Doing Business with China
Austin Zhao
Special Presentation for SWCA
November 10, 2011
© PATHWAY TO CHINA 2011
Brief Introduction
Pathway to China:
 Consulting -- China-business services
 Over two decades of hands-on experience
 Targeting Clients: US manufactures &
distributors
2
Business Model
The Old Way
Chinese
Co.
Chinese
Co.
$
Broker
￥
US Co.
Pathway to China
US Co.
PTC
3
Core Offerings
 Marketing & Selling to China
 Direct Sourcing from China
 Training & Coaching of Chinese
Business Culture
4
China
“Let her sleep, for when she wakes,
she will shake the world.”
Napoleon Bonaparte
5
Facts & Figures of China
 Economy: 2nd largest economy in the world (2010)
Countries
GDP (in trillion US$ )
Annual Growth Rate (%)
Unites States
14.66
2.8
China
5.87
10.3
Japan
5.46
3.9
Germany
3.32
3.5
Source: CIA World Factbook, 2010
 Foreign Exchange Reserves: about $3.2 trillion (Jun. ‘11)
 US Debt Purchased: $1.14 trillion (Aug. ‘11), #1 buyer
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Facts & Figures of China
 Middle Class: 150 million (2010), exceeding the
combined population of the U.K. and France. 400 million
more in the next 10 years,
 Colleges produce: 400,000 engineers and scientists per
year, more than U.S, Japan and Germany combined.
 Largest car market: 18 million car sales (2010).
 Largest Internet users: 485 million (end of June. ’11) more than a third of the entire population.
 Mobile phone subscribers: 927 million (end of Aug. ’11).
 Biggest consumer of steel, copper, and cement.
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Growth in US Imports from China
23.1%
400
5.1%
↑
Value in $ Billion
18.2%
↑
300
↑
338
322
296
288
23.8%
250
29.1%
↑
21.7%
200
22.4%
243
197
↑
152
↑
150
↑
Year 2010
365
↑
11.7%
350
-12.3%
125
102
100
Rank
Country
$B
1
China
365
2
Canada
276
3
Mexico
230
4
Japan
120
5
Germany
83
6
UK
50
7
Korea
49
8
France
39
9
Taiwan
36
10
Ireland
34
Not including Hong Kong,
4 Bs.
50
0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Year
Source: USITC
Database
8
Growth in US Exports to China
32.1
%
100
90
9.5%
18.1%
80
32.0%
Value in $ Billion
70
↑
71
70
55
22.2%
50
↑
28.9%
40
↑
30
19
42
35
↑
14.7%
20
↑
65
↑
20.5%
60
↑
↑
-2.6%
Year 2010
92
28
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Rank
Country
$B
1
Canada
248
2
Mexico
163
3
China
92
4
Japan
61
5
UK
48
6
Germany
48
7
Korea
39
8
Brazil
35
9
Netherlands
35
10
Singapore
29
Not including Hong Kong,
27 Bs.
10
0
2001
2002
2003
2004
2005
Year
Source: USITC Database
2006
2007
2008
2009
2010
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US – China Trade in General
Year 2010
US Statistics
Rank
1
2
3
4
5
Country
Canada
China
Mexico
Japan
Germany
China Statistics
Rank Country
1
EU
2
US
3
Japan
4
S.E. Asia
5
S. Korea
US & China – 2nd largest trade partner of each other
Source: USITC Database and Ministry of Commerce of China
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Driving Force of the Growth
 Political Stability
 Economic System Reform
 The People & the Culture
 Hard-working & Self-sacrifice
 Education
 Discipline
 Financial Prudence
11
Downside/Problems
 Increasing gap between the rich and the
poor → Inequality
 Increasing Labor Cost
 Ageing Population
 Environmental Pollutions
12
What We Buy from & Sell to China
Buy
Sell
1. Consumer electronics,
appliances
2. Computers & components
3. Telephone Sets & Cell phones
4. Toys & games
5. Furniture
6. Footwear
7. Apparel
8. Leather & travel goods
9. Lamps & Lights
10.Plastics Articles
1.
2.
3.
4.
Source: USITC Database
Soybeans
Scraps (Metal, Paper & Plastic)
Aircraft & Components
Computer parts, Communication
equipment
5. Chemicals
6. Cars
7. Cotton
8. Plastics
9. Machinery & equipment,
components
10.Optics & medical equipment
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Chemical Trade with China
Import
Export
1.
2.
3.
4.
1. Petroleum Coke
2. Polyethylene
3. Plastic Scrap
4. Polyvinyl Chloride
5. Diammonium Phosphate
6. Polypropylene
7. Acetone
8. Ethylene Glycol
9. Acrylonitrile
10. Fuel Oil #5-7
Rubber Articles (Tires & Gloves)
Plastics & Plastic Articles
Urea
Crude Oils and Oils obtained from
bituminous minerals
5. Kerosene-type Jet Fuel
6. Liquid Caustic Soda
7. Paraffin Wax
8. Artificial Corundum
9. Iron Oxides and Hydroxides
10. Sulfuric Acid
65.71% of All Chem. Imp.
52.03% of All Chem. Exp.
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Source: Ministry of Commerce of China &USITC Database
Brief on China Chemicals
 More than 36,700 manufactures with 6.9
million employees in the chemical industry
 # 1 producer in nitrogenous fertilizer,
phosphorous fertilizer, soda ash, caustic soda,
sulfuric acid, calcium carbide, pesticide,
dyestuff, tire, methanol and synthetic fiber
 #2 producer in ethylene, synthetic resin,
synthetic rubber
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Brief on China Chemicals
 2nd largest in chemical production
 2010: $1.20 trillion in 2010, 15% of whole world
chemical demand
 2nd largest in chemical consumption
 2010: $1.25 trillion, (import: $185.5 billion, 14.8% of
total China’s consumption)
 US Export to China: $17 billion - 33.84%
increase in 2010
 US Import from China: $13.4 billion - 29.8%
increase in 2010
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Challenges/Risks
A man ordered size 14.5 slipper and got
size 1450 (82.7” x 51.2” x 25.6” )
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Challenges/Risks
 Quality Inconsistency
 Risk in Advanced Payment
 Bureaucracy & Corruption
 Cultural Differences
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Conclusion
1. Everything is possible
2. Nothing is easy
3. When you are very optimistic,
please refer Point # 2
4. Before you give up, please refer to
Point # 1
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Thank You!
Austin Zhao
Pathway to China
www.pathwaytochina.com
austin@pathwaytochina.com
Tel: 713-954-4878
Fax: 281-966-1878
Cell: 281-630-6666
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