Former Secretary of Labor, Prof. Robert Reich discussed the limitation of China as a source of boosting US economy and jobs in his blog, “Obama, China, and Wishful Thinking About American Jobs,” at Huffington Post. He points out the limitation of China in boosting US economy and jobs as China’s high savings and investments rates and low consumption rates. These characteristics have been the typical profile of developing countries in the stage of high economic growth before reaching the stage of becoming advanced industrialized countries like US and Western European countries.

Here is one irony that I cannot avoid but noticing. Americans here expect Chinese people to help, save US economy and job conditions while they themselves (or we ourselves) keep damaging our own economy and jobs by scheming / manipulating domestic policies for political advantages or profit reasons that end up providing excessive profits to a few wealth group of people at the costs of screwing up the rest of people and the whole economy. And we look for the solution of our problem from a foreign country which also struggles with its own sets of problems including starving people and high unemployment in parts of the country? Does this make sense?

Regarding Prof. Reich’s blog, I wondered about other reasons of China being a limited source of US export market and boosting US economy:  (a) the huge gap between the riches and the poors in that country; (b) the limitation of US international marketing / business.

Regarding the huge income gap in China’s riches and poores as a source of limiting the country’s potential to help out US economy and job losses, Chinese riches live like the corresponding American riches. Chinese poors live like the correspnoding African poors; they starve like poor Africans. Rather than high Chinese savings and investment rates, I wonder whether it may be the huge income gap between Chinese riches and poores that cancel out the potential of Chinese consumers as a whole to help out US. Years ago, I heard from a Chinese that, in poor rural China, there were even families that owned only one pants for 7-8 family members. So, whenever family members had to go out, each member took turn to wear that pants while the rest of family members stay home naked or without wearing pants. Of course, this is a side story compared to their starvation. This is the story of “Rural China” where there are few industrial bases and job sources to feed people. This Rural China story may be comparable to those of US cities or towns that have declining or disappearing industrial bases, less and less jobs available, and increasing homelessness and starvations, such as the conditions of mining towns or cities of declining car manufacturing. On contrast, in “Urban China” booming industries and jobs exist to support Chinese people to increasingly live like people in richer countries.

In case of my country of origin, South Korea, in the 1980s and early 1990s, the young generations of riches in their 20s lived like the corresponding age group in US, attending universities, partying, drinking, killing times for ultimate entertainments and dating, enjoying such spoiled lifestyles and consumption patterns. In contrast, the young generations of poor Koreans, such as sons and daughters of poor farmers or factory workers, were often involved with underground student/labor/political organizations and demonstrations against the military governments and social/political issues, run away from smoke bombs and got arrested during street demonstrations, blacklisted by the government and often tortured by policies or military, maybe partially comparable story to those of young terrorists in Middle Eastern countries. What I am trying to say here is, the choices of lifestyles and consumption patterns seem to determined by the availability of money, not by nationality. The hierarchy of income levels and choices of lifestyles and consumption patterns within a country is exactly parallel to those across different countries regardless of nationality or different economic profiles of countries but more because of availability of money. I believe, human nature is same all over the world.

Regarding US firms’ limitation of exploring foreign consumers, although US has the finest business schools such as Harvard Business School etc., either many US corporates haven’t utilized these human resources or these human resources forgot what they learned in school after their graduation and run business based on what they feel like or their personalities. Despite  some exceptions, many US companies seem to only target domestic consumer and produce goods at corporate/executives’ convenience and needs (as shown by US auto industries), rather than considering / analyzing what consumers or competitors think and act. Some time ago, I read a review/rating of international travelers by, I think, French employees of tourism. They rated Japanese as most cordial and pleasant travelers, French most obnoxious (French travelers were even disliked by their only country fellows), and Americans being as the only nationality who insist to speak only English instead of learning the local languages even while traveling foreign countries. This attitude of American tourists may also explain the mentality of US corporate executives. The story of US corporate people in doing foreign business often sounds similar to that of American tourists. These American business people in foreign countries often don’t like to learn local languages and cultures. They prefer / expect the local people learn English to communicate with them. I may call it as “US Corporate Centralism” although there may be other terminologies given to this kind of behavioral, cultural pattern. Instead of providing goods that fit to the tastes, sizes, and consumption patterns of people in foreign countries, US corporates expect foreign consumers to adjust, adapt to the ways of American-made goods that US corporates produce and provide as they like.

Along with the role of exchange rates between China and US (which has been another huge issue between two countries over a decade) and China’s country profile, this American style of doing foreign business has been and may continue to be the major barrier of selling American goods in foreign countries. In the past, there had been strong, high demand for American goods all over the world. In South Korea, for example, Korean mothers got crazy to rush to OshKosh clothing stores in Korea if they had heard about those stores’ sales advertizements. Because those OshKosh children clothings were sold in Korea at 200%-300% higher prices than the original US prices and not easily available there, if those clothing store had had sales, their were crowds of mothers around those stores and many people behind the crowd even couldn’t look at the products and just wait until somebody toss behind some unwanted products. That’s what I heard from Korean mothers. US products have often meant status symbols for many consumers in developing countries because of the image of US as world super power and American products were not easily available there. Foreign people wished to have American products to show up to their friends and neighbors, but they couldn’t find them. US corporates probably didn’t know that because they were not interested in foreign markets and didn’t do market research, mainly serving US consumers with products that the corporate people like to produce. Without solving visible barriers in engaging in international business, are we supposed to keep talking about why Chinese consumers would not really help US economy and unemployment problem?

Mr. Reich’s Oroginal Article: http://www.huffingtonpost.com/robert-reich/obama-china-and-wishful-t_b_361492.html

China Market Potentials  

1. 80% of applicants receive travel visas from U.S. embassy in 2008.
2. In 2008, 400,000 Chinese tourists entered the United States.
3. From 2007-2008, Chinese tourism to the U.S. increased by 23%.
4. The Chinese rate of tourism to the U.S. is the highest among all countries.

Summary:  Chinese traveling to the U.S. represents a huge growth market.  For the last many years, Chinese tourism to the U.S. has been increasing annually at a steady and accelerating pace.  

Competitive analysis 

1.    The Selling Features of Competing U.S. Cities: 

1) Landmark cities such as NYC, Chicago, San Francisco, LA…

2) American National Parks: Yellowstone, Grand Canyon, Niagara Falls …

3) Second-front States: Kentucky, Tennessee, Alaska, Georgia.  These states have already launched publicity campaigns in the China market  ( e.g, in the web site u.cctv, which is supported by the major TV station in China) 

2.    The Selling Features of Portland (From Chinese tourists’ perspective) 

1)      Portland’s Exhilarating Cultural Scenes & Attractions 

1. The biggest artistic and cultural city in northwest of the U.S.: Arts and culture scene is booming here; Tourists can shop arts and culture at an affordable price 
2. A perfect combination of “green-country” life and fashionable city life.   It is a blend of laid-back, leisure attitude and fashionable and energetic city life, which is appealing to many Chinese big city residents who desire healthier city life. Portland is surrounded by gorgeous mountains, rivers and vineyards. People can enjoy diverse country fun such as wine tasting, breweries, harvest festivals and various outdoor activities such as golfing, biking, rafting, fishing… 
3. Best NW cuisine. Portland has some of the best restaurants in America.  One aspect or another of the Portland restaurant scene is often highlighted in such newspapers as the New York Times, and others.  The Pearl District alone has more than 40 restaurants, cafes and bars in which to sample the best of NW cuisine, as well as a dozen or more other international cuisine choices. 
4. Portland’s vibrant, people-friendly Cultural Districts:

             – Pearl District: The Pearl hosts a continually emerging collection of art galleries, loft apartments, boutiques, restaurants and performance spaces

             – Portland Saturday Market: The largest continuously operated open-air arts and crafts market in the nation.

            – The Hawthorne and Belmont Districts.   Here is the home of “Keep Portland Weird,”   which could be an excellent marketing banner for young travelers from China, etc.   Funky arts and crafts stores mix in a colorful way with a great variety of restaurants, cafes, and coffee shops.  Tourists can sense the lost spirit of the free-loving 60s here.

2)      Nike

Portland is Nike’s headquarter , which is a very famous US brand in China. Tourists and especially business travelers may have interest to visit Nike and learn about its successful business practices. 

3)      Location Advantage

1. On the West Coast: One of most popular destinations for Chinese tourists
2. Between San Francisco and Seattle:  two other big hot spots for tourists
3. It’s easier to include Portland into the tour package for Chinese tourists

Summary: 

1. Even though it’s challenging for Portland to compete with the landmark cities such as New York, LA, or Las Vegas, etc., Portland still has many unique and powerful tourism attractions for the first-time Chinese tourists.  The city and the state can be clearly marketed in different ways than other large American cities and states. 
2. Chinese tourists will go to Portland instead of other second–front cities because it is arguably the largest “artistic city” in America.  And it also attractively located between San Francisco and Seattle on the West Coast. 

Segment Market 

1. Artistic lifestyle lovers: People  who are fond of art, culture and leisure lifestyle

           Target audience profile: Well-educated, living in bigger cities, age at 25-65, having a least an average salary level, love arts and culture, enjoy a balanced life, more females than males.

Market Strategies 

1. Position Portland as the biggest artistic city in the NW of the U.S., a place where people can shop for quality art and culture offerings at an affordable price. 
2. Emphasize Portland Artistic scenes such as Pearl District, The Hawthorne and Belmont Districts, Portland Saturday Market, etc.
3. Include Portland into West Coast Travel Package including SF, Portland and Seattle, etc.

     4.   For better cultural understanding in China, Portland could also be positioned as American’s Chengdu  (Chengdu is one of a major cities in western China, famous for its warm weather, flowering and green environments and leisure, cultural and affordable life).

    5.  Get Portland exposed as much and impressively as possible in multiple media

    6.  Government relationship is very important for foreign business. So get government’s support by building relations with China National Tourism Administration Department 

Major Tactics  

1. Invite major media journalists in China to Portland and encourage them to have the direct experience of the city. In this way, get the publicities started in major media and build the relationships with Chinese journalists 
2. Include Portland in major travel programs and on major travel channels. If possible, sponsor or name a popular TV program in China 
3. Launch commercials with some of the most popular TV shows such as National News in CCTV 
4. If possible, make a breakthrough campaign by making a Chinese TV show shot in Portland and Oregon area. (Movie and TV shows can really build or change the impression of a place. Eg, Seattle becomes famous to Chinese people after “Sleepless in Seattle” shown in China. The Japanese TV drama “From Portland with Love” shot in 1984, brought a large amount of Japanese tourists to Portland in 80s and 90s.)

 Media Platform 

1.    Trade Shows 

2.    Online promotion

1)      Chinese version website

2)      Blog/Online Forum/Message Board:

a.携程旅游网www.ctrip.com: The most popular travel website in China, with the United States section ( http://destguides.ctrip.com/northamerica/unitedstates/region47/).

b.新浪网www.sina.com: The most popular portal website in China, with the travel section and US section (http://bbs.tour.sina.com.cn/forum-407-3/table–0.html?ref=10).

3)      Online ads at major travel web sites(eg: 新浪sina, 携程ctrip,华夏 tom, 央视网旅游u.cctv, 新华网旅游xinhuanet)

4)      Search Engine Promotion: Google and Baidu

 3.    Magazines:

1)      Major Travel magazines:

时尚旅游 :National Geographic Traveler

中国旅游 China Tourism (supported by China National Tourism Administration Department)

旅行家 Traveler (Circulation: 338.000 per issue)

2)      Others (Leisure, Fashion, Outdoor, Health) 

4.    TV:   Travel Channel and Travel Programs 

Notes:  Other Media Resource

Web Site：国家旅游局网站 央视网旅游 新华网旅游 人民网旅游 中国网旅游 千龙旅游 环球网 芒果网 远方网

Newspaper：中国旅游报 上海旅游时报 中青报旅游周刊
交通旅游导报 中国旅游摄影 环球游报 精品购物指南

Magazine：中国国家地理 度假 玩家旅游 旅游休闲 新旅行 时尚旅游 商务旅游 户外探险 旅行社 西藏旅游

Look under the hood

Occasionally some of our Chinese clients claimed that prices of our products that we deal with appeared to be uncompetitive. I know our prices are competitive, otherwise, we won’t be in business and doing so well for over 20 years.  China is a highly competitive market as there are a lot of suppliers and agents setting up offices there and are trying to undercut each other so as to survive.

“Look under the hood”. It is the message that I have been trying to convey to those clients in question. Buying parts for canmaking machines are no different from buying parts for a car. Often times, the clients in question approached us with parts involving Original Equipment Manufacturers (OEM), such as Stolle, Belvac etc. The serial numbers provided by them mostly are those of the OEM. Therefore, we have to go to such OEM for quoting the relevant parts. OEM prices are understandably more expensive. It is like going to a Toyota dealership to buy a carburetor, an air filter, or spark plugs or a set of tires when it comes to maintenance of a Toyota car.

However, if one looks into each of the OEM machines, i.e. look under the hood, one is likely to find that a lot of the parts are not manufactured by OEM. For instance, you may find a ABC Motor in an OEM machine. If a client could provide the serial number for such motor to us, we can go to ABC Motor and ask for a quote for that particular motor. I am sure we can provide the clients with very competitive prices for that motor, and likewise for other parts. At the end of the day it will mean tremendous savings to the clients.

AMRO’s edges

In this respect, AMRO’s competitive edges are:

1      We are able to obtain competitive prices for parts of some of the US small manufacturers. As we are a leading provider of US parts we are able to get bigger discounts than our competitors  from those manufacturers due to our long dealings and relationship with them.

2.     We  have our own warehouse in the US. We are able to consolidate orders of the various manufacturers into one shipment at our warehouse. Therefore, the clients can save freight charges and administration costs. Some of my Chinese clients incline to deal with the OEM or their agents because they do not want to deal with too many manufacturers. However, this problem can be solved by dealing with AMRO, one source for many manufacturers. Further. those clients by going to the OEM or their agents they are sometimes paying more for the parts then they realize, as explained above.

I think no one would dispute that one of the competitive advantages of China in the business world is that it has an abundant supply of cheap labour force. This advantage is clearly shown in the manufacturing sector as China is now the largest manufacturing country in the world.

This advantage is also evident in the commercial sector. I am saying that from my personal experience.  In my business, I have been assisting my China clients to buy foreign made parts through my US principal, AMRO Supply Inc, a procurement agent.  I have advised my China clients umpteen times that one way to save costs is to have their orders from different suppliers consolidated in one shipment, in which way, among others things, they would save on administration costs. The concept is that instead of having the client’s administration staff handle ten sets of documents and ten shipments for purchases from ten suppliers, if they consolidate them in one order, they need only to handle one set of documents and one shipment, likewise for managers who supervise them. At the end of the day, less documents or works means less headaches. Further by consolidation, over the long run, the company could reduce its headcount, thereby improving its bottom line. I shall call this concept the said concept hereinbelow. However, a lot of my China clients are unconvinced of the said concept.

I have discussed the above issue with my US principal. I was told that our US company has no problem getting the said concept across to clients in developed countries like the US and those in Europe as their costs for clerical staff are understandably high. As for clients in developing countries, like in South East Asia, which related costs are low, their managers have no problem understanding the said concept as they realize that less works means less problems, as I said above.

Then the question is why Chinese managers do not buy the said concept. Often times, we received from our Chinese clients one order for one supplier, which I was told by my US principal, is uncommon for clients for the rest of the world. After much discussion, the only conclusion we can draw is that saving on the related administration costs apparently is a non factor to our Chinese clients and, with no disrespect to my fellow countrymen, the reason is that the costs for their clerical staff are cheap. Nonetheless, the China clerical staff, though making low salaries, they are highly efficient, which make them probably the most cost effective among their counterparts in the world, and that is what counts. In some parts of the world, one may hire similar staff at much lower cost, but if they are not productive it would not be meaningful.

From my personal experience, I vouch for that. I deal with client’s clerical staff day in and day out. Most of the clerks whom I deal with are freshly graduated from universities with an English degree or an international business degree (and English proficiency is a must), therefore, their English standard is high. Most of them make about USD600 a month (comparing to say USD3000 in the US or USD1500 in Hong Kong). Most of them are hardworking and have high aspirations. A lot of them take the entry level job as a stepping stone to bigger things. They are willing to go extra mile to get works done so as to impress on their managers. It is not unusual for them to start work at eight in the morning until six or seven in the evening and working on Saturdays and Sundays are not unacceptable to them. As a matter of fact a clerk of my client has a habit of sending me emails at 11 o’clock or even midnight from his home.

Further, almost all my China counterparts readily provide me with their cellular numbers, junior staff included. As a matter of fact, most of them have their cellular numbers printed on their business cards. In case of urgency I can always call them outside office hours. I think the same cannot be said for most employees, especially the clerical staff, for other countries, as once they leave the office they want nothing to do with business.

Further, it is common practice for a Chinese client to deal with more than one procurement agent. Again this could be handled efficiently thanks to those high caliber clerical staff. As a result of this, because of competition, these clients are getting very competitive prices, which I hate to say is not to my liking. Often times, they could pick the agent whoever provides the best price to them for one particular item. This is also one of the reasons that my Chinese clients are not enthusiastic about the said concept as the price advantages they gain from dealing with more than one agent outweigh the costs they could save on consolidation.

Finally, I have a lot of respect for my compatriot counterparts, who are so dedicated to their jobs. I think their dedications have given China an edge, which makes the country so competitive in the commercial world.

Watchmaking Iconoclast’s New Location At Jin Bao Street’s Legendale Hotel Features Decor And Accents Shipped From Paris

Richard Mille's flagship store in Beijing brings an air of bygone Europe to Beijing's Jin Bao Street

Richard Mille, the French luxury watch brand,has just opened a flagship store in Beijing’s five-star Legendale Hotel, according to a company press release. Mille’s fixation with high-tech materials and unique alloys inspired by F-1 motorsport and the aerospace industry, has made him one of the most unusual — and fastest-rising — luxury watch forces in the world, and with the flood of spending we’ve seen in China on luxury goods like watches, cars, wine, jewelry and contemporary art, Beijing’s flagship Mille store should attract the city’s free-spending elite in no time.

[T]he flagship occupies 260 square meters of space at this platinum 5-star hotel that represents European elegance and luxury in the heart of this capital of the People’s Republic of China. With such a prime address and grand interiors, Sparkle Roll Group Limited, the exclusive dealer of Richard Mille in PRC, invested HK$45 million in building this flagship in Beijing.

The exterior of the hotel is a reminiscent of the 17th century architecture of Southern Europe.

…

Arches wrapped in black leather dominate the main seating area; the showcases are built in the tonneau shape; the 3-dimensional engraved glass windows form a signature throughout all Richard Mille stores. The combination of dark ebony, black leather and etched glass subverts a classical concept and reinterprets it in a way that perfectly showcases the charisma of the Richard Mille collections.

It seems that Mille has chosen the right time to make his grand entrance to the Beijing luxury watch  market, as recent financial results show that exports of Swiss watches to China rose 20% last month, despite weak demand in the traditional markets of Hong Kong and the United States.

• Coca-Cola Beverages (China)
• Snow Breweries (China)
• Pepsi Cola Beverage (China)
• Yeo Hiap Seng (Guangzhou)
• Budweiser (Wuhan) International
• Rexam Beverage Can
• Shantou oriental Technology
• Hangzhou Wahaha Group
• Jianlibao
• Fute Container Jiaduobao Drink & Food
• Carlsberg Brewery (Guangdong)
• Shanghai Maling Aquarius Guangdong
• YASHILI Group
• Baosteel Can Making
• Mead Johnson Nutrition (China)
• Zhujiang Brewery
• Tongfa Group
• Red Bull
• COFCO Packing
• Tsingtao Brewery
• Jianlibao Beverage
• ORG Can Making
• Yanjing Beer Group
• LEE KUM KEE
• Tibet Lhasa Brewery Company Limited
• Nestlé Qingdao Limited
• Wuzhou Zhizhonghe Health Food Co., Ltd.
• Guangzhou Watson’s Food & Beverage Co. Ltd.
• Inbev (China) Zhedong Brewery Company
• Canpac Vietnam Pte Ltd
• Saudi Arabian Packaging Industry
• Impress USA
• Kian Joo can Envases Comeca Alfa Interfood
• Asko-Vogel & noot
• PT. Indonesia Multi-Colour Printing
• PT. Ancol Terang MPI Hindustan Tin Works
• PT. Balihai Brewery Indonesia
• Modern Co. for Food Products Fabrica de Envases del Pacifico Vinayak Industries
• Picopack ZRT.
• Beverage House
• Bickfords Australia Pty Ltd
• Evergreen Drums & Cans Pvt. Ltd.
• Envases Layta
• MetalPren
• Owens-Illinois Peru S.A
• Emarati Foodstuff & Plastic Packing co.
• Tech Pro Packing S.L
• Rheem South Africa (PTY) LTD
• Witec GmbH
• Egyptian Canning Best

Per information provided by Canneed

The WIG Index gain +3.15%:

Today’s session was quite volatile, but the Index gained some points. However, the daily trend is still broken and the situation is not clear.

There is not much to say – current setup is risky and we have to wait for market action.

Gold reaches 1000 USD (here).

China market is still in downtrend (here or Shanghai Composite).

Sources:
[http://www.bloomberg.com/apps/news?pid=20601087&sid=aAgAWSs_xezk]
[http://www.marketwatch.com/story/china-data-storm-may-confirm-recovery-2009-09-07]

The WG Index fell -0.73%:

The market almost generated daily sell signal. Neither oscillators nor volume suggest further fall, but most of European markets finished on red. In my opinion we shall be careful now, but until daily trend is broken we want to enter long positions.

China’s Shanghai Composite Index fell -6.74% (here).

Sources:
[http://www.marketwatch.com/story/us-stocks-futures-lower-as-china-sinks-again-2009-08-31-9060]
[http://www.bloomberg.com/apps/quote?ticker=SHCOMP%3AIND]

Readers of my blog, although not too many of them, know that I from time to time criticized my Chinese clients. In my last blog, I criticized the un- professionalism of a China bank. It seems that I am a China basher. However, as a matter of fact I am not. I am just using this blog to air my grievances. It is interesting to note that China bashing usually attracts more blog readers than otherwise. If it helps my blog, I don’t mind being seen as one of them. Further, I know the (Mainland) Chinese would not read my blog simply due to the fact all foreign social nets, such as WordPress, Twitter, Facebook, Google Blog and others, are blocked  in China. I can criticise my Chinese clients all I want and I won’t lose their businesses. The same cannot be said about my US principal. If I criticise them,  they may read it (although I doubt it) I may just as well kiss my job good-bye.

Talking about China Banks, I would like to bring up an interesting question. Recently, I came across a Chinese client who intended to pay for the goods ordered from us by a letter of credit (LC). The LC would be opened by one of the three largest state banks in China. When I mention “a China Bank” hereinbelow, I am referring to one of such banks.  My question is would you as a seller accept a LC opened by a China bank?. Personally, I would. A LC is essentially a bank guarantee. Therefore, the issue is whether a China bank is an acceptable risk. Do you know that currently the 3 largest banks in the world by market capitalisation are the 3 largest in China, namely Industrial and Commercial Bank of China (ICBC), China Construction Bank (CCB) and Bank of China (BOC), and in that order? It is the reason this blog is entitled “China Banks are becoming the world’s financial powerhouse”. I have so much confidence in them that over 7o% of my stock portfolio are invested in ICBC and BOC and I am sitting on very nice profits on these two stocks (see I am a China fan and not a basher).

Being one of the largest banks in the world and being a state bank, I can’t see how a China Bank could renege or default on a LC. Therefore my answer to the above question as to whether one could accept such LC is an undeniable YES.  What is your view?

I had a busy day today. I spent almost half a day trying to sort out a payment which a China client claimed to have made but was returned by the remitting Chinese bank. The client claimed that they had following the payment instructions appearing on our invoice to the letter. So if there were an error it could only be that the banking information provided by us was incorrect. Without checking,  I knew the client’s claim did not have a leg to stand on.  Personally, I think any company which got the instructions for making payments on its invoice wrong should not be in business at all.  I knew our company would not be one of them. Further, our bank, Citibank, is an international bank. I did not doubt for a minute their ability in handling such transaction.

The ball was clearly on the client’s court. I wrote an e-mail to the client asking them to sort out the matter with their bank. Apparently the client was not happy that I was pointing the finger at them or their bank. The client reiterated that it had done everything right and was trying to pass the ball to me.

Finally, the client sent me the note that Citibank sent to the remitting bank. When I looked at the note, lo and behold, I knew where the problem was.  Citibank was advising the remitting bank to comply with the SWIFT practice for remittance of such sort. Nevertheless I could not pin down what exactly went wrong. Thanks to my colleague’s  advice, the remitting bank apparently ommitted to put down the relevant SWIFT code. No wonder the remittance was rejected.

SWIFT codes are like branch codes but are applicable to banks when making overseas money transfers. The relevant SWIFT codes could easily be obtained through searching the SWIFT portal. I did that on the Citibank New York office by entering the name of the bank at the said portal. I was surprised why the China remitting bank, which should be familiar with international banking practices, could have overlooked such an important piece of information.

More on China banks tomorrow.

I had a tough day yesterday. A potential China client which I have attended to since April asked me to revise my revised revised quote.  I will call this potential client “the client” just for the sake of convenience, though  it is unlikely that I am going to get it. There were a lot of toings and froings with this client since April. I can’t remember how many times I have revised the quotes.  Finally the  client gave me the impression that the deal were to be closed imminently.

I spent the last couple of days liaising with my principals in the US and a freight forwarder in Hong Kong trying to give the client the best deal. Due to the time difference, I had to stay up late just to talk to my US office. There are so many rules and regulations for doing business in China.  Sometimes one has to be creative in structuring deals for making shipments into China. Finally, I thought I had come up with an excellent deal for the client and e-mailed the final quote to the client. Within 10 minutes I got a reply from the client claiming that my quote was not competitive and it decided to stay with the company which it had been dealing with for 10 years. Essentially he was asking me to substantially cut my prices which made us not making any money at all. Needless to say, my US company refused to budge. There goes the deal and the efforts my company and I had put into were “wasted”.

I think the Chinese buyers are really spoiled nowadays. There are so many overseas suppliers and manufacturers knocking on their doors.  It is a survival game out there.  For me to survive I just have to hang in there. It is two o’clock in the morning.  I will hit the sack and wake up tomorrow and go on with another deal.

Mir Global Marketing LLC has completed it’s summer tour of China, and what a journey is has been! What do we have to report? Well, quite a bit. Since it is too much to compile into one simple blog entry, I have decided to begin with some travel advice and general words of wisdom about doing business in China.

July 13 — New York City –> Beijing (12.5 hours on Continental’s direct flight.) Highly recommend anyone traveling to China from the New York City area and not obligated to any specific carrier book their ticket on this flight. You save between 4-8 hours in additional travel time / transfer time at airports. You do not risk missing a connecting flight, and the service on the plane is quite good for a US owned airline. The one negative side is the cranky American flight attendants, which you do not find if you’re traveling JAL, Cathay, Asiana, etc.

Arrival in Beijing was quick and easy. Customs allowed me to pass with more wine than I was probably legally allowed to bring, I recovered from jet lag quite fast and was out on the town showcasing our wines from Chile and Argentina by my second night.

After reconvening with Xu Wenquan, Mir Global Marketing’s director of sales in China/ Asia we set out a game plan for how to best approach diverse selection of potential buyers / contacts. We would need to fine tune our marketing strategy for three different market segments.

- Chinese government owned entities.

- Chinese entrepreneurs / business owners of bars and night clubs which cater China’s rising middle and upper class. In other words, the sons and daughters of wealthy Chinese who are looking to make a name for themselves and are have chosen to start a business. Not with the goal of attracting foreign customers (although they would not object), bur rather China’s new consumers looking for a good time and some nice drinks.

- Western operated and privately owned establishments in Beijing, Shanghai and Guangzhou. These type of businesses cater to China’s trendy, diverse, metropolitan cultures. I define this group as a mix of foreigners and urban Chinese you would find at a popular bar in a major city like Beijing.

Now, I present a few words of wisdom for those considering to do business in China. These are my own opinions, and I welcome those who would like to discuss any of these points. Please add your comments below or drop me a email, bennett.reiss (at) gmail.com

1. The more interaction you have with China, and the longer you stay, the more you realize how little you truly know and understand the country. Don’t think a mere semester or two of studying in China, speaking Chinese, reading books about “doing business in China,” foreign policy or cultural communication classes make you a expert. They do not.

2. What you learned in business school will not necessarily apply in China. You must cautiously and selectively archive into the back of your mind what you have come to accept as common business practices. What you learned in all those over-priced business classes will usually not apply in China. This is especially true when dealing with Chinese partners, be it from the private sector or a government owned entity.

3. Smile. Even if you are impatient, frustrated, mentally a mess, cranky, jet lagged, suffering from heart break, or angry with life itself… Smile and put a face that mixes happy, calm and confident all in one. The moment you allow what you have bottled up inside to show, vis-à-vis body language or with words, you have lost the battle. You will fail at negotiating a cheaper hotel, you will fail to convince your taxi driver to take the shorter route and you will fail in business negotiation. A calm, collected persona and a smile go a long way in China. Remember this.

4. Keep an open mind and remain flexible as to adapt to any given situation you face. It is popular in western cultures to look for a logical explanation for something you do not understand or a problem you may face. Westerners also tend to believe it is possible to control things like your schedule. Many times in China, there is no logical answer, and controlling things is quite difficult when you are operating in a country as complex and large as China. Accept this now, before you lose your mind, and therefore compromise all the elements I described above in point #3.

5. Dress to impress if you’re doing business. Even if its hot and humid, put on that suit and leave the tie and jacket behind. As they say, you only get one first impression. When you’re dealing with a Chinese businessman/ woman, it is incredibly important to do all in your power to make your first meeting as professional as possible.

** Reminder to all readers, opinions expressed in this entry are my own and should be not treated as fact. Thank you.

~ Bennett Reiss – International Trade Consultant at Mir Global Marketing LLC

With the global economic crisis in full swing liquor stores and wine bars are seeing their older, high-priced wines gather dust.

Bronco Wine Co. in Ceres, Stanislaus County produces more than just box wine like Franzia. The group is also behind other affordable brands such as Charles Shaw, Crane Lake and Napa Ridge.

Year to date, Bronco’s Wine sales are up 25% on volume. Charles Shaw alone is currently selling about 6 million cases a year. The company has aspirations of eventually moving 100 million cases a year.

Where do they expect to find the bulk of their buyers? You guessed it, China.

Next month, the plan is to unveil a new Australian Chardonnay by the name of “Down Under.” It will sell for half the price of Yellow Tale, currently one of the most consumed, affordable, white wine around the world.

Fred Franzia, who sold his brand to Bronco wines, had the following words to offer to offer the SF Chronicle, in this article.

“His only worry seems to be that he might run out of wine – even though he controls reportedly 40,000 acres and buys far more in bulk. “We’ll probably have to allocate. Imagine that.”

This is the year, after all, when cult-wine allocations are being busted, when retailers can cherry-pick the finest wines. And yet many wineries still won’t flinch on pricing. Suddenly, Franzia’s crusade against high prices – he still believes no wine should cost more than 10 bucks – has an eerie resonance.

Mir Global Wine Corner Analysis

It does not take a genious to figure out Franzia’s market strategy, especially when it comes to China. In general, Franzia hopes to capitalize on the rising consumption of wine in markets like the United States, China and Russia by tempting people who like to drink with cheap prices and wine that doesn’t taste like rubbing alcohol.

Franzia box wine and Charles Shaw do taste better than the majority of Chinese wines I sampled in the past. That does not however mean that they are by any means… good.

In the United States where a great variety quality wines from Chile, Argentina and Australia are widely Franzia will get lucky if this recession forces consumers to substitute slightly higher priced, quality wines from these countries for their poor alternative.

If Franzia is able to slightly improve its quality and hook consumers however, I can see their strategy working out to a certain extent.

As for China. This is great news for companies like my own Mir Global Marketing Co., which specialize in South American wines.

If Franzia goes through the trouble to promote their cheap products in China and are able to successfully get the Chinese consumers buying cheap, lower quality Chinese wines to switch to their wines, they will be doing South American wines a great favor.

One of the main difficulties for Argentine producers at the moment is convincing the very brand conscious Chinese to trust the quality of their products. France remains synonymous with quality when it comes to wine, while wines from Italy, Australia and Chile had to struggle for years to build a trusting image with Chinese consumers.

Franzia already has a decent customer base in China where wines are outrageously over-priced. Although something just does not sit well with me when you must pay $6-8 for a glass of Franzia.

What if there was a Chardonnay from Argentina listed on a menu just Franzia’s selection?

If Franzia’s marketing and promotion of their own wines have worked, this will inevitably mean the Chinese consumer has become more educated about wines and that his/her tastes have evolved.

I have a feeling, after drinking a few glasses of Franzia, the sophisticated wine drinker in China will decide to spend a few extra RMB for a much higher quality glass of wine.

So let me say the following:

“Thank you Franzia.”

Bennett Reiss – International Trade Consultant at Mir Global Marketing Co.

Multinationals Hope Domestic Consumption, Inland Movement Will Counterbalance Drop In Exports

The world's target market

CNN reports today on the hopes of many western investors and CEOs for the rise of the Chinese consumer to help lift up the sluggish global economy. With slowly-increasing consumption rates in a country still highly populated by savers rather than spenders, redoubled efforts by western and Japanese companies to retain and expand their customer base shows that they understand that the Chinese market — with its vast potential but cut-throat competition — is critical for their global strategy.

“The dream of China is the life preserver many multinational corporations are clinging to, not without some reason,” writes Kevin Voigt, who points out that the recent Shanghai Auto Show proved that world automakers simply cannot go forward without a strong, flexible, and localized China strategy. As consumption drops in previously-solid markets like North America and Japan, everyone depends on the Chinese consumer to pick up the slack…for both. This is no small feat, and requires intensive marketing and branding efforts, even for well-established brands. Here, incentive and domestic growth are key. China’s 1Q growth slowed to roughly 6% — exceptional by current world standards, but short of their 8% target — and without growth that translates to real-world benefits for consumers (rising wages, inflation under control, commodities prices staying in check) they simply will not spring for their first Audi A4, Louis Vuitton handbag, or Apple laptop. Instead, they’ll choose the Geely sedan, the JNBY purse, and the Founder laptop – good for domestic companies, very bad for everyone else. That’s why marketing has taken a new, localized, intensified urgency. Going back to Shanghai, the auto industry seems to exemplify, perhaps better than any other, the critical nature of the Chinese consumer forgoing his reluctance to spend his hard-earned money:

While the Big Three from Detroit are fighting for their lives, China has more than 100 domestic car makers competing with multinational carmaker to get a piece of the growing Chinese car market. For the first quarter of the year, 2.7 million cars were sold in China — besting U.S. sales of 2.2 million for the first time to become the world’s largest car market.

The automobile industry’s hopes for China are emblematic for nearly every industry in the world. A Nielsen consumer confidence index shows Chinese consumers are more optimistic than most consumers elsewhere, rating 89 points compared to the global average of 77.

While CNN contends that this does not translate to the China market being without its problems — and it has many, from unemployment to inflation to (still) consumer reluctance to spend — for companies who take the time to adequately localize, understand the lay of the land and the cultural aspects of convincing Chinese consumers that your product is worth the price and is superior in both pedigree and quality to its domestic competitors, the payoff can be both sustainable and sizable.

By simply rushing into the Chinese market and using the same strategy you’re using in North America or Europe, you’re not going to make any headway, and, most likely, you’re going to taint your brand in that market for the long term.