Conformity Magazine - March 2009 - (Page 15) 1. 2. 3. 4. A strong local market of 7 million people with a per capita gross domestic product of $30K. Twenty million visitors per year. Shopping! Tailored suits! Disneyland! Coordination center for China for sourcing from China. Springboard for WFOE formation in China. Having an HK company own a WFOE in the PRC gives certain tangible benefits and protections as corporate transactions are performed under HK rule. Hong Kong is the center of East Asia, and is an entry point for the region. although China has some of the most strict (and, on paper, Draconian) measures (including the death penalty!) to deal with IP theft, enforcement is another matter. However, things are improving on this score, as China continues to open her processes in accordance with its standing as a member of the World Trade Organization (WTO), which mandates that regulatory and trade practices meet international standards. There are a variety of strategies to deal with this. For example, placing U.S. expatriates in key positions is one way to ameliorate the situation. This, however, can be an expensive proposition. Figure on doubling the cost of a U.S.-based employee to provide housing, schooling, return trips to the U.S., shipping of household goods, etc. Then, once on the ground, the situation gets complicated quickly as the worker (and possibly his or her family) have to deal with localization (cultural and familiarity), schooling in English, navigating the bureaucracy. It can, however be a rich experience and, depending on the location of the office, there are plenty of western amenities to be had (parts of Shanghai, for example, resemble any major city in the world, but on a huge scale). Other steps that a foreign company can take are fairly discrete and are, compared with 10 years ago, more open and make much more sense. 5. Establishing China Operations, Step 4: What Kind of China Entity? Either by taking an incremental approach through Taiwan or Hong Kong or going directly into China, there are numerous ways to put down stakes. These, too, can take an incremental approach. The first is an informal arrangement with a trusted presence (see “Guan xi” above). This arrangement can carry a high degree of risk, depending on the nature of your activities, and if there is any intellectual property (IP) involved. Protecting IP in China is a well-known challenge and, 901 Sheldon Dr., RTP (Cary), NC 27513 USA marCh 2009 Conformity 15 http://www.productsafet.com http://www.productsafet.com
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