Doing Business With China: Avoiding the Pitfalls

Doing Business With China: Avoiding the Pitfalls

Stewart Hamilton, Jinxuan (Ann) Zhang

Language: English

Pages: 205


Format: PDF / Kindle (mobi) / ePub

The better and faster learner wins. That is the clear conclusion that the authors reach in this detailed analysis of why many Western companies fail in their attempts to succeed in China, one of the fastest growing markets in the world and why many Chinese companies encounter difficulties in their overseas ventures.

Fundamental errors are made; lessons from the experience of others ignored and the lack of adequate advance planning are just some of the pitfalls to be avoided. This book is intended to help Western companies and executives avoid the common mistakes and to assist their understanding of what is required to make a success of venturing into China, and vice versa, Chinese companies and executives coming onto the world stage.

Facts speak for themselves. The book draws on extensive interviews with both Chinese and Western executives and regulators and presents a series of detailed cases to illustrate what went wrong and why. The authors suggest what needs to be done to ensure success, particularly in terms of having learning and building corporate capabilities as the ultimate objectives for any proposed investment/venture.

Understanding the Chinese approach to business and being conscious of rules of the road are just two of the key elements.

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first cross-provincial investment by acquiring three insolvent local companies* and setting up a subsidiary in Fulin, Chongqing municipality, about 1,500 miles (2,000kms) away from Hangzhou. This enabled Wahaha to reduce its distribution costs by having a manufacturing base in inland China. Wahaha Fulin Company became an important contributor to the local economy and one of the “15 leading corporations” of Chongqing.4 Subsequently, Wahaha further expanded across the country and set up about 20

A was over-subscribed (i.e. creditors representing more than US$100 million of debt chose Option A), creditors would participate in Option A on a pro-rata basis to the value of their debts with any claims in excess of US$100 million being transferred to Option B. Conversely if Option A was not fully subscribed (that is creditors representing less than US$100 million of debt choose Option A), there would be a corresponding increase in the value of creditors’ debts participating in Option B and any

the fact that relevant Chinese regulatory authorities approved oil derivative trading as part of CAO’s businesses was a major factor leading to the debacle. Second, under the terms and conditions of the Approved Oil Trader (later GTP) status, CAO was obliged to meet certain minimum requirements as set by the Singaporean government to maintain its GTP status and to enjoy tax advantages. Such requirements, as well as the endorsement from CAO’s parent company and its board, were major factors in

currency risks or risks associated with derivatives trades. Not to mention that few had anticipated the global credit crunch that had brought down many more sophisticated players in the world of derivatives. According to a veteran Hong Kong banker, Financial officers at new, fast growing Asian companies often don’t want to spend the cash on buying unlimited downside protection, which can often be done by buying a “put” option. What is common… is a straight-up form of speculation, whereby a

http://www.china. (accessed August 30, 2011). 3. (accessed August 31, 2011). 4. Dune Lawrence and Nikolaj Gammeltoft. “Short Seller Block Takes On Paulson, Greenberg in China.” Bloomberg, June 6, 2011, http://www. (accessed August 31, 2011). 5. Cherniak, Cyndee Todgham (2010) “Lesson Learned From

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