This session will go through the characteristics of an entrepreneur, the early stages of entrepreneurship and show what services different government institutions offer. This session will be held in Chinese.

Organised byHomelike Oulu project together with BID Consulting Group
Speaker Consultant: Dan Wang

Topics:
– What is entrepreneurship?
– Requirements of entrepreneurship
– Characteristics of entrepreneurships
– Idea to business
– Financing your company
– Start-up grants
– Entrepreneur training
– Where to find help to set up

Location:
University of Oulu, Linnanmaa, lecture room TA101
Linnanmaa_TA 101 on Map of Uni.

13：00——17：00
07.12.2011

Registration:
Register by 01.12.2011 to Heini Rosqvist
E-mail: heini.rosqvist@ouka.fi

This session will go through the characteristics of an entrepreneur, the early stages of entrepreneurship and show what services different government institutions offer. This session will be held in Chinese.

Organised by Business Oulu, Homelike Oulu project together with BID Consulting Group, consultant Dan Wang.

Topics:
– What is entrepreneurship?
– Requirements of entrepreneurship
– Characteristics of entrepreneurships
– Idea to business
– Financing your company
– Start-up grants
– Entrepreneur training
– Where to find help to set up

Location:
Business Oulu
Elektroniikkatie 3

12：00——16：00
30.9.2011

Registration:
Register by 27.09.2011 to Henry Koivukangas
henry.koivukangas@businessoulu.com

Equity joint venture

An equity joint venture is a partnership between an overseas and a Chinese individual, company/enterprise or financial organizations approved by the China government. Companies in an equity joint venture share both mutual rewards and risks. This is one of the most preferred manners for cooperation where the Chinese government and Chinese businesses are concerned.
However, overseas parties are only allowed to invest at least 25% of the entire registered capital in the form of cash or trade property rights etc. The parties to the joint venture shall share the rewards, risks and losses according to the ratio of investment.
Cooperation among the partners is imperative for a noteworthy joint venture. However, cooperation does not mean the need to always use the same strategies. Each equity joint venture partner plays supplementary and complementary roles with the other thus different strategies are frequently adopted by each partner. The Chinese partners’ strategies must be in compliance with the State economic development programmers.

Contractual joint venture

As the name goes, this type of joint venture is rather similar to a equity joint venture but in a contractual form. Before the joint venture, all liabilities, rights and responsibilities are agreed upon a contract thus the parties involve will negotiate the form of administration and profit division. Contractual is different from equity joint venture because profit sharing is not based on ratio of investment but according to form of investment as per contract.
The major difference between an equity joint venture and a contractual joint venture as means in China market entry is that the latter neither necessarily calculates the shares in the form of currency nor distributes profit in proportion to their share, but share profit according to the form of investment and the ration of profit sharing as per the contract.
Joint venture is the most common method in China market entry, there are many advantages of joint venture:
• it provides great flexibility to arrange business relationship in a way that benefits both parties. This applies to the management of the joint venture and its financing
• comparing joint venture with wholly foreign-owned enterprise, joint venture investing reduces capital expenditure as well as manpower. With joint venture, its easier to obtain the capital, the technology as well as local society and government support
• joint ventures allow the firms to enjoy a higher degree of marketing control which would shorten the time taken to obtain local market information
• a foreign investor does not need to set up a new corporation in China under joint venture structures. The foreign investor and Chinese partner participate in the joint venture by doing business using the Chinese business license under a co-operative and contractual arrangement. This would allow each partner to focus on their own specialty
However, there are also some disadvantages of joint venture as means in China market entry:
• comparing with license and contract manufacturing in China, joint venture requires the foreign enterprise to pump in more funds which results in higher risks
• due to culture differences and profit sharing issues, valuable time would have been wasted after settling an agreement. Therefore, correct communication techniques are important
• undesirable income tax and liability implications if joint venture is construed as a partnership
• parties involved do not have the autonomy of a sole proprietorship in the decision making process

Wholly foreign-owned enterprise

Wholly foreign-owned enterprises refer to enterprises established in China by foreign investors, exclusively with their own capital, according to Wholly Foreign Owned Enterprise Law of the People Republic of China (PRC). It does not include branches set up in China by foreign enterprises and other foreign economic organizations. Therefore, the formation of a wholly foreign-owned enterprise must be with capital coming only from outside China and without any co-investment by Chinese entities.
The advantages of establishing a wholly foreign-owned enterprise as means in China market entry include:
• autonomy and independence to carry out worldwide strategies of its parent company without having to consult their Chinese partners
• full control over management and production quality and profit distribution provided that the legal limitations are fulfilled
• able to issue invoices to customers in Chinese currency, RenMinBi (RMB), receiving revenues in RMB, and converting RMB profits into US dollars for remittance to their parent company overseas
• safeguard their technical intelligence and the chemistry of their equipment
• increase its operations and management efficiency and advance further in development
The disadvantages of establishing a wholly foreign-owned enterprise as means to do business in China include:
• lack of Chinese partner and local contacts. A Chinese party may have the necessary relationship (“Guan Xi”) to secure authorization of certain projects or the expertise to handle strict bureaucracy. The Chinese party may further obtain land-use rights for a particular site or may have particular know-how, technology, assets or resources which would not otherwise be available
• spending more time and effort to hire trained professionals and to create a sales network
• unable to obtain cheaper alternatives of land acquisition (for joint ventures)
• huge investment involved will result in higher risks. At the same time, it is also tougher to obtain the production resources and obtain Chinese government support

Assembling in China

In this way, the manufacturers may produce some or most of the spare parts in their native country and then transport them to China to be assembled. They can then sell the end products in China market or export them to the overseas market.
This will have some benefits. Firstly the amount of investment can be reduced, the customs duty is low and the labor force in china is inexpensive, coupled with China huge domestic market and incentives from the Chinese government, these make it worthwhile.

Contract manufacturing

Contract manufacturing is always referred to as OEM. In this method, what the manufacturers will do is that they can sub-contract the manufacturing of their products to local Chinese manufactures and once the products are produced in accordance to the manufacturers’ requirements, the foreign manufacturers will be in charge of the sales of their own products.
The advantages of contact manufacturing are that the foreign manufacturers’ superiority may lie in their technology, craft and marketing, but not in manufacturing. Hence by sub-contracting to local Chinese manufacturer, they can reduce capital investments and investment risks. As the foreign manufacturers still have the rights to sell the products, they are able to control their market. By manufacturing their products in China, it is beneficial to the relationship with China government as well.
However this method has its own limitations. Firstly, it might be difficult to find a suitable local manufacturer and if they do, they will have to share their profits with them. Once the contract with the local manufacturer ends, the local manufacturer might become a key competitor then. If this happens, you may lose control of the technical “know-how” in China.

Trade permit

Through trade permit, foreign companies will sign an agreement with Chinese local companies such that the Chinese companies are given certain rights to the patents, the trademarks, service marks, technologies etc. The Chinese companies will produce or sell the products under certain conditions while paying the foreign companies some royalties. Franchise is one of the most common methods of trade permit.
By entering the Chinese market through trade permits, the foreign companies will be able to break into the Chinese market with minimum capital and at the shortest time possible. The foreign companies are also free from having to pay any taxes and transportation costs. The risk will be smaller and the foreign companies can also avoid having their license confiscated. At the same time, after the product is sold in the local market, should there be any amendments to the products; the foreign companies need not pay the expenses.
Since the local companies are given so many responsibilities, this would mean that the foreign firm will have little control over the product’s quality and how the product is being projected and marketed. Moreover, if the agreement with the local companies has ended, the Chinese companies might become a potential competitor as they will be familiar with the operation of the foreign enterprise.　

For a successful partnership, both parties need to go the extra mile to learn more about each other culturally and their business styles.

The Chinese are not difficult to work with. As long as we are familiar with the way they work and their style of negotiation, overseas companies can collaborate with local organizations and expand their enterprise into the China market. Since the China market consists of mainly local organizations, overseas companies would need to have contacts among the locals to enter into the China market.
We have collated a few suggestions on how overseas companies can work effectively with the locals in China.

1. Chinese Business Culture

Many foreign investors find it very frustrating to work with the Chinese because firstly they do not understand the Chinese language and culture, and secondly they feel that the Chinese have a different sense of business style. Language barriers cause conflicts and miscommunications among the parties. Thus, for foreign investors to successfully enter into China market, they would need to be able to communicate and negotiate with the locals.

The people in China have a strong national and culture pride thus it is of no surprise that the Chinese tend to carry out their business according to their beliefs and values. For example, the Chinese places a high importance on respect in society. Hence, at the workplace, the Chinese have a high respect for their superiors and their co-workers. Thus, foreign investors would need to recognize that that they need to be respectful when talking to the Chinese during business meetings. If the Chinese feel that the foreigners are unknowingly disrespectful, the foreign company may not be able to strike a deal with the locals.

Furthermore, the foreign companies need to understand how the Chinese carry out their business here. As China is only an emerging market, not many companies understand the Chinese business culture. In China, the locals are very concerned about building up good relationships with their partners and clients. Therefore, the Chinese will put in a lot of effort and time to socialize with their clients before settling on a deal. Even though the business deal might not be successful, the Chinese would still want to keep that relationship strong for future benefits.

2. “Guanxi”

Maintaining good relationships in China would help foreign companies in the China market.

The Chinese feel that one needs to be constantly networking in China. In China, establishing relationships with others is referred to as having “Guanxi” with people. Guanxi (relationship) is an important element in achieving successful business in China. With a good relationship with others, a company would benefit in many different ways. First, a trust between the different parties would have long been established thus the parties would be very comfortable working
with each other. Next, if a company would to encounter any problems in any field, knowing someone who is an expert in that field would help explain matters and may even help to resolve any problems.

3. Establish close relations with government officials

Because the China government plays an important role in influencing market movement and administering foreign investments, a strong government relationship remains an important factor to do business successfully in China. Fewer hiccups may be met during paperwork applications or achieving local authorization if a strong relationship with government officials is in place.

4. Local competition

Foreign investors also need to find out what their local competitions are. However, one must not overlook small local companies in the China market as the Chinese have a very strong national pride thus they tend to be more supportive towards their local rather than foreign products. Hence, foreign companies would really need to do a detailed market and consumer research if they want to not only enter the China market but also market their products to the local market.

Population – ~1.3 billion*

Official Language – 7 main Chinese languages including standard Chinese or Mandarin, Cantonese.

Currency – Yuan (CNY) also referred to as the Renminbi (RMB)

Capital city – Beijing

GDP – RMB 39.79 trillion in 2010

GDP Per Capita – RMB 29,748 in 2010*

Overview

The most populous country in the world, The People’s Republic of China is today emerging as one of the major global economies. China is infamously known as a country of etiquette and ceremonies. The unique character of the Chinese is built on a strong sense of pride in their ancient history and culture. Understanding the basic Chinese cultural, ethical and business values is paramount to any organisation wanting to conduct business in today’s rapidly progressing China.

Chinese culture – Key concepts and values

Guanxi – In literal terms, this central concept in Chinese culture means ‘relationships’ or ‘connections’. Guanxi is a network of elaborate relationships promoting trust and co-operation and for centuries was the main way of accomplishing everyday tasks. Establishing a sincere, supportive relationship based on mutual respect is a fundamental aspect of Chinese culture. In the world of business, possessing the right guanxi is crucial for ensuring the minimization of difficulties and frustrations that are often encountered.

Mianzi – An important issue that should be considered throughout business interactions with the Chinese is the concept of ‘mianzi’ or ‘face’. Face is a mark of personal pride and forms the basis of an individual’s reputation and social status. In Chinese business culture ‘saving face’, ‘losing face’ and ‘giving face’ are vital for successful business. Causing someone to lose face through public humiliation or inappropriate allocation of respect to individuals within the organization can seriously damage business discussions. On the other hand, praising someone in moderation before their colleagues is a form of ‘giving face’ and can earn respect, loyalty and aid negotiations.

Keqi – The notion of keqi is based on the amalgamation of two Chinese words, ‘ke’ meaning ‘guest’ and ‘qi’ signifying ‘behaviour’. Together, this cultural concept advocates thoughtful, courteous and refined behaviour. In business terms, it is important to demonstrate humility and modesty as exaggerated claims of ability are viewed with suspicion and are likely to be looked into.

Confucianism – The recognised ethical belief system of Confucianism is based on the teachings and writings of the 6th century BCE philosopher Confucius. Emphasis is placed on the concept of relationships and the elements of responsibility and obligation. This Chinese philosophy remains a vital cultural factor in the development of Chinese society and is still effective in Chinese business culture today in the preservation of surface harmony and collective good.

From ChinaDaily