Operating Business in China.

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1. Introduction.

The Viewpoint by Siva Yam (Establishing Entities in China: 2002:1-2)

Siva Yam who is President of the U.S.-China Chamber of Commerce. He is also Managing Director of Siva Yam & Associates, L.L.C., a private investment banking and consulting firm that specializes in micro and middle market companies that invest in China.

Siva framed his presentation with the statement "everything in China is illegal until proven innocent," to underscore his sentiment that "the people in China who make money are the ones who give the approvals [to do business in the country]."

Siva supported his opening remarks with the historical fact that China suffered 200 years of political turmoil catalyzed by the colonial aspirations of Western powers. Siva emphasized to the audience that that memory is still fresh for China, which "will not let anyone take control of it again."

A further complication to doing business in China is that "the South is not the same as the North," he said.

"The way you do business in Beijing or Shanghai or Shenzhen is all different." So, "the McDonald's theory does not work." The theory holds a company can sell the same thing across the entire country and expect success overnight. "Companies that source from China make more money than companies that try to sell into China," he added.

"A developing economy with Chinese characteristics," Siva said, "has government involved with business." He counseled that Western company representatives "must know the parties you're negotiating with." State-owned Enterprises (SOEs) take a long time to approve deals. Negotiators on the Chinese side see no personal compensation from the deal. "They need to see their security ensured in the future coming from the deal," he added. Private companies are faster to deal with since they operate from a profit-motive instead of...