what you think. Will China be successful in the global OJ marketplace?

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How to Get Your Money Into China 1/3/2011

So you have decided you want to invest in China and play your hand in one of the biggest economies in the world. What next? Setting up a business in China is a long process that requires meticulous record keeping, persistence and ingenuity. But don’t worry; it is possible! And if you are in the right spot at the right time, very profitable.

China’s protective nature of the RMB makes getting money in and out of the country somewhat of an art. But if you have the right plan of attack in place, you will not be baffled.

Once you know what location is right for you, based on your customer and/or your supplier base, you have to conquer the task of getting your money into the country to start up the business. After all it takes money to make money right?

First, make sure you know what type of business you will need to set up: a WFOE, Rep Office, Joint Venture or Partnership Enterprise. Our firm decided on a WFOE because of the flexibility, the ability to conduct profit-making activity and the protection granted by the government (equal to that of Chinese businesses). Each business is different however, and a rep office might be the right place to start for your company. Check out our partner company’s resource on Incorporating a Business in China for a nice start.

You need to know that there are limits on the amount of capital each business can invest in the country. The amount you plan to invest and the industry that you play in determines what regulatory agency must approve your investment and for how much. Once your investment gets approved then you will be issued a business license. Then you must gain approval to convert your investment into RMB by China’s State Administration of Foreign Exchange. This however can throw a stick in your spoke if you are not prepared.

Here is the catch: you can only get approved to convert your investment after you open a local bank account. But you can’t get a local bank account until you have approval to invest. The good news? There are multiple ways to get around this.

If you have someone that you trust in China, it may be a good idea to leverage their connections (and bank account) to get started. Or, you can also open what is called a pre-investment bank account, where companies are allowed to spend up to $100,000 to set up their business and gain investment approval. This money can also be applied toward your approved investment capital needed to open the doors. Whatever your decision, make sure your money is safe and if you have any doubts, there are professionals that can help you through every step of the process.

Great New York Times Article

RMB Currency Converter

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Top Investments for 2011 12/15/2010

Looking for a great investment for the new year? The Wall Street Journal recently published a list of promising investments for those looking for a profitable 2011. Twelve companies were highlighted and who ranked among the top? Yum Brands! Why is Yum so promising? Their existing China market strength and opportunity for continued growth China.

Yum Brands expands in ChinaWho is Yum? Yum is the company behind KFC, Pizza Hut and Taco bell. Based in Louisville, Kentucky, Yum has been in China for 20 years and in fact, KFC is the top “western fast food” chain in China. In addition, the China segment of the business is more lucrative than their domestic operations.

Is there room for growth in China? You bet! In America, there is one fast food restaurant for every 2,000 city residents. Compared to China, where there is one fast food restaurant for every 14,000 urban dwellers. As a result, the Journal expects Yum’s profits to increase 12 percent to $1.3 billion in 2011 as the China segment of the business grows.

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Global Trade Resource Predicts Top Holiday Toys 12/8/2010

Panjiva, an online trade platform used by sourcing and supply chain professionals to screen US import data, released their predictions for the top holiday toys of 2010.  Panjiva’s database tracks the overseas shipments of more than 1.5 million companies doing business across borders. Panjiva’s top toy selections are based on the number of toy shipments sent to the United States (the majority of which are coming from China). The graphs below show the top toys for each category. The “rookie toys” versus the “veteran toys.” The “rookies” are the toys released this year versus and the “verteran” toys are toys that existed prior to 2010.

Top Holiday Toy Predictions RookiesTop Holiday Toy Predictions Veterans

As you can see, there is almost a three way tie in the rookie category between the Squinkies, Paper Jamz, and Zoobles. For the Veterans, the victor is much more clear: Toy Story toys have been shipped much more than the second and third place toys, Elmo and Airhog Helicopters.

They also had a great chart indicating the trending of toy shipments over the past three years. According to Panjiva’s database, toy shipments are up 24% from August to October when compared to the same period in 2009.

That said, I am predicting a very merry holiday for lots of children this year!

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Suzhou Industrial Parks: SND- An Alternative to SIP 11/30/2010

SND Suzhou National New & Hi-Tech Industrial Development ZoneAfter doing a post on the Suzhou Industrial Park earlier this month, I found that people have been very interested in the topic. So I decided to write a blog on the SIP’s main competitor, the Suzhou National New & Hi-Tech Industrial Development Zone (SND).

In case you didn’t read my earlier post on Suzhou Industrial Parks, I will re-cap some of the main points on Suzhou and then get into the detail of SND. Suzhou, China is located in the Jiangsu Province and is about a two-hour drive from Shanghai. Suzhou proper is also only about 2.5 hours away by car to the Shanghai Pudong International Airport and only about 20 minutes away by train to the Shanghai Hongqiao Airport.

Suzhou is abundant in human resources with over 24 universities and colleges in the region that produce over 500,000 students each year. Suzhou boasts over 15,000 foreign invested companies in many different industries

SND is located in the western region of Suzhou and began in 1990. Initially it was only about 52 km2 (about 32 sq. miles) By 2002, it grew to over 258 km2 (about 161 sq. miles) and is now home to over 1,738 foreign companies and USD 25 billion in FDI. There are over 150 American companies and 160 European companies with facilities in the SND. Over 55 of the Fortune 500 also have a presence in SND.

The most common industries of SND are IT, chemicals, environmental protection, new materials and precision machinery. There are now over 2,000 companies in the molding industry and 10% of China’s sensor revenue comes from Suzhou as well.

Below is a roadmap of what to expect if you are thinking of setting up Greenfield operations in SND. The SND provides free services to encourage foreign investment and assist with licensing, permits and registrations. Below is an approximate time-line of the establishment period that must be take place with the local government:

• Name verification: 1 working day
• EHS (Environmental Health & Safety Division) Pre-approval of environment impact: 5 working days
• EHS Detailed environmental assessment form: 1 week-1 month
• EHS Detailed environmental assessment report: 1-2 months
• Investment approval: 3 working days
• Business license: 5 working days

Below is a list provided by SND of things you will need to obtain a legal business license in SND:

1. Business License of parent company – 2 copies
2. Notarization and certification for the Business License of Parent Company – 2 originals
3. Authorization Letter –  2 originals
4. Credit Status of parent company Issued by Bank – 2 originals
5. Application – 2 originals
6. Application Form of Name Registration – 1 original
7. Environmental Impact Form –  5 originals
8. Application Letter for WFOE Registration –  1 original
9. Recommendation Letter for Directors and Supervisor – 2 originals
10. Recommendation Letter for GM and Deputy GMs – 2 originals
11. Articles of Association – 2 originals
12. Land Transfer/Building Leasing Contract –  1 original
13. Copy of Passports of Directors, GM, Deputy GMs and Supervisor – 2 copies

And lastly, if you are interested in Investing in China, please visit our partner site for more information on Incorporating a Business in China.

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China Wage Comparison Resource 11/29/2010

Our company’s partner site, Understand-China, has spent the past year compiling and researching China wages. They have put together a nice chart comparing China’s different regions that shows the wages in both RMB and USD. The rates are for skilled manufacturing/direct employees.

Did you know? China has no standard national minimum wage. However, nearly all of its various provinces and other local jurisdictions have enacted legislation designating a minimum wage for full time and part time employees.

Keep in mind that it is difficult to calculate the exact cost of a direct employee due to things like benefits, social insurances and holiday pay, but this chart is a great starting point to learn which regions are more costly in terms of labor than others. Remember that the cost of labor is only one factor to consider when starting or expanding a business in China: property and real estate costs, labor supply and skill sets, utility costs, logistics and access to ports/airports are just a few other things to keep in mind.

The rates below are monthly wages for Skilled Manufacturing/Direct Employees.  All wages provided are estimates.  For the most recent data, please contact Understand China.

Avg..RMB/month Avg..USD/month
Hong Kong n/a n/a
Beijing 3000 441
Hainan 2100 309
Gansu 2046 301
Binhai 2000 294
Shanghai 1996 294
Sichuan 1925 283
Zhejiang 1870 275
Chongqing 1866 274
Hebei 1838 270
Jiangsu 1800 265
Heilongjiang 1750 257
Shenzhen 1750 257
Xiamen 1750 257
Tianjin 1640 241
Liaoning 1633 240
Henan 1590 234
Guangdong 1530 225
Fujian 1510 222
Shantou 1408 207
Macau 1400 206
Zhuhai 1400 206
Hubei 1200 176
Pudong 1120 165
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Nice China Business Resource 11/25/2010

China Export ShipThe other day I came across this nice little checklist to help businesses considering whether or not they are ready to enter the China market. It is provided by the U.S. government and focuses on exporting to China, but has a lot of good tips and advice for doing business with China in general, whether it be sourcing, investing or exporting. The checklist has a lot of questions to ask yourself and includes a lot of things that you may have not even considered: from things like product and intellectual patents and trademarks to things as simple as getting your money to go to the right place. The article also includes a lot of  additional resources that are very helpful when doing your research.

In addition to the checklist, the rest of the site has a lot more great information that will help you learn more out the China marketplace.

Source: Are you China Ready?

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2011 Spring Canton Fair Dates & Information 11/24/2010

The 2011 Spring Canton Fair will be here before we know it and if you are planning to attend Asia’s largest import and export fair you will need to do some planning. If you have never been before, here are the basics for getting into the fair:

First, you need to get “invited” to attend, so you apply for the invitation through their portal here. After reviewing your application, which takes about one week typically, you will receive your invitation and confirmation number. Make sure to print this out and bring with you to the fair on your first day. Once at the fairgrounds, you will need to allow about 30-40 minutes for the registration process, in which you are administered your pass (you will need a passport photo or you can take one there for a few dollars). Once you have your pass, you can use this for as many years as you want (as long as the photo is still valid). Oh, and admission is free! Now you are good to spend time wandering through the 50,000 plus exhibits over the 15 day span of the fair.

2011 Canton Fair Essential Information:

When is the 2011 Spring Canton Fair?
Phase 1: April 15-19, 2011 | 9:30-18:00
Phase 2: April 23-27, 2011 | 9:30-18:00
Phase 3: May 1-5, 2011 | 9:30-18:00

Where is the Canton Fair held?
China Import and Export Fair Complex
No. 380, Yuejiang Zhong Road, Guangzhou, China

Which phase are you going to check out?

Phase 1: April 15-19, 2011 | 9:30-18:00
* Electronics & Household Electrical Appliances
* Lighting Equipment
* Vehicles & Spare Parts
* Machinery
* Hardware & Tools
* Building Materials
* Chemical Products
* International Pavilion

Phase 2: April 23-27, 2011 | 9:30-18:00
* Consumer Goods
* Gifts
* Home Decorations

Phase 3: May 1-5, 2011 | 9:30-18:00
* Textiles & Garments
* Shoes
* Office Supplies, Cases & Bags, and Recreation Products
* Medicines, Medical Devices and Health Products
* Food & Native Produce
* International Pavilion

Fun Fact: 2010’s Spring Session brought in over $34 Billion (yes, with a B) in business turnover.

A more detailed breakdown of the types of products in each phase can be found at The Canton Fair’s website.

Also a nice promotional video is posted on their site if you want to get excited about going: Video

2011 Canton Fair

A brief overview from the 2010 Fall Canton Fair:

Date: Phase 1: October 15-19, 2010
Phase 2: October 23-27, 2010
Phase 3: October 31- November 4, 2010
Venue: China Import and Export Fair Complex
Sections: Electronics & Household Electrical Appliances/Lighting Equipment/Vehicles & Spare Parts/Machinery/Hardware & Tools/Building Materials/Chemical Products/International Pavilion
Consumer Goods/Gifts/Home Decorations
Textiles & Garments/Shoes/Office Supplies, Cases & Bags, and Recreation Products/Medicines, Medical Devices and Health Products/Food & Native Produce
Exhibition Space: 1,130,000 M2 (More than 200 football fields combined!)
Number of Booths: 57,136 standard booths
Business Turnover: coming soon
Number of Overseas Buyers: 200,612
Number of Exhibitors: 23,599 exhibitors


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Caterpillar to build new Engine Plant in Tianjin 11/23/2010

China Manufacturing - Caterpillar Buckets

China Manufacturing - Caterpillar Buckets

Caterpillar Inc., one of the leading heavy industrial equipment companies in the world, has recently announced their new plan to further expand their manufacturing operations in China. Set to open in 2013, Cat will build a $300M engine manufacturing plant in Northern China to produce their 3500 series of large engines to be used in their oil-and-gas, marine, and electric power sectors. The Tianjin plant will be Caterpillar’s third manufacturing site for the 3500 series engines.

Opening a plant in Tianjin will allow Caterpillar to be better positioned to compete in the global marketplace as well as support their growing customer base in China and throughout Asia.

This is not Caterpillar’s first endeavor in China however. Earlier this year they announced a new logistics center to improve its regional supply chain, to be built in Suzhou. They also revealed plans to build a plant in Wujiang for hydraulic excavators and another plant for excavator production in Zuzhou.

How will this impact the current production facilities? Caterpillar has said that the new production plants are not expected to impact existing employees (such as those in the Lafayette, Ind. plant) due to the increase in demand from China and the surrounding regions.

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