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BUSINESS TRAVELER

Country Profile: China

Aired December 12, 2004 - 08:30:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


RICHARD QUEST, CNN ANCHOR: It's a traditional commercial center experiencing growth and expansion in the very heart of Asia. It's Shanghai; on this month's CNN BUSINESS TRAVELER, China, a country focus.
Hello and welcome to CNN BUSINESS TRAVELER. I'm Richard Quest, this month reporting from Shanghai, China's city that's fueling the economic growth.

In fact, of the country's top industries, most of them are based right here. It's no wonder that international business and global investors are coming here in droves.

Now, an early piece of advice: if you're coming to Shanghai, bring plenty of these, your business cards, you'll be handing them out by the dozen.

Hello. Have a business card. Thank you. Would you like one? Do have a card.

(BEGIN VIDEO CLIP)

(voice-over): So on this program, join us on our Shanghai business trip as we unravel the mysteries and common misconceptions about business in China, how to get through the red tape, plus target your market. Find out if China is the right place for your money. Which sectors should you focus on and why. And understanding the business culture; why learning the right etiquette is essential to your success in China.

(END VIDEO CLIP)

Gold and prosperity. That's what (UNINTELLIGIBLE) means. And that's what this is all about. The (UNINTELLIGIBLE) Tower.

It is a symbol of the city and the country's emergence as an economic powerhouse. China, after all, is growing by some 9 percent per annum.

The problem is, with such (UNINTELLIGIBLE) economic growth, the international investor can't often decide which is the best sector, where should you put your money.

(BEGIN VIDEOTAPE)

(voice-over): Pomp and ceremony start the celebrations at the beginning of a new operation in China.

SIG (UNINTELLIGIBLE) Swiss packaging company has opened its newest plant, just outside Shanghai. This is a wholly owned foreign company. Like many other businesses in China today, SIG decided not to go the joint venture route.

It's taken a year of careful preparation.

UNIDENTIFIED MALE: We entered the markets first with (UNINTELLIGIBLE) Bangkok office, afterwards with representative offices, and once we felt sure we had established customer relationships to actually sustain a plant, then we took the decision to move in.

QUEST: The reasons for any company to come to China are obvious. It's how you operate once you get here where the challenge lies.

Business in China is shrouded in mystery and sometimes misconceptions. Perhaps the most common concern, red tape.

So we setout on a quest in Shanghai to find out if it was true.

Steve Schneider (ph) has been working in the country for the past five years.

STEVE SCHNEIDER (ph), GENERAL ELECTRIC: It's about jet engines. It's about the power market. It's about the healthcare market.

QUEST: He now heads General Electric's China operation, a sizeable division. GE has setup operations here for all eight of its businesses with a total of investment of more than $1.5 billion.

It's a multinational with a major presence in China.

(on camera): Coming from outside, we think it must be the government telling you what to do and where to invest, we think it must be censorship. We think it must be lack of transparency and bankruptcy laws and joint venture agreements, and you're telling me I'm talking a lot of old cobblers.

UNIDENTIFIED MALE: I don't view the government as a hindrance at all. It's about how do you drive growth, how do you utilize technology to take care of your customers, how do you train people. Today, in the last three to six months, we've added, you know, 5,000 people.

QUEST: Do you feel you can have an out and out argument and disagreement with the government?

UNIDENTIFIED MALE: Absolutely. And I have. I think we have a pretty good voice. When I say we, I mean multinationals have a pretty good voice into various levels of the government to actually talk to them.

QUEST (voice-over): Many businesses try to make it here on their own, so we head to a cocktail party in Shanghai given by the American Chamber of Commerce.

It's here that I'm meeting Lorian Von Openheim (ph), a record company executive who is proof it's not that easy.

UNIDENTIFIED MALE: It's been pretty difficult. It took us over nine months to get our business license, and (UNINTELLIGIBLE) coming out, going to different ministries, to finally get our license. I've seen kind of the bureaucratic end, which has slowed down our business a lot.

QUEST (on camera): Did you ever think about just giving up, it had just become too difficult?

UNIDENTIFIED MALE: Yes. It's been a lot more of a problem than I thought when I first came here. I think I was partly kind of dazzled by what I was reading in the press, in my city job in London, in front of my computer, thinking can I be off to China.

QUEST: So you are an example of the sort of person that these other people have been telling me about, do your due diligence, do your homework, do your research, and don't just get on a plane.

UNIDENTIFIED MALE: Yes. It's important to do that.

QUEST (voice-over): Researching the market beforehand is necessary in any country you do business. In China, it's essential.

UNIDENTIFIED MALE: There is a tendency to think of China as a single market because that's how people talk about it, but actually, of course, it's a vast place. It's 33 different provinces. Many of them have populations greater than many European countries. Companies should identify which part of China they want to enter first. The market is competitive and they need to be sure that they're choosing a part of the country or a city or a province where their product or service is going to have particular success.

QUEST: Richard Chang is a Chinese businessman who also understands the importance of researching the local market. He's the founder and chief executive of SMIC, the world's fourth largest semiconductor maker.

(on camera): What would be your biggest piece of advice?

RICHARD CHANG, BUSINESSMAN: OK. Number one, they have to have very clear vision. They know do they have a really big and long-term market here of their product or their services.

Number two, they have to be very patient. They have the skill. Not only the business skill, but also the human skill. Dealing with the Chinese is different from dealing with the Americans.

QUEST: Everyone focuses on the potential.

CHANG: Yes.

QUEST: But the risks, aren't they also quite large in coming to China?

CHANG: Definitely. No pain, no gain. No risk, also no profit. Or low risk ends always with low profit.

QUEST (voice-over): Regardless of the potential gain and profit, there was one risk that each of the business people we met warned against.

UNIDENTIFIED MALE: The protection of intellectual property rights is very important to every company in the world.

QUEST: Protection of intellectual property is an issue we heard again and again so it's an issue we took up with a top government official.

(on camera): Does China have to do more on issues like intellectual property, protection of copyright?

UNIDENTIFIED MALE (through translator): Central government is very concerned about the IPR and copyright protections, and also we have blue paper for the IPR protections.

QUEST (voice-over): The government may be taking steps to protect your company, but it's still in its early stages, so you may have to take matters into your own hands.

UNIDENTIFIED MALE: The way we protect it is the same exact way that we protect it everywhere else in the world. We use patent law. We write good patents. We file them here in China. We file them in the rest of the world. We are very careful to understand the processes associated with if you have an issue, how do you look at resolving that issue.

QUEST: There is no doubt, China is a country with extraordinary business opportunity.

UNIDENTIFIED MALE: This is really China's century, so anyone who is not learning about China, not getting their feet on the ground here, is really missing out.

QUEST: And despite assurances from the government that anyone with the right business plan is welcome.

UNIDENTIFIED MALE (through translator): If their business is right in the market and their products are very competitive, we encourage them to come to China.

QUEST: . to succeed you must do your homework. Study this market carefully if you want to be part of this modern day gold rush.

(END VIDEOTAPE)

And coming up after the break, what lies behind Shanghai's modern fa‡ade. The traditional business practices that have survived in today's China.

(COMMERCIAL BREAK)

QUEST: Your business in China probably doesn't end in the boardroom, because if you haven't managed to clench the deal there, you're on to a 10 course Chinese banquet, and don't forget the cards. You'll need lots of them. And then, hopefully, you'll manage to do the deal.

Because in China, food is serious business.

My guests for lunch are Mr. Wu (ph) and Mr. Joe (ph). We start, gentlemen, I believe, with cold dishes, correct? Eat.

UNIDENTIFIED MALE: The whole process of exchanging gifts and exchanging meals is a way of building up relationships. The Chinese call it (UNINTELLIGIBLE). In China, business flows from friendship, along the lines of a Confucius Golden Rule of reciprocity, do to others as you would want to do unto them.

QUEST: Mr. Wu (ph), have some mandarin fish.

UNIDENTIFIED MALE: You will find that early on in your relationships with the Chinese, they will probably invite you to a banquet, and before you leave China you should invite them back out.

QUEST: That is very good.

UNIDENTIFIED MALE: Where a banquet follows on from a meeting, you could find other people there, the real decision-makers, and the bosses might well appear at the banquet just to see what you're like.

QUEST: We're on to the third set of courses now. This is tofu and seafood. Frankly, it's time for me to get serious.

UNIDENTIFIED MALE: Never ever speak off the record and never ever assume that the Chinese don't speak your own language.

QUEST: What does it taste like, Mr. Wu (ph)? What does it taste like?

UNIDENTIFIED MALE: The Chinese have phenomenal memories. It's part of the wary they're educated at school.

If it's an evening banquet, it will probably start about 6:00. You go through all the 14, 16 dishes, making sure that you don't fill yourself up early on in the banquet. Because if you do, and you can't manage anymore, I'm sorry but you just have to eat the food because to refuse food is quite impolite.

To show your appreciation of the generosity, you shouldn't finish all the food. If you finish all the food, it shows that -- or the host might misinterpret it as he hasn't provided enough.

Most Chinese try to eat everything they can with their chopsticks, but touching food is considered impolite except in certain circumstances, so if you drop food on the floor or drop food on the table, you leave it. You wouldn't pick it up, not with your hands, not with your chopsticks.

QUEST: We need to do toasts.

UNIDENTIFIED MALE: Toasts are a very important part of banqueting etiquette.

UNIDENTIFIED MALE: To Britain and China.

QUEST: Britain and China.

UNIDENTIFIED MALE: To the friendship of Shanghai and London.

QUEST: Shanghai and London.

To friendship of our people.

UNIDENTIFIED MALE: Yes.

UNIDENTIFIED MALE: Refusing alcohol is very difficult.

QUEST: Mr. Wu (ph), your turn.

UNIDENTIFIED MALE: The Chinese have a special spirit called Malachi (ph) which is very, very fierce indeed, so only a little bit of it, I would suggest.

QUEST: To friendship.

UNIDENTIFIED MALE: Friendship.

QUEST: Your Chinese banquet lunch will end with desert, probably something quite simple like these sesame pastries and some fresh fruit.

My thanks to my guests, Mr. Wu (ph) and Mr. Joe (ph) for joining me for lunch.

Now, you will have had your own experiences of doing business in Shanghai or in China, and we want to know how you have found the business environment. What are your experiences? It is an e-mail please to Quest@CNN.com.

We'll start a discussion, we'll have a debate, and we'll put the best e-mails on our Web site, where you can find a whole host of interesting business travel features. It is at CNN.com/BusinessTraveler.

And a reminder again for where the e-mails should be sent, Quest@CNN.com.

How have you found doing business in China? What problems, what difficulties, what challenges?

Mr. Wu (ph), would you like some fruit?

(BEGIN VIDEO CLIP)

(voice-over): While we have desert, coming up next, TWO HOURS TO KILL.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

QUEST: In the 1930s, Shanghai was known as the Paris of the East and considered the jazz and cabaret center of Asia.

Today some seven decades later, a new breed of performer is keeping Shanghai's jazz culture alive, which is why it's essential to visit one of the city's jazz clubs if you've got TWO HOURS TO KILL.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: My name is Bar (ph). I'm a jazz musician in Shanghai. We're jamming here at the Cotton Club. It has the reputation for having the best live blues music and live music.

All right, we're done jamming here at the Cotton Club and we're going to go shopping. Let's go.

We're at (UNINTELLIGIBLE) Market in Shanghai, one of the coolest markets there is. Anybody who comes to Shanghai has to come here and you'll find stuff, just about anything, if the price is right. Jackets, wallets, purses, bags, DVDs, or anything else. Whatever you're looking for.

This place is open from 9:00 in the morning until 9:00 p.m. at night, 12 hours a day. And 360 days a year.

We're at Caf‚ Mont Mart (ph), right next to Shanghai Market. This is the place my friends and I like to come and have coffee after we get done shopping.

The type of food you get here is mostly French or fusion Chinese- French food. Very nice. Everybody comes here. This is it.

I'm at the lake in the middle of Shanghai. Behind me this is actually a manmade lake, very quiet, very relaxed and chilled out. I like to come here for daybreak.

Behind the lake is (UNINTELLIGIBLE), very well-known for its nightlife. A lot of clubs, restaurants, bars, shops, a bit expensive but the stuff is really good. It's where the action is at. It's very well- known in China, actually, not only in Shanghai. People will come to Shanghai to visit (UNINTELLIGIBLE).

As you can see, there's lots of people, lots of action, and it's full of life, and that's my Shanghai.

(END VIDEOTAPE)

QUEST: If you've still got a few moments to spare, well, (UNINTELLIGIBLE) Gardens, with its famous tea houses, it has to be a must.

I've got just one business card left, which means it's time to head home.

And that is CNN BUSINESS TRAVELER for this month. I'm Richard Quest, in Shanghai. Wherever your travels may take you, I hope it's profitable. I'll see you next month.

END

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