Michael Li Selling etiquette in china
China • Location: Eastern Asia, bordering the East China Sea, Korea Bay, Yellow Sea, and South China Sea, between North Korea and Vietnam • People:HanChinese 91.5%, Zhuang, Manchu, Hui, Miao, Uighur, Tujia, Yi, Mongol, Tibetan, Buyi, Dong, Yao, Korean, and other nationalities 8.5% (2000 census)
Greetings • When people walk to the shop in China, the sellers always say ‘hello’ with a smile. • People shake hands when they meet others. (they do not kiss other’s face) • Only best friend may have a hug when they meet.
Preferred time of day to conduct business • The Chinese company starts at 8am and finishes at 5pm. • In a weekday, the evening is the best time to sell product. Because lots of people would like to go out after having lunch or just go out to shopping and have dinner.
Business aspects, money • Dividend Withholding Tax: You can take profits out of China in the form of dividends. However, any declared dividends for foreign enterprises are subject to a 10% withholding tax. Your profits are better spent re-investing in your enterprise inside China which is exactly what the government wants you to do. • The dividend withholding tax also comes into play when setting transfer prices.
Fees • Fees are a part of life in China. You will incur fees whether starting up a manufacturing operation, a marketing house, a distribution channel or importing product. Fees and licenses for power hook-up, installations, permits, etc are no small items.
Special Economic Zones- Tax Holidays • Special Economic Zones(SEZs) offer reduced tax rates to manufacturing operations. The objective is to lure international investment into these zones. The rates offer a tax holiday for a number of years.
Federal and Provincial Taxes • The federal tax(subject to change) is 33%. As mentioned above, there are major tax concessions in SEZ's during the early years of your operations. In starting up manufacturing outside and SEZ, seek to negotiate concessions in the early years. • Check with your international accounting firms or a local chinese firm in the area you will be operation for any changes to federal tax rates and for rates for the province in which you are located.
Payroll taxes • Old Pension Fund 25.5% • Housing Fund 15% • Medical Insurance 5.5% • Unemployment 1.0% • Trade Union 2.0% • IN GENERAL!
Things to do and not to do in public • Walk fast in the subway, or you will be push • Some shops have exhibitions, do not touch them. • In China, the last name always comes first. • When you meet someone in business, shaking hands, not hugging. • Don’t eat at the subway or bus. • Never make someone lose face • Never take food with the wrong end of your chopsticks • Never drink alcohol without first offering a toast especially in a business meal.
How to dress, casual or business attire • What you wearing now is what people wear in china now. • In winter, most people will wear sweater. Some people can make the sweater by themselves. • When in a business attire, people usually wear suits with the tie.
Food and table manners • Never stick your chopsticks upright in the rice bowl, since that usually appears on the funeral and is deemed extremely impolite to the host and seniors present. • Make sure the spout of the teapot is not facing anyone. The proper way is make it direct outward from the table. • Don't tap on your bowl with your chopsticks, since that will be deemed insult to the host or the chef.
Never try to turn a fish over and debone it yourself, since the separation of the fish skeleton from the lower half of the flesh will usually be performed by the host or a waiter. Superstitious people will deem bad luck will ensue and a fishing boat will capsize otherwise. • Never drink alcohol without first offering a toast especially in a business meal.
Holiday and celebrations • Spring Festival-the most important holiday. • Student will have winter vacation during the winter around the spring Festival. It is about a month.(But students will have lots of homework to do) • Many business during the spring festival will have lots of sales promotion. It is the best time to promote the product to the people. • The festival is celebrated grandly and extensively across the country. Various cultural activities such as lighting fireworks, dragon dancing, lion dancing and other traditional performances, are arranged in parks and streets in cities and towns.
Every family thoroughly cleans the house, sweeps the floors and washes daily things. House cleaning is believed to drive away ill-fortune and bring good luck in the coming year. Windows and doors are decorated with red paper-cuts and couplets. See New Year decorations. • Labor day. May1st • National day October 1st
Legal matters • Registration, Certification and Licensing RequirementsMany products must be registered, certified or licensed by the relevant Chinese authority before they can be sold in China. Products concerning human health and safety, or products which are deemed potentially hazardous to human, animal or environmental health and safety, usually have certification or registration requirements. We recommend that you check the regulations with the State Administration of Quality Supervision, Inspection and Quarantine, the Certification and Accreditation Administration, and the relevant authority of your industry (for example, the Ministry of Health is your relevant authority if you manufacture medical equipment) to confirm if a registration, certification or license requirement applies to a specific product.
Foreign Exchange Regulations China has relatively strict foreign exchange regulations. Moving currency in or out of the country often triggers a settlement, registration or approval requirement, depending on the type of transaction. For example, a loan agreement between a foreign lender and a Chinese borrower must be approved by the State Administration of Foreign Exchange or its local branch to be legally effective. For a distributorship arrangement, in order for the local distributor to obtain the foreign currency required to compensate its foreign seller, the contract, invoice and certain customs documents must be submitted to a designated bank for verification that foreign currency is required to meet a valid contractual obligation. A U.S. company should evaluate if the foreign exchange regulations in China have any implications on the planned transaction based on the structure of the transaction.
Local Tax and Import Duties Depending on the structure of the transaction, a U.S. company may incur tax liability under Chinese law. For example, a U.S. company may be subject to China’s enterprise income tax for certain China-sourced income such as interest, royalties, capital gains, etc. In addition, revenue generated from a licensing arrangement is subject to a business tax in China. The income tax paid in China will be eligible for the foreign tax credit provided under the U.S. tax law, but the business tax may not be similarly eligible.
Labor Law Compliance • A new Labor Contract Law aimed at providing better protection to employees went into effect in China on January 1, 2008. The law applies to both domestic and foreign-owned firms hiring employees in China. A U.S. company with employees in China, usually through its Chinese subsidiary, should acquaint itself with the mandatory requirements of this new law, which are very different than what is customary for a U.S. employer. • The law requires that an employer enter into a written employment contract with all employees and significant penalties can be levied against employers that fail to do so. The familiar “at will” employment concept has no place under the Chinese Labor Contract Law. The law only allows three types of contracts: fixed term, open-ended and project-based. An open-ended contract has no termination date and the employer can only terminate the employee under the specific grounds enumerated in the law. A fixed-term contract has an agreed-upon termination date, but an employee retained after two fixed-term contracts have expired is deemed to have an open-ended contract. The law also requires a mandatory open-ended term contract in certain situations where the employee has worked for the employer for more than ten years. A project-based contract’s term is based on the project’s length. • Furthermore, a non-competition clause is only valid if it meets certain statutory requirements and compensation is required to be paid to the employee during the non-competition term.
Product trade info • An update on production costs on the Mainland • Export confidence drifting while labour costs continue to rise • The HKTDC Export Index fell further to 35.3 in the third quarter of 2012, the lowest reading since the second quarter of 2009. The sub-index of new export orders of China’s Manufacturing Purchasing Managers’ Index (PMI) has dropped below the watershed of 50 since May this year.
China’s food prices increasing at moderating pace • China’s inflation reached a recent peak in July 2011 with the Consumer Price Index (CPI) increasing by 6.5% and food prices increasing by 14.8%, but has begun to decelerate since then. The CPI recorded a 1.8% increase in July 2012 before edging back to 2% in August 2012 while food prices grew 3.4%. In the first eight months of 2012, the CPI increased by an average of 2.9% and food prices grew by 5.9%.
Commodity prices moving up recently • The World commodity prices had been in a downward trend since March 2011, but have begun picking up since June 2012. According to the Economist Commodity Price Index, in mid-September 2012, the index of all commodity items increased by 10.3% compared to June 2012. The general metal price level has also started picking up more markedly since August 2012.
Language and key words to know • 你好Ni hao! (knee how)- Hello! • 2.你好吗Ni hao ma? (knee how ma) How are you? (Then again if you were a traveler and asked this question, you might not have a clue what their answer means!) • 3我很好.Wo hen hao (wohhun how)- I'm very well (thanks). • 4. 多少钱duo shaoqian? (dwoshaohchyen)? - how much (money) -For foreigners normally you don't have to worry because they will show you a calculator with the price on it or they can write it down, and you can write back whatever you are willing to buy something for. Be sure if you go to a place where you can bargain, to bring it down to a price that's pushing it and shocking for yourself. What sounds cheap for you, might still be a rip off.
5. 救命啊jiuming a! (joming a) Help! (if you're in danger) • 6. 请帮我一下qing bang woyixia (ching bang woh e siyah) Please help me (as a favour, inquiry etc) • 7. 谢谢xiexie (syeh-syeh) Thanks • 8. 电话dianhua (dyenhwa) phone • 9. 便宜点吧pianyidianba (pyenyidyarba)- make it cheaer
互惠互利 ( hu4hui4hu4li4) – mutual benefit, mutually beneficial Definition: Dependent on each other in a mutual or shared manner. Example: 双方可以协力工作，互惠互利。 Meaning: We can work together for our mutual benefit. • 贸易壁垒 ( mao4yi4 bi4lei3) – a trade barrier Definition: Any regulation or policy that restricts international trade. Example: 政府已解除了对进口小气车的贸易壁垒。 Meaning: The government has removed a trade barrier on importing foreign cars.
份额 (fen4e2) – a share of trade Definition: A part or portion of trade that is divided among a number of countries. Example:由于中国开始为世界市场输入商品，其他国家损失了很大贸易份额 Meaning: Since China started producing for the world market, other countries have lost their share of the market. • 国内生产总值 (guo2nei4 sheng1chan3 zong3zhi2) – gross domestic product (GDP) Definition: The total market value of all final goods and services produced in a country in a given year, equal to total consumer, investment and government spending, plus the value of exports, minus the value of imports. Example: 美国的国内生产总值是世界上最高的。
Hand gestures and body language • Two-Handed Pass and Recieve • When you meet someone new, they may give you a business card - with both hands. Make sure you accept the card with both hands. • ide your tongue • Many people in China consider it rude to show the inside of their mouth. That's why so many Chinese girls cover their mouth in a cute way while they laugh.
Touching or pointing to tip of one’s own nose with raised forefinger “It’s me” “I’m the one” (To Westerners, the gesture would seem slightly funny) • Using an open hand to cover one’s mouth while speaking (generally used by older people) To show confidentiality and secrecy; sometimes no meaning • Using both hands (when one would be enough) in offering something to a visitor or another person Respect • (When one’s tea cup is being refilled by the host or hostess) putting one or both hands upright, palm open, beside the cup “Thank you” • Upraised forefinger of each hand coming together in front of the body until the two touch Boy and girl in love; a good match
Safety while in that country • Unlike the U.S. where you might get mugged at gun-point — or parts of Europe where pick-pocketing tourists has been elevated to an art form — China on the whole is extremely safe. Crime against foreigners is rare. And violent crime — like mugging and rape — against foreigners is exceedingly rare.
Be careful about where and what you eat. • You should never miss out on the chance to try a variety of traditional Chinese dishes, but you should choose where you eat carefully. Take a close look at a restaurants or street vendor before eating the food. If there is no price indicated on the menu, ask how much an item is before you order it. Business owners sometimes inflate prices for tourists.
Be especially wary at train stations. For example, while waiting in line to buy your ticket, the Chinese tend to push up really tight (for fear of someone cutting in line!) so be particularly cautious about that guy behind you. Also, when at the ticket counter, don’t just casually leave your bag next to you.
References • http://www.huschblackwell.com/top-eight-legal-issues-regarding-entering-the-china-market/ • http://www.chinahighlights.com/travelguide/special-report/chinese-new-year/ • http://www.asianinfo.org/asianinfo/china/society_celebrations.htm • http://www.travelchinaguide.com/intro/cuisine.htm • http://www.nationsencyclopedia.com/economies/Asia-and-the-Pacific/China-INTERNATIONAL-TRADE.html • http://economists-pick-research.hktdc.com/business-news/article/Research-Articles/An-update-on-production-costs-on-the-Mainland/rp/en/1/1X000000/1X09PKUI.htm • http://www.hillslearning.com/2011/06/29/learning-business-chinese-3/ • http://www.china-window.com/china_business/doing_business_in_china/body-languages.shtml