Dos and Donts

1

• Dos and Donts
• of Doing Business in China
• Dr. Xinyu Song
• xing.com, xue24.com

2
Two personal stories one observation

• China Roadshow for Deutsche Bank
• Survey on European Investment in China of
  Roland Berger
• Merrill lynch Is China Profitable?

3
Is China profitable?
4
Wrong discussion about numbers

• 9.6 average growth rate p.a. 1979-2004
• 988 bill.US foreign currency reserve at 9/ 2006
• 1760 bill.US (24!) foreign trade (969 bill.
  Export, 791 bill. Import) in 2006
• 70 bill. US foreign investment in 2006
• 29 contribution to growth in the world in 2005
  according to World Bank

5
Wrong discussion about numbers

• 1/3 of world textile / shoe production
• 20 of world electronic electric appliances
• Largest fixed line (368 mill. users) and mobile
  network (461 mill. users) in the world
• Internet users 137 mill. at end of 2006 (23),
  only 10.5 penetration

6
The right question What are the drivers?

• The Chinese Market
• The Chinese Model
• The Chinese Ambition
• The Chinese Cost Advantage
• The Chinese Resources

7
A Chinese Vision

• China will reach world average
• Weight in world economy from 5 to 20
• No. 2 after USA
• Strategic Market

8
Risks!

• Increasing social economic discrepancy
• Demographic time-bomb
• Bad loan of banking system
• Political transition
• Losing drivers

9
Why foreigner are loosing?

• - Sina beated yahoo
• - Baidu beated google
• - Dangdang beated amazon/joyo
• - Taobao beated eBay

10
A quotation

• At first, they dont know that we exist. Then
  they think its not necessary to look at us. Then
  they looked at us but dont understand us. At the
  end they understand us but cant catch up with
  us.
• - Jack Ma, CEO of Alibaba on his foreign
  competitor

11
Success factors

• Localization, localization, localization
• Speed, speed, speed
• Right people is essential

12
Foreigner dont need to loose
13
Donts and dos in China

• Dont underestimate the power of steady growth,
  be on the right ship
• Dont expect to earn fast money, be patient
• Dont work with the wrong partner/people, select
  carefully with whom you cooperate
• Dont mistrust people you work with, trust them
• Dont believe press, believe your own eyes and
  judgment

14

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