Executive Report on Strategies in China
ICON Group International, June 2007, Pages: 390
How to Strategically Evaluate China
Perhaps the most efficient way of evaluating China is to consider key dimensions which themselves are composites of multiple factors. Composite portfolio approaches have long been used by strategic planners. The biggest challenge in this approach is to choose the appropriate factors that are the most relevant to international planning. The two measures of greatest relevance are “latent demand” and “market accessibility”. The figure below summarizes the key dimensions and recommendations of such an approach. Using these two composites, one can prioritize all countries of the world. Countries of high latent demand and high relative accessibility (e.g. easier entry for one firm compared to other firms) are given highest priority. The figure below shows two different scenarios. Accessibility is defined as a firm’s ease of entering or supplying from or to a market (the “supply side”), and latent demand is an indicator of the potential in serving from or to the market (the “demand side”).
Framework for Prioritizing Countries
Demand/Market Potential Driven Firm
Relative Accessibility
Accessibility/Supply Averse Firm
Relative Accessibility
In the top figure, the firm is driven by market potential, whereas the bottom figure represents a firm that is driven by costs or by an aversion to difficult markets. This report treats the reader as coming from a “generic firm” approaching the global market - neither a market-driven nor a cost-driven company. Planners must therefore augment this report with their own company-specific factors that might change the priorities.
Latent Demand and Accessibility in China
This report provides an extremely detailed overview of factors driving latent demand and accessibility in China. Latent demand is largely driven by economic fundamentals. But, latent demand only represents half of the picture. A country may at first sight appear to be attractive due to a high latent demand, but it is often less attractive when one considers at the macro level how easy it might be to serve that entire potential and/or general business risks.
Chapter 2 deals with macro-accessibility. While accessibility will always vary from one company to another for a given country, the following domains are typically considered when evaluating macro-accessibility in China:
Openness to Trade in China
Openness to Direct Investment in China
Local Marketing and Entry Strategy Alternatives
Local Human Resources
Local Risks
Across these domains, a number of not-so-obvious factors can affect accessibility and risk. These are also covered in Chapter 2, which is presented from the perspective of an American firm, though it is equally applicable to most firms entering China. This chapter has been authored by local offices of the U.S. Government. I have included a number of edits to clarify the provided information as it relates to the general strategic framework.
In Chapter 3, I summarize the economic potential for China over the next five years for hundreds of industries, categories, and products. The goal of this chapter is to report my findings on the real economic potential, or latent demand, represented by China when defined as an area of dominant influence. The data presented are the result of various spatial econometric and time-series forecasting models which, for each category presented, are applied to forecast and allocate latent demand across all countries of the world and major distribution centers or centers of dominant influence within each country. This is accomplished knowing that economic fundamentals (e.g. income) generally vary from one country to another within a given country over time. In this chapter, I report the allocation for each category for China as an area of dominant influence in Asia and, potentially, the world.
The report concludes with trade indicators for China. Often, the amount of trade flowing into and out of a country is a strong indicator of trading partners, trade openness, and related latent demand. Trade indicators are purely statistical in nature. Although international trade is not a direct measure of latent demand, it does provide an indicator of general market conditions with respect to trade flows and trade openness in China.
As a whole, this report presents a strategic assessment of China by considering an extremely broad set of factors affecting both latent demand and accessibility, as outlined in the following chapters.
MACRO-ACCESSIBILITY IN CHINA
Government Intervention Risks
Although China’s private sector has grown tremendously since economic reforms began in 1979, state-owned or state-controlled entities continue to play the leading role in the Chinese economy. For example, traditional state-owned enterprises and corporations with majority of shares held by the state accounted for just under 42 percent of gross industrial output for the year. In addition, the Chinese Communist Party maintains its authority to oversee economic policies as well as managerial appointments in all financial institutions and major industrial enterprises. Although the authorities’ long-term plan is to sell all or part of the government share in most state-owned enterprises and financial institutions to the public, ultimate control over managers of these assets will remain in the hands of the Party. Leading officials and bureaucratic institutions also maintain substantial authority to approve or deny investment decisions by enterprises and individuals.
Although direct price controls on most commodities have been eliminated, prices for thirteen broad categories of items, including electric power, transportation, telecommunications, and some services, remain subject to varying degrees of government “guidance.” Petroleum prices have generally been allowed to fluctuate in accord with the international market. The government sets all interest rates and fees at financial institutions, distorting the cost of capital and preventing banks and other institutions from using interest rates as a way to adjust for risk.
Infrastructure Investment
Although the government is no longer explicitly pursuing a tight credit policy to quell inflation, its efforts to improve the asset quality of the state-owned banking system effectively limits the kinds of projects which receive official approval and which the banks will finance. Private firms, in particular, still have serious difficulties in raising capital. State-sponsored infrastructure projects are seen as “safe” investments for domestic financial organs. Financing for key projects comes from an increasing variety of sources, including special construction funds, surcharges on power and other utilities, provincial and local government budgets, as well as domestic loans from the China Development Bank and other banks.
Chinese officials have said they would prefer roughly 15-20 percent of infrastructure investment to come from foreign sources, but shifting foreign investment away from export-oriented industries presents some difficulties. Infrastructure investments have long payback periods, with no ready source of foreign exchange. Policies designed to attract foreign investment, notably those inspired by the central government’s “Great Western Development Strategy,” have tended to emphasize land-use and tax incentives without addressing more fundamental problems in the investment environment. China’s weak legal structure, failure to enforce contracts and court decisions, restricted access to foreign exchange, and the cumbersome approval process work against foreign participation in infrastructure projects, particularly in the road, rail and power sectors. The regulatory impediments to foreign involvement in infrastructure projects are gradually disappearing. For example, changes in rules governing current account transactions have gone a long way toward solving the problem of guaranteeing foreign exchange convertibility.
Infrastructure development in the telecommunications sector remains strong and China now boasts the largest wireline and wireless networks in the world. The Chinese Government’s policies have contributed to this growth. They have made telecom and IT development a national priority and enacted preferential policy initiatives to promote telecommunications modernization throughout the country. In addition, technological advances have contributed to network expansion by making better equipment available at lower prices.
Political Risks
Although there has been considerable reform of China’s economic model - from a centrally planned economy to a market-oriented one - the same is far less true of the PRC’s (People’s Republic of China) political system. The Chinese Communist Party (CCP) still dominates the entire political apparatus, and its leaders make all major policy decisions. Party members hold most senior government positions at all levels of administration. Ultimate authority rests with the 24 members of the CCP Politburo and, in particular, its nine-member Standing Committee. Ministries and lower-level counterparts implement policy on a day-to-day basis, and China’s parliament, the National People’s Congress (NPC), reviews and approves legislation and nominees for government offices. Many provincial governments - especially those in fast-growing coastal regions - actively adapt central government policy decisions to suit local needs. Senior leaders generally agree on the need for further economic reform, but stability remains the paramount concern, and differences exist within the leadership over the content, pace, and goals of both economic and political reform.
China faces a growing disconnect between the demands of its reforming economy and society and a political system that is largely ill-suited to meet their needs. The growing disparity between urban and rural incomes, income gaps between the wealthy coastal regions and the poor interior, a large “floating population” of itinerant workers, mounting unemployment created as State-Owned Enterprises restructure and downsize, and official corruption are the chief potential threats to stability. So far, none has prompted the kind of mass protest movement that erupted in Beijing in the spring of 1989, although a number of localized large-scale labor protests occurred in 2002. The central authorities prefer to minimize tensions through the implementation of pragmatic policies. They also recognize that moves to reduce personal and economic freedoms would harm China’s long-term interests. Nonetheless, the national leadership would respond forcefully if confronted with what it regarded as another serious threat to its monopoly on political power, as it did after approximately 10,000 members of the Falun Gong spiritual movement appeared outside the leadership compound in Beijing in April 1999. As evidenced by harsh sentences handed down to labor activists and Internet dissidents in May and June 2003, the new leadership appears to be placing a strong emphasis on stability and perceived threats to power.
Political relations with the U.S. temporarily deteriorated following the accidental bombing of the Chinese Embassy in Belgrade, Yugoslavia, in May 1999 and again following the collision of a U.S. EP-3 reconnaissance aircraft and a Chinese fighter in international airspace in April 2001. Bilateral relations have gradually recovered from both incidents. China came out firmly in support of the United States following the September 11 terrorist attacks. Relations further improved with the October 2001 and February 2002 visits by President Bush to China and the October 2002 visit of then President Jiang Zemin to the United States. Differences, however, remain between the U.S. and Chinese governments on some political issues, such as nonproliferation and human rights, and these will continue to color the relationship.
Marketing Strategies
Distribution Channel Options
Before China’s accession to the WTO, China prohibited foreign companies from distributing imported products or providing repair and maintenance services. Since WTO implementation, China has worked towards liberalizing its distribution system to provide full distribution rights for U.S. firms. However, this is an issue still very much in debate and with much improvement to be made. Current restrictions for most distribution related services are to be phased-out within three years from the date of accession, although the schedule of commitment until that time remains according to the service, (for more information on China’s commitments on the WTO, please refer to the U.S. Embassy Web site links to the Economic Section and Trade and Commerce at: www.usembassy-china.org.cn).
Trading and distribution are two separate issues and are, accordingly, covered separately by the WTO implementation documents. Trading simply covers the rights to import and export product into and from China. Distribution, on the other hand, covers the sale/resale of products once the products are in China.
Trading Companies
One of the legal changes as a result of WTO was the release in July of 2001 of the Expanding Import and Export Management Rights of Foreign Invested Enterprises (FIEs) rule. Prior to WTO accession, FIEs always had the rights to import materials needed for production and export the products they produced. The rule was designed to allow manufacturing FIEs to become export trading companies, purchasing and exporting any products free from quotas, license control and government monopoly. This is the first step towards implementing China’s commitment to liberalize trading rights. FIEs in foreign trade zones are now allowed to establish offices outside the zones, which will enable FIEs to establish distribution networks across the country before the phase-in of the distribution rights. China’s WTO implementing documents state that 3 years after China’s WTO accession, all Chinese companies that have RMB 1 million in capitalization and are registered, can obtain an import/export license.
The law was to cover the establishment of FIE service suppliers (distribution companies) on December 11, 2002, but then only through joint ventures in which an FIE has a minority stake. However, this did not happen. The Chinese government maintains that as FIEs can set up wholesaling and retailing companies that they meet their requirements. It is unclear at this time whether FIEs will be able to distribute products they do not manufacture in China or whether the foreign invested would need to establish a minority foreign-owned distributor.
Distribution
As we continue to wait for distribution rights to become more liberalized as per the WTO implementation documents, business remains in a similar state. Distribution covers:
Commission agent services,
Wholesale services, and
Retailing.
Regarding FIEs, the WTO implementation documents state that FIES can distribute products they produce/manufacture as well as related subordinate services.
Given the complexities of the markets in China it is advised that foreign companies use a domestic Chinese agent for both importing into China and marketing within China.
With careful selection, training, and constant contact, a U.S. exporter can obtain good market representation from a Chinese trading company, many of which are authorized to deal in a wide range of products. Some of the larger companies have offices in the U.S. and other countries around the world, as well as a network of offices and affiliates in China. However, given transportation and communication difficulties as well as regional peculiarities, most of these trading companies cannot provide diversified coverage throughout China. China’s WTO accession promises a three-year phase in of improved trading rights that should improve such conditions for foreign firms.
Local Agents
In addition to trading companies, China is witnessing an explosion in local sales agents who handle internal distribution and marketing. Most of these firms do not have import/export authorization. They are the next layer down the distribution chain, buying imported products from those entities that have an import/export license. They may be representative offices of Hong Kong or other foreign trading companies, or domestic Chinese firms with regional or partial national networks.
Given China’s size and diversity, as well as the lack of agents with wide-reaching capabilities, it makes sense to engage several agents to cover different areas, and to be cautious when giving exclusive territories. China can be divided roughly into at least five major regions: the South (Guangzhou), the East (Shanghai), the Central/North (Beijing-Tianjin), West China and the Northeast.
The U.S. Commercial Service (USCS) assists new-to-market firms. The International Partner Search (IPS) will locate, screen, and assess potential qualified overseas sales representatives, agents, distributors, joint venture partners, licensees, franchisees or strategic partners for your products or services. The IPS program locates up to six potential agents or distributors, screened from a large pool of candidate firms. Normal turnaround time is around 30 calendar days after each post receives USD 450 for each product line and the company’s product literature. A report is developed from on-the-spot research by U.S. Embassy staff and provides the contacts needed to launch marketing efforts in China. As a next step, a visit to China can be supported by our Gold Key Service (GKS), which is designed to set-up appointments with prospective agents and distributors, and key government officials responsible for an industry (USD 600 per location). IPS clients can upgrade their existing IPS to meet one-on-one with those identified companies (i.e, GKS) for USD 150 if done within 6 months upon completion of the IPS. Regional IPSs and GKSs are available from the USCS offices in Beijing, Shanghai, Guangzhou, Shenyang, and Chengdu, but nation-wide searches are not available.
For those firms unable to travel and seeking potential partners, USCS continues to offer BuyUSA.com as a user-supported “B2B” Web site. Companies seeking foreign partners may list their firm’s information, and foreign buyers are enlisted worldwide
Establishing a Presence in China
Representative offices are the easiest type of offices for foreign firms to set up in china, but these offices are limited by Chinese law to performing “liaison” activities. As such, they cannot sign sales contracts or directly bill customers or supply parts and after-sales services for a fee, although most representative offices perform these activities in the name of their parent companies. Despite limitations on its scope of business activities, this form of business has proved very successful for many U.S. companies as it allows the business to remain foreign-controlled
China’s Company Law, which has been in effect since July 1, 1994, permits the opening of branches by foreign companies but, as a policy matter, China still restricts this entry approach to selected banks, insurance companies, accounting and law firms. While representative offices are given a registration certificate, branch offices obtain an actual operating or business license and can engage in profit-making activities.
Establishing a representative office gives a company increased control over a dedicated sales force and permits greater utilization of its specialized technical expertise. The cost of supporting a modest representative office ranges from USD 250,000 to USD 500,000 per year, depending on its size and how it is staffed. The largest expenses are rent for office space and housing, expatriate salaries and benefits.
Establishing a Chinese Subsidiary
A locally-incorporated equity or cooperative joint venture with one or more Chinese partners, or a wholly foreign-owned enterprise (WFOE, often pronounced “woofy”), may be the final step in developing markets for a company’s products. In-country production avoids import restrictions - including relatively high tariffs - and provides U.S. firms with greater control over both intellectual property and marketing. The establishment of a WFOE in China has gained in popularity among U.S. firms as a result of an easing of restrictions, directly attributed to China’s accession to the WTO.
The role of the Chinese partner in the success or failure of a joint venture cannot be over-emphasized. A good Chinese partner will have the connections to help smooth over red tape and obstructive bureaucrats; a bad partner, on the other hand, can make even the most promising venture fail. Common investor complaints concern conflicts of interest (e.g., the partner setting up competing businesses), bureaucracy and violations of confidentiality). The protection of intellectual property, no matter the form of cooperation, is one of the most pressing matters for U.S. firms doing business in China. American companies should bear in mind that joint ventures are time-consuming and resource demanding, and will involve constant and prudent monitoring of critical areas such as finance, personnel and basic operations in order for them to be a success.
Licensing
Technology transfer is another initial market entry approach used by many companies. It offers short-term profits but runs the risk of creating long-term competitors. Due to this concern, as well as intellectual property considerations and the lower technical level prevailing in the China market, some firms attempt to license older technology, promising higher-level access at some future date or in the context of a future joint venture arrangement.
Licensing contracts must be approved by and registered with the Ministry of Commerce (formally, the Ministry of Foreign Trade and Economic Cooperation (MOFTEC)). A tax of 10-20 percent (depending on the technology involved and the existing applicable bilateral tax treaty) is withheld on royalty payments.
Franchising
Many foreign companies are beginning to establish multiple retail outlets under a variety of creative arrangements, including some which for all practical purposes function like franchises. Virtually all of the foreign companies who operate multiple-outlet retail venues in China either manage the retail operations themselves with Chinese partners (typically establishing a different partner in each major city) or sell to a master franchisee, which then leases out and oversees several franchise areas within the territory. Within three years of WTO accession, restrictions on equity share, number of outlets and geographical area are to be eliminated.
Direct Selling
Major U.S. direct selling companies entered the China market in the early- to mid-1990’s, when China’s legal and regulatory framework for this industry was not very clear. Direct selling was quickly modeled after by domestic Chinese companies, some of whom abused this legitimate format of doing business and operated scams to cheat consumers and evade taxes. In early 1998, the Chinese Government started implementing a series of strict controls over this industry, culminating in the re-licensing of all direct selling companies. Although a few major U.S direct selling companies were re-issued business licenses, restrictions are severe and requirements many, resulting in difficult a business environment.
E-Commerce
The Chinese Government has adopted an open attitude towards the advent of electronic commerce in China. Interest among both Chinese and international businesses focuses on investing and on establishing vertical integration and sales channels on-line. Investment is risky, however, due to the lack of clearly defined regulatory powers over the industry, an effective Chinese certificate authentication system, secure and reliable on-line settlement system, and an efficient physical delivery system. Many U.S. IT sector companies have been actively engaged in jointly developing these systems in China, and WTO accession will increase the speed of these developments. E-commerce in China has great potential, but first must overcome three major impediments:
China is still a cash-based society and use of credit cards is not widely adopted;
Channels of distribution in China are not well developed for the delivery of items purchased over the Internet;
Internet security.
There are several Chinese Internet companies that have been very successful in a cash-on-delivery e-commerce model in the major cities. The recent SARS epidemic proved that China is ready to adopt greater e-commerce technology.
Selling Strategies
Relationships
Personal relationships (“guanxi” in Chinese) in business are critical. The Chinese feel more comfortable dealing with “old friends,” and it is important for exporters, importers, and investors to establish and maintain close relationships with their Chinese counterparts and relevant government agencies. It is equally important that American exporters encourage strong personal relationships between their Chinese agents or distributors and the buyers and end-users. A Web of strong personal relationships will help ensure smoother development of business in China.
Foreign Currency
In general, Chinese companies are not permitted to retain foreign exchange. In business deals with Chinese companies, U.S. companies have been asked to keep a portion of the Chinese companies’ hard currency earnings in foreign bank accounts to avoid reporting and turning it over to the foreign exchange control authorities. As part of an effort to clamp down on corruption and tighten foreign exchange control, the Chinese Government is coming down hard on such practices. In September 1997, China issued a new rule allowing some Chinese enterprises that meet a certain criteria to establish a foreign currency account in a designated bank, thus retaining a limited amount of foreign currency earnings. In November 2001, the State Administration of Foreign Exchange adjusted the administration policy of Chinese enterprises’ foreign currency accounts and further lowered the criteria for establishing such foreign currency accounts.
In contrast, FIEs are permitted to retain foreign exchange contributed to or earned by the enterprise. On December 1, 1996, China made its currency convertible on the current trade account. However, foreign exchange balancing requirements remain in effect in other Chinese laws and regulations and in joint venture contractual arrangements.
Chinese companies are, however, able to purchase the foreign currency necessary for authorized imports and foreign currency obligations such as licensing fees, royalties, and loans by authorized entities.
The banking sector is one area that has benefited from WTO accession. The Ministry of Finance has moved very quickly to implement its WTO commitments. Client restriction on foreign banks’ foreign currency services was one of the areas immediately removed upon China’s WTO accession, which meant foreign banks could offer foreign currency services to corporate and individual clients. On March 19, 2002, Citibank announced that it had become the first bank to receive a license to provide foreign currency services to local domestic customers.
Advertising and Trade Promotion
Advertising
Advertising is an effective way to create product awareness among potential consumers in China. Channels for mass advertising include publications, radio, television, billboard displays, Internet, and sports sponsorship.
China’s retail boom and increasing competition among retailers is making China’s advertising industry grow even faster than the economy as a whole. According to China’s National Advertising Association (under the State Administration for Industry and Commerce, or SAIC), over-all advertising spending reached USD 10.92 billion in 2002, a 13.6 percent growth over 2001’s volume. China has about 89,552 advertising businesses, including more than 385 foreign joint ventures. Foreign service suppliers are permitted to establish advertising enterprises in China only in the form of joint ventures with foreign investment no more than 49 percent. Within two years after China’s accession to the WTO, foreign majority ownership will be permitted and within four years after China’s accession, wholly foreign-owned subsidiaries will be permitted. All of the major international advertising firms are present in China.
Television advertising takes up the largest single portion of the Chinese advertising market. China’s regular television viewing population is 84 percent of China’s 1.3 billion people. Major articles sold on television include toiletries, foodstuffs, pharmaceuticals, liquor, and home electronics. Television stations in big markets (Beijing, Guangzhou, Shanghai) require advertisers to book and pay for specific spots two to ten months in advance.
Now that China is in the midst of a consumer revolution, foreign products, complete with advanced marketing, advertising and research techniques, are leading the way. Brand awareness is increasingly important and sophisticated advertising is beginning to play a crucial role in charming the Chinese consumer. Foreign products are expected to continue making inroads despite 1999 regulations calling for more control over customer surveys that help foreign firms enhance their marketing effectiveness.
China’s 1995 Advertising Law contains guiding principles that set broad requirements. For example, one of the requirements is that advertising should “safeguard the dignity and interests of the State.” Comparison advertising is not allowed, nor is the use of superlatives. Chinese restrictions within the advertising sector include requirements for the verification of safety and hygiene from the relevant ministries that monitor various consumer products. Censorship standards vary considerably throughout China.
SAIC is the primary regulatory organization for the advertising sector, but many other organizations, such as the Ministry of Culture and the State Administration of Radio, Film and Television, play an active role in controlling print or television content.
Trade Shows and Missions
Hundreds of exhibitions are now held annually in China. Most are sponsored or co-sponsored by government agencies, professional societies, or the China Council for the Promotion of International Trade (CCPIT). Shows are also organized by U.S., Hong Kong and state trade departments, and other professional show organizers. Show participation costs are sometimes high and may only reach a local audience, so companies are advised to scrutinize shows.
Electronic Commerce and the Internet
As growth in Internet usage rises in China, so to does interest in e-commerce activities. Though China remains a developing country, the ambitious use of high technology has made inroads with the growth of governmental and business-to-business forms of e-commerce. Government at all levels seeks to use technology to inform the public about laws, deal with customs and simplify procedures; and businesses are beginning to conduct bidding, process sales and handle contacts on-line. In addition, direct marketing and sales-on-line have begun despite the lack of credit card usage and distribution difficulties. Beijing and Shanghai AICs have begun a licensing process to create a “reasonable and reliable market.” In May 2000, nearly 30 Internet companies were awarded licenses to sell online advertising.
Pricing Issues
Most Chinese consumers are sensitive to price and will usually choose the less expensive product unless they can be swayed by better after-sales service or clearly better product quality. For larger purchases, attractive financing that lowers the effective price is offered by Japanese, European and other foreign governments’ companies, and may make some U.S. products less competitive.
Foreign companies are normally not permitted to directly provide after-sales service and customer support for their products sold into China. FIEs can provide such services for products that they manufacture in-country. Foreign firms sometimes engage authorized Chinese entities to provide service, often on a contractual basis, or to establish service centers jointly that can provide both spare parts and after-sales service. American companies complain that such arrangements give them inadequate control over the quality of customer service and result in the loss of customer confidence. Some companies opt to provide regular servicing from bases outside of China, such as Hong Kong.
Selling to the Government
In 1999, the Chinese State Develop
1 INTRODUCTION & METHODOLOGY 12
1.1 What Does This Report Cover? 12
1.2 How to Strategically Evaluate China 12
1.3 Latent Demand and Accessibility in China 14
2 MACRO-ACCESSIBILITY IN CHINA 15
2.1.1 Government Intervention Risks 15
2.1.2 Infrastructure Investment 15
2.2 Political Risks 16
2.3 Marketing Strategies 16
2.3.1 Distribution Channel Options 16
2.3.2 Establishing a Presence in China 18
2.3.3 Selling Strategies 20
2.3.4 Advertising and Trade Promotion 20
2.3.5 Pricing Issues 21
2.3.6 Selling to the Government 22
2.3.7 Intellectual Property Risks 22
2.3.8 Local Professional Services 27
2.3.9 Performing Due Diligence 28
2.4 Import and Export Regulation Risks 28
2.4.1 Import Tariffs and Customs Regulations 29
2.4.2 Trade Barrier Risks 30
2.4.3 Import Documentation Requirements 33
2.4.4 Controls on Exports 34
2.4.5 Export Controls 35
2.4.6 Inspection Standards 36
2.4.7 Labeling Issues 38
2.4.8 Additional Trade Issues 38
2.4.9 Restrictions on Imports 39
2.4.10 Customs Contact Information 40
2.5 Investment Climate 40
2.5.1 Openness to Foreign Investment 40
2.5.2 Laws Affecting Foreign Enterprise Establishment 43
2.5.3 Other Laws Relating to Investment 45
2.5.4 Conversion and Transfer Policies 47
2.5.5 Expropriation and Compensation 47
2.5.6 Dispute Settlement 47
2.5.7 Performance Requirements and Incentives 49
2.5.8 Right to Private Ownership and Establishment 50
2.5.9 Transparency of the Regulatory System 51
2.5.10 Capital Market Risks 52
2.5.11 Political Violence 53
2.5.12 Corruption 53
2.5.13 Bilateral Investment Agreements 54
2.5.14 OPIC and Other Investment Insurance 54
2.5.15 Labor 54
2.5.16 Free Trade Zone Options 56
2.6 Trade and Project Financing 56
2.6.1 Banking System 56
2.6.2 Foreign Exchange Control Risks 58
2.6.3 Financing Exports 59
2.6.4 Terms of Payment 61
2.6.5 Insurance 62
2.6.6 Financing Projects 62
2.6.7 Commercial Bank Contacts 62
2.7 Travel Risks 67
2.7.1 Planning and Logistics 68
2.7.2 Temporary Entry of Materials and Personal Belongings 69
2.7.3 Country Data 70
2.7.4 Major U.S. Investors in China 71
2.8 Key Contacts 72
2.8.1 State Commissions 72
2.8.2 Chinese Ministries 72
2.8.3 Associations and Corporations 81
2.8.4 American Chamber of Commerce 83
2.8.5 U.S. Embassy Contacts 84
2.8.6 Contacts in Washington D.C. 86
2.8.7 U.S.-Based Multipliers 87
3 ECONOMIC AND PRODUCT MARKETS IN CHINA 88
3.1 Introduction & Methodology 88
3.1.1 Overview & Methodology 88
3.1.2 Market Potential Estimation Methodology 88
3.2 Summary Rankings 94
3.3 Latent Demand Forecasts 99
3.3.1 Advertising Services 99
3.3.2 Aerospace and Defense Equipment 99
3.3.3 Alcoholic Beverages 100
3.3.4 Ales and Stouts 100
3.3.5 Alimentary and Metabolism Pharmaceuticals 101
3.3.6 Amusement and Recreation Services 101
3.3.7 Apparel and Accessories 102
3.3.8 Applications Software 102
3.3.9 Baked Goods 103
3.3.10 Bakery Products 103
3.3.11 Base Chemicals 104
3.3.12 Beauty and Barber Shops 104
3.3.13 Beer 105
3.3.14 Biotechnology 105
3.3.15 Bituminous Coal 106
3.3.16 Bottles of Lager Beer 106
3.3.17 Building Materials and Garden Supplies 107
3.3.18 Cable TV 107
3.3.19 Cafes and Restaurants 108
3.3.20 Candy 108
3.3.21 Car Aftermarket Products 109
3.3.22 Casinos and Gambling 109
3.3.23 Chemicals 110
3.3.24 Chilled and Deli Food 110
3.3.25 Cigarette Manufacturing 111
3.3.26 Civil Aerospace Equipment 111
3.3.27 Colas 112
3.3.28 Commercial Banking 112
3.3.29 Communications Services 113
3.3.30 Computer Hardware 113
3.3.31 Concrete Building Products 114
3.3.32 Construction and Engineering Services 114
3.3.33 Consumer Chemicals 115
3.3.34 Convenience Stores 115
3.3.35 Cosmetics and Toiletries 116
3.3.36 Cotton Yarn 116
3.3.37 Cross/utility Vehicles (CUVs) 117
3.3.38 Crude Petroleum and Natural Gas Extraction 117
3.3.39 Data Processing and Network Services 118
3.3.40 Defense Industry Equipment 118
3.3.41 Deli Food 119
3.3.42 Department Stores 119
3.3.43 Depository Credit Intermediation 120
3.3.44 Desktop Personal Computers 120
3.3.45 Dial-Up Internet Access 121
3.3.46 Dining Out 121
3.3.47 Direct Selling Establishments 122
3.3.48 Discount Superstores 122
3.3.49 Disposable Health Care Equipment and Supplies 123
3.3.50 Distillate Fuel Oil 123
3.3.51 Draught Lager Beer 124
3.3.52 Drug Delivery Systems 124
3.3.53 Durable Goods 125
3.3.54 Eating and Drinking Places 125
3.3.55 Education and Training Services 126
3.3.56 Elementary and Secondary Schools 126
3.3.57 Engineering Services 127
3.3.58 Extended Stay and Business Suite Motels 127
3.3.59 Family Clothing Stores 128
3.3.60 Fast Food 128
3.3.61 Financial Services 129
3.3.62 Fixed-Line Telecommunications Services 129
3.3.63 Forestry and Fishing 130
3.3.64 Fossil Fuel-Powered Electric Power Generation 130
3.3.65 Franchising 131
3.3.66 Fresh Beef and Veal 131
3.3.67 Gambling 132
3.3.68 Gardening Supplies, Outdoor Furniture, and Plants 132
3.3.69 General Merchandise stores 133
3.3.70 Gifts 133
3.3.71 Government Public Health Activities 134
3.3.72 Grocery Discounters 134
3.3.73 Guided Missiles and Space Vehicles 135
3.3.74 Health Care Equipment and Supplies 135
3.3.75 Home Improvement Retailers 136
3.3.76 Hunting, Trapping, and Game Propagation 136
3.3.77 Janitorial Services 137
3.3.78 Jewelry Stores 137
3.3.79 Kitchen Appliances 138
3.3.80 Knitwear 138
3.3.81 Lager Beer 139
3.3.82 Laptop Computers 139
3.3.83 Lawn and Garden Equipment and Supplies Stores 140
3.3.84 Legal Services 140
3.3.85 Leisure Education 141
3.3.86 Life Insurance Sold by Life Insurance Companies 141
3.3.87 Liquefied Petroleum Gas 142
3.3.88 Local and Interurban Passenger Transit 142
3.3.89 Lumber and Wood Products 143
3.3.90 Malt Beverages 143
3.3.91 Management Consulting Services 144
3.3.92 Marine Freight Services 144
3.3.93 Measuring and Controlling Instruments 145
3.3.94 Meat and Poultry 145
3.3.95 Media Advertising 146
3.3.96 Medical Biotechnology 146
3.3.97 Medium and Heavy Trucks 147
3.3.98 Menswear 147
3.3.99 Millwork 148
3.3.100 Motor Vehicles and Motor Vehicle Equipment 148
3.3.101 Music and Video Game Stores 149
3.3.102 National Newspapers 149
3.3.103 New Car Dealers 150
3.3.104 Non-Citrus Fruit 150
3.3.105 Non-Depository Credit Intermediation 151
3.3.106 Non-Durable Goods 151
3.3.107 Non-Farm Housing Services 152
3.3.108 Non-Food Retail Sales 152
3.3.109 Non-Interest Commercial Banking 153
3.3.110 Non-Residential Construction and Engineering 153
3.3.111 Non-Store Retailers and Mail Order 154
3.3.112 Nursery, Garden Center, and Farm Supply Stores 154
3.3.113 Nursing Homes 155
3.3.114 Oil, Gas, and Mining Exploration Services 155
3.3.115 Operations Management Services 156
3.3.116 Optical Goods and Eye Care Products 156
3.3.117 OTC Healthcare Products 157
3.3.118 Outerwear Clothing and Accessories 157
3.3.119 Passenger Transportation 158
3.3.120 Passive Components 158
3.3.121 Periodicals 159
3.3.122 Pharmacies and Drug Stores 159
3.3.123 Physicians Services 160
3.3.124 Poultry Products 160
3.3.125 Primary Metal Industries 161
3.3.126 Private Residential Construction 161
3.3.127 Professional Computer Services 162
3.3.128 Property and Casualty Insurance 162
3.3.129 Public Residential Construction 163
3.3.130 Publishing Advertising 163
3.3.131 Radio and Television Broadcasting 164
3.3.132 Railroad Freight Services 164
3.3.133 Real Jewelry 165
3.3.134 Red Meat 165
3.3.135 Regional Newspapers 166
3.3.136 Residential Construction 166
3.3.137 Residual Fuel Oil 167
3.3.138 Retail Logistics 167
3.3.139 Retirement Savings Plans 168
3.3.140 Sawmills 168
3.3.141 School Food Service 169
3.3.142 Security and Commodity Brokers and Dealers 169
3.3.143 Services 170
3.3.144 Slaughtering Animals Excluding Poultry 170
3.3.145 Sporting Goods Retailers 171
3.3.146 Stationary Bicycles 171
3.3.147 Steel Mill Products 172
3.3.148 Television Broadcasting 172
3.3.149 Temporary Employment Services 173
3.3.150 Textile Fabrics 173
3.3.151 Tobacco Products 174
3.3.152 Toy Stores 174
3.3.153 Traditional Toys 175
3.3.154 Transportation Equipment 175
3.3.155 Unleaded Gasoline 176
3.3.156 Used Car Dealers 176
3.3.157 Utilities 177
3.3.158 Water Utilities 177
3.3.159 Whiskey 178
3.3.160 Wireless Communication Services 178
3.3.161 Definition of Terms 179
4 TRADE INDICATORS: IMPORTS INTO CHINA 195
4.1 Introduction & Methodology 195
4.2 Summary of Imports into China 196
4.3 Import Details 201
4.3.1 Acrylic Polymers in Primary Forms 201
4.3.2 Acyclic Monohydric Alcohols 202
4.3.3 Alumina (Aluminum Oxide) Excluding Artificial Corundum 203
4.3.4 Animal and Vegetable Oils, Fats, and Waxes 204
4.3.5 Animal Feed Made from Meat, Meat Offal, Fish, Crustaceans, Mollusks, or Aquatic Invertebrates 205
4.3.6 Automatic Regulating or Controlling Instruments and Apparatus 206
4.3.7 Ball Bearings 207
4.3.8 Batteries, Electric Accumulators, and Their Parts 208
4.3.9 Cold-Rolled Stainless Steel Flat-Rolled Products 209
4.3.10 Continuous-Action Elevators and Conveyors for Goods or Materials 210
4.3.11 Copper Foil Less Than .15 mm Thick, Copper Powders, and Copper Flakes 211
4.3.12 Copper Ores and Concentrates 212
4.3.13 Copper Plates, Sheets, and Strip over .15 mm Thick 213
4.3.14 Copper Wire 214
4.3.15 Copper, Copper Anodes for Electrolytic Refining, and Unwrought Copper Alloys 215
4.3.16 Cotton Yarn 216
4.3.17 Crude Oils from Petroleum and Bituminous Minerals 217
4.3.18 Cyclic Hydrocarbons 218
4.3.19 Data Processing Input or Output Units 219
4.3.20 Diamonds Excluding Industrial Diamonds 220
4.3.21 Digital Processing Units Which May Contain Storage Units, Input Units, or Output Units 221
4.3.22 Electric Generating Sets 222
4.3.23 Electric Motors with Output Exceeding 37.5 w and AC Generators 223
4.3.24 Electrical Resistors, Rheostats, and Potentiometeres, and Their Parts Excluding Heat Resistors 224
4.3.25 Electronic Integrated Circuits and Microassemblies 225
4.3.26 Epoxide Resins in Primary Forms 226
4.3.27 Ferrous Metal Waste and Scrap Excluding Waste and Scrap of Cast Iron and Alloy Steel 227
4.3.28 Filtering and Purifying Machinery for Liquids or Gases 228
4.3.29 Fixed Line Telephone and Telegraph Equipment 229
4.3.30 Fixed, Variable, or Adjustable Electrical Capacitors and Parts Thereof 230
4.3.31 Food and Live Animals 231
4.3.32 Frozen Fish Excluding Fillets 232
4.3.33 Greasy Wool 233
4.3.34 Halogenated Derivatives of Hydrocarbons 234
4.3.35 Hot-Rolled Stainless Steel Flat-Rolled Product 235
4.3.36 Industrial and Laboratory Furnaces and Ovens and Their Parts 236
4.3.37 Industrial Refrigerators, Freezers, and Other Refrigeration and Freezing Equipment and Parts 237
4.3.38 Inedible Crude Materials Excluding Fuels 238
4.3.39 Iron and Steel Seamless Tubes, Pipes, and Hollow Profiles 239
4.3.40 Iron or Non-Alloy Steel Semi-Finished Products Containing Less Than .25% Carbon by Weight 240
4.3.41 Iron or Steel Screws, Bolts, Nuts, Screw Hooks, Rivets, Washers, and Similar Articles 241
4.3.42 Iron Ore Agglomerates 242
4.3.43 Knitted or Crocheted Fabrics 243
4.3.44 Lactams and Heterocyclic Compounds with Oxygen Hetero-Atom(s) Only 244
4.3.45 Liquefied Butane 245
4.3.46 Liquefied Propane 246
4.3.47 Machinery and Transport Equipment 247
4.3.48 Manufactured Goods 248
4.3.49 Metal Surface Finishing Tools Excluding Gear Cutting Machines 249
4.3.50 Metal-Rolling Mills Including Its Rolls and Other Parts 250
4.3.51 Mineral Fuels, Lubricants, and Related Materials 251
4.3.52 Natural Rubber in Primary Forms, Plates, Sheets, or Strips Excluding Latex 252
4.3.53 Offset Printing Machinery 253
4.3.54 Palm Oil and Its Fractions 253
4.3.55 Parts and Accessories for Office Machines and Automatic Data Processing Machines 254
4.3.56 Parts and Accessories for Telecommunication and Sound Recording or Reproducing Equipment 255
4.3.57 Phenols and Phenol-Alcohols, and Their Halogenated, Sulfonated, Nitrated or Nitrosated Derivatives 256
4.3.58 Plated or Zinc-Coated Iron and Non-Alloy Steel Flat-Rolled Products 257
4.3.59 Polyacetals and Other Polyethers in Primary Forms 258
4.3.60 Polyamides in Primary Forms 259
4.3.61 Polycarbonates, Alkyd Resins, and Other Polyesters in Primary Forms 260
4.3.62 Polyethylene in Primary Forms 261
4.3.63 Polymers of Propylene or Other Olefins in Primary Forms 262
4.3.64 Polystyrene in Primary Forms 263
4.3.65 Polyvinyl Chloride in Primary Forms 264
4.3.66 Potassic Mineral and Chemical Fertilizers Excluding Crude Natural Potassium Salts 265
4.3.67 Printed Circuits 266
4.3.68 Raw Bovine and Equine Hides 267
4.3.69 Sawn, Chipped, Sliced, or Peeled Non-Coniferous Wood over 6 Millimeters Thick 268
4.3.70 Self-Propelled Mechanical Shovels, Excavators, and Shovel-Loaders 269
4.3.71 Semi-Bleached or Bleached Chemical Wood Pulp, Soda, or Sulfate Excluding That of Dissolving Grades 270
4.3.72 Silicon-Electrical Steel Flat-Rolled Products 271
4.3.73 Soybean Oil and Its Fractions 272
4.3.74 Soybeans 272
4.3.75 Special Transactions and Commodities Not Classified by Kind 273
4.3.76 Styrene in Primary Forms Excluding Polystyrene 274
4.3.77 Sulfur Excluding Sublimed, Precipitated, and Colloidal Sulfur 275
4.3.78 Synthetic Rubber and Factice from Oils Including Natural Rubber Mixtures 276
4.3.79 Television Picture Tubes and Cathode-Ray Tubes 277
4.3.80 Unagglomerated Iron Ore and Concentrates 278
4.3.81 Uncarded, Uncombed Cotton Excluding Linters 279
4.3.82 Unmilled Durum Wheat 280
4.3.83 Unprocessed Synthetic Staple Fibers 281
4.3.84 Untreated, Rough or Roughly Squared Coniferous Wood 282
4.3.85 Untreated, Rough or Roughly Squared Non-Coniferous Wood 283
4.3.86 Unwrought Aluminum and Aluminum Alloys 284
4.3.87 Unwrought Nickel and Nickel Alloys 285
4.3.88 Waste and Scrap of Paper or Paperboard 286
4.3.89 Worked Aluminum and Aluminum Alloys 287
4.3.90 Woven Fabrics Made of Synthetic Filament Yarn 288
5 TRADE INDICATORS: EXPORTS FROM CHINA 289
5.1 Introduction & Methodology 289
5.2 Summary of Exports from China 290
5.3 Export Details 295
5.3.1 Apparel and Clothing Accessories Made of Plastics or Vulcanized Rubber Excluding Hard Rubber 295
5.3.2 Artificial Flowers, Foliage, Fruit, and Their Parts and Articles 296
5.3.3 Babies Garments and Clothing Accessories of Textile Fabrics 297
5.3.4 Batteries, Electric Accumulators, and Their Parts 298
5.3.5 Battery-Powered Wristwatches with Cases Made of Neither Precious Metal Nor Clad with Precious Metal 299
5.3.6 Bed, Table, Toilet, and Kitchen Linens 300
5.3.7 Beverages and Tobacco 301
5.3.8 Bicycles and Other Motorless Cycles 302
5.3.9 Blankets and Traveling Rugs 303
5.3.10 Brassieres, Girdles, Corsets, Braces, Suspenders, Garters, and Similar Articles 304
5.3.11 Builders Plastic Wares 305
5.3.12 Candles, Matches, Pyrophoric Alloys, Articles of Combustible Materials, and Smokers Requisites 306
5.3.13 Ceramic Statuettes and Other Ornamental Ceramic Articles 307
5.3.14 Ceramic Tableware, Kitchenware and Other Ceramic Household or Toilet Articles 308
5.3.15 Childrens Toys and Indoor Games 309
5.3.16 Clocks 310
5.3.17 Color Television Receivers, Video Monitors, and Projectors 311
5.3.18 Cotton Yarn 312
5.3.19 Crude Oils from Petroleum and Bituminous Minerals 313
5.3.20 Data Processing Input or Output Units 314
5.3.21 Diamonds Excluding Industrial Diamonds 315
5.3.22 Digital Processing Units Which May Contain Storage Units, Input Units, or Output Units 316
5.3.23 Electric Motors with Output Exceeding 37.5 w and AC Generators 317
5.3.24 Electric Motors with Output Not Exceeding 37.5 w 318
5.3.25 Electrical Transformers 319
5.3.26 Electromechanical Hand Tools with Self-Contained Electric Motors and Parts Thereof 320
5.3.27 Electronic Integrated Circuits and Microassemblies 321
5.3.28 Fans and Cooker Hoods with Fans 322
5.3.29 Fixed Line Telephone and Telegraph Equipment 323
5.3.30 Fixed, Variable, or Adjustable Electrical Capacitors and Parts Thereof 324
5.3.31 Food and Live Animals 325
5.3.32 Frozen Fish Fillets 326
5.3.33 Glassware for Table, Kitchen, Toilet, Office, and Indoor Decoration 327
5.3.34 Household Refrigerators and Food Freezers 328
5.3.35 Imitation Jewelry 329
5.3.36 In-Car Radio Broadcast Receivers 330
5.3.37 Industrial Refrigerators, Freezers, and Other Refrigeration and Freezing Equipment and Parts 331
5.3.38 Inedible Crude Materials Excluding Fuels 332
5.3.39 Iron and Steel Seamless Tubes, Pipes, and Hollow Profiles 333
5.3.40 Iron and Steel Tube and Pipe Fittings 334
5.3.41 Iron or Non-Alloy Steel Semi-Finished Products Containing Less Than .25% Carbon by Weight 335
5.3.42 Iron or Steel Screws, Bolts, Nuts, Screw Hooks, Rivets, Washers, and Similar Articles 336
5.3.43 Iron or Steel Structures and Parts of Structures 337
5.3.44 Iron, Steel, or Copper Non-Electric Domestic Cooking or Heating Equipment and Parts 338
5.3.45 Knitted or Crocheted Fabrics 339
5.3.46 Knitted or Crocheted Jerseys, Pullovers, Cardigans, Waistcoats, and Similar Articles 340
5.3.47 Knitted or Crocheted Panty Hose, Tights, Stocking, Socks, and Hosiery 341
5.3.48 Leather Apparel and Clothing Accessories 342
5.3.49 Machinery and Transport Equipment 343
5.3.50 Manufactured Goods 344
5.3.51 Manufactures of Wood for Domestic or Decorative Use Excluding Furniture 345
5.3.52 Mens and Boys Shirts of Knitted or Crocheted Textile Fabrics 346
5.3.53 Mens and Boys Shirts of Woven Textile Materials 347
5.3.54 Mens and Boys Suit Jackets and Blazers of Woven Textile Materials 348
5.3.55 Mens and Boys Suits of Woven Textile Fabrics 349
5.3.56 Mens and Boys Trousers, Bib and Brace Overalls, Breeches, and Shorts of Woven Textile Materials 350
5.3.57 Mineral Fuels, Lubricants, and Related Materials 351
5.3.58 Motorcycles, Mopeds, and Cycles with Auxiliary Motors and Their Sidecars 352
5.3.59 New Pneumatic Rubber Tires for Buses and Trucks 353
5.3.60 Paper and Paperboard Boxes, Bags, and Cartons, Cases, and Packing Containers 354
5.3.61 Parts and Accessories for Office Machines and Automatic Data Processing Machines 355
5.3.62 Parts and Accessories for Telecommunication and Sound Recording or Reproducing Equipment 356
5.3.63 Parts and Accessories of Photocopying and Thermocopying Equipment 357
5.3.64 Parts or Footwear, Removable In-Soles, Heel Cushions, Gaiters, Leggings, and Similar Articles 358
5.3.65 Pens, Pencils, and Fountain Pens 359
5.3.66 Plastic Floor, Wall, or Ceiling Coverings and Plastic Household and Toilet Articles 360
5.3.67 Plastic Stoppers, Lids, Caps, Closures, and Articles for the Conveyance or Packing of Goods 361
5.3.68 Plywood with Each Ply Not Over 6 mm Thick 362
5.3.69 Portable Radio Broadcast Receivers 363
5.3.70 Printed Books, Pamphlets, Maps, and Globes Excluding Advertising Material 364
5.3.71 Printed Circuits 365
5.3.72 Retort Carbon and Coke or Semi-Coke of Coal, Lignite, and Peat 366
5.3.73 Sound and Video Recording or Reproducing Apparatus 367
5.3.74 Special Transactions and Commodities Not Classified by Kind 368
5.3.75 Spectacles and Spectacle Frames 369
5.3.76 Spoons, Forks, Ladles, Skimmers, Cake-Servers, and Non-Cutting Fish Knives and Butter Knives 370
5.3.77 Sporting Goods 371
5.3.78 Sports Footwear 372
5.3.79 Swimwear of Textile Fabrics 373
5.3.80 Synthetic Organic Coloring Matter and Its Preparations 374
5.3.81 Textile Tarpaulins, Awnings, Sunblinds, Tents, Boat Sails, and Camping Goods 375
5.3.82 Thermocopying Equipment or Photocopying Equipment with Optical and Contact-Type Systems 376
5.3.83 Trunks, Suitcases, Vanity Cases, Executive Cases, Briefcases, and School Satchels 377
5.3.84 Umbrellas, Parasols, Walking-Sticks, and Similar Articles, and Their Parts 378
5.3.85 Unagglomerated Coal Excluding Anthracite 379
5.3.86 Unwrought Aluminum and Aluminum Alloys 380
5.3.87 Wheelchairs and Their Parts 381
5.3.88 Womens and Girls Jackets and Blazers 382
5.3.89 Womens and Girls Blouses, Shirts, and Shirt-Blouses of Knitted or Crocheted Textile Fabrics 383
5.3.90 Womens and Girls Dresses of Woven Textile Fabrics 384
5.3.91 Womens and Girls Skirts and Divided Skirts of Woven Textile Fabrics 385
5.3.92 Womens and Girls Trousers, Bib and Brace Overalls, Breeches, and Shorts of Woven Textile Fabrics 386
5.3.93 Woven Fabrics Made of Synthetic Filament Yarn 387
6 DISCLAIMERS, WARRANTEES, AND USER AGREEMENT PROVISIONS 388
6.1 Disclaimers & Safe Harbor 388
6.2 ICON Group International, Inc. User Agreement Provisions 389
Customers who bought this item also bought
All rights reserved. © Copyright 2013 Research and Markets WWW5
Terms and Conditions Privacy Policy Publishers Employment Opportunities Site Map Link to us Webmaster Affiliate Network
