“ The Business Network for International Trade”

Castlet Ltd Setting Up A Business In China By Bryan Carr

Castlet Limited Designers and manufacturers of industrial process equipment. High Voltage power supplies for Electrostatic Precipitators. Applications in Power Stations, Steel and Cement works, and Incineration Plants.

History By % of UK market. By early % world market outside of China, USA and Russia. By 2005 had supplied 19 new power stations in China. Always interested in having a company in China. Company founded in 1974.

GROWTH OF COAL FIRED POWER STATIONS IN CHINA 19492MW MW MW MW MW Before 2004 emission limit 200mg/m ³ After 2004 emission limit 50mg/m³

October 2004 gave paper at Chinese pollution control conference. Many Chinese companies wanted us to joint venture with them. Selected Shanghai Resistor a state owned company which was up for sale. Wholly Foreign owed enterprise (WFOE).

Shanghai Electric Group Shanghai Enterprise Development Shanghai Petrol Chemical Company Shanghai Resistor

Shanghai Resistor Minhang District Employed 340 people. 4,700m² manufacturing/office space. Output capability 400 power supplies/annum. Present output 100 per annum. Average wage £75/month.

MINHANG DISTRICT Located SW suburbs of Shanghai. About 50 minute drive from centre. Population about 750,000. Inward investment by 2400 companies. Total FDI £5 billion from 40 countries. Exports £1.4 billion/annum.

QUALIFICATONS TO BID LETTER TO MOTHER COMPANY –Your company profile –Accounts showing assets –Testimonials –Reason you want to buy –Products you will introduce to China –How you will make workers conditions better at work

MUST AGREE Employ minimum of 70 people for minimum of 3 years. Wage structure for different classes of staff To pay: –Medical insurance –Pensions –Unemployment insurance –Housing fund –Total 62% add on costs

ASSET VALUATION Impartial Asset valuation. Public announcement of sale, asset value and registered capital. 20 working days to register interest for qualified bidders.

DOCUMENTS REQUIRED FOR REGISTER OF INTEREST The following documents in both English and Chinese, notarised by Solicitor with legal authority to notarise documents. Foreign and Commonwealth Office. Chinese embassy.

Letter from bank sufficient funds. Minutes of shareholders meeting authorising the company to register interest. Signed by all shareholders. Share subscription agreement. Memorandum and Articles of Association. Company certificate of incorporation.

21 September 2005 – Castlet only bidder. Due diligence revealed a horror story. Many of the debtors did not exist. Over inflated assets. Motor vehicles with no registration documents. Overall very poor Quality Audit.

Plan B Identified suitable premises just a short distance from Shanghai Resistor. Invited senior managers to view. Priced all equipment needed. Made sure Mother Company were aware of Plan B.

Mother company agreed only to sell certain assets. Legal agreement and warranty to ensure Castlet only responsible for events after signing.

DOCUMENTS REQUIRED TO SET UP A WOFE Five independent Chinese names Applications letter Business registration certificate Passport copy of legal representative Bank reference letter Office leasing agreement – chopped by landlord Passport copy of proposed Board and CV with 2 two inch photographs Environment protection, fire protection and sanitation certificates Tax, finance, customs, VAT registration certificates Foreign exchange licence

In parallel and independent of all this activity. Located suitable manufacturing of printed circuit boards. Made sure nothing in documents related to Castlet. Order via reliable trading company. Cost reduction of about 50% from UK supply.

“ The Business Network for International Trade”