1. Chapter 14
Qīngmíng Shànghé Tú (section)

2. 14. Doing Business in China
14.1 Starting a business 14.2 Ease of doing business across China 14.3 Understanding China’s business culture 14.4 Managing cultural differences

3. Keywords: business, business culture,
foreign invested enterprise (FIE),
registering property,
getting credit,
enforcing contracts,
Chinese culture,
cross-cultural negotiation

4. 14.1 Starting a business
First things first Selecting a business type Drafting a business plan Multiregional difference

5. Determinants of an ideal location for your business (Lapowsky, 2010):
What are your transportation needs?
What are your logistical needs?
Are you relying on goods that may be imported to China?
How can you get the goods from the port to your location?
What government inspections and restrictions will you be subject to?

6. Figure 14.1 How long does it take to start a business in different parts of the world?
Source: World Bank (2008, p. 9).

7. Table 14.1 Time needed for starting a business, selected nations and Chinese provinces
Days in 2010
Chinese provinces
Days in 2006
Austria, Palau 28
Guangdong
Tanzania 29
India, Russia 30
Zhejiang
Bahamas, Benin, Nepal, Nigeria 31
Jiangsu
Burundi, Poland, Thailand 32
Guyana (CR), Israel, Kenya 34
Jilin 33
Cameroon, Kuwait, Paraguay 35
Shanghai, Sichuan
Sudan 36
Hubei
Djibouti, Guatemala 37
Beijing, Jilin
China, Sri Lanka, Tajikistan 38
Hainan
Malawi, Nicaragua, Seychelles, Vanuatu 39
Chongqing
Côte d'Ivoire, Lesotho 40
Fujian
Guinea, Peru 41
Liaoning, Tianjin, Henan
Trinidad and Tobago 43
Anhui, Heilongjiang, Hebei, Hunan, Shaanxi, Yunnan
42-43
Bangladesh, Belize 44
Xinjiang
Bhutan, Fiji 46
Jiangxi, Guangxi
Spain 47
Gansu
West Bank and Gaza 49
Inner Mongolia 48
Bolivia, Vietnam 50
Guizhou
Papua New Guinea 51
Qinghai
Philippines 53
Shanxi, Ningxia 55
Sources: World Bank (2011, pp ) and Annex B.1.

8. 14.2 Ease of doing business across China
Registering property Getting credit Enforcing contracts Summary

9. Sources: World Bank (2011, pp. 145-205) and Annex B.2.
Table 14.2 Time needed for registering property, selected nations and Chinese provinces
Nations
Days in 2010
Chinese provinces
Days in 2006
Italy 27
Chongqing 28
China, Luxembourg, Mali 29
Shanghai
Bahrain, Chile, El Salvador, Zimbabwe 31
Jiangsu
Austria, Panama, Kosovo, Philippines
32-34
Niger, Hong Kong, Iran
35-6
Guangdong 35
Tajikistan 37
Fujian
Ireland, St. Vincent and the Grenadines 38
Gabon, Tunisia, Zambia 39
Jilin, Sichuan
Djibouti, Germany, Kazakhstan, Ethiopia
40-1
Albania, Brazil, Denmark, Mozambique 42
Tianjin
Russia, Chad, India, Swaziland
43-4
Latvia 45
Xinjiang
Paraguay 46
Anhui
Algeria, Morocco, Venezuela 47
Inner Mongolia
Liberia, Pakistan 50
Jiangxi, Shaanxi, Zhejiang
Iraq 51
Liaoning
Argentina 52
Hunan 53
Congo, Dem. Rep. 54
Jillin 55
Congo (Rep.), Jamaica, Kuwait
Heilongjiang
Cambodia, Vietnam, Macedonia
56-8
Hebei 58
Burkina Faso 59
Beijing, Ningxia
Belize, Dominican Rep., Rwanda 60
Hubei, Henan
Côte d'Ivoire, São Tomé and Principe 62
Shanxi
Gambia, Uruguay 66
Yunnan, Guangxi
Fiji 68
Qinghai 69
Central African Republic 75
Hainan 76
Grenada, Uganda 77
Guizhou
Czech Republic, Eritrea, Uzbekistan 78
Gansu
Sources: World Bank (2011, pp ) and Annex B.2.

10. Table 14.3 Time needed for enforcing contracts, selected nations and Chinese
Days in 2010
Chinese provinces
Days in 2006
Jiangsu
112
Singapore
150
Guangdong
120
Uzbekistan, New Zealand
Jilin
210
Belarus, S. Korea, Azerbaijan
225-37
Shaanxi
235
Kyrgyz Republic, Rwanda
260
Liaoning
Namibia
270
Ningxia
Lithuania, Guinea
275-6
Hubei
277
Hong Kong, Norway, Russia
280-1
Armenia, Georgia
285
Henan, Zhejiang, Chongqing
285-6
Heilongjiang, Shanghai
290-2
Vietnam
295
Sichuan
United States
300
Anhui, Shanxi, Tianjin
Latvia, Mongolia, Luxembourg
309-21
Hainan
310
France
331
Inner Mongolia
330
Ukraine
345
Beijing, Fujian
340-2
Japan, Moldova
360-5
Yunnan, Jiangxi
365
Macedonia, Mauritania, Finland
370-5
Denmark
380
Hunan
382
Albania, Kazakhstan, Germany
390-4
Xinjiang
392
Australia, Hungary, Austria, Fiji
395-7
Guizhou, Guangxi, Hebei
397
China, Cambodia, Eritrea, UK
Mexico, Iceland, Switzerland Turkey, Peru
415-28
Tajikistan, Lao PDR
430-43
Gansu
440
Nigeria
457
Qinghai
458
United Arab Emirates
537
Brunei, Nicaragua
540
Jillin
Montenegro, Niger, Portugal
545-7
Sources: World Bank (2011, pp ) and Annex B.4.

11. Table 14.4 Ease of doing business in China – top and bottom five provinces
Rank no.
Starting a business
Registering property
Getting credit
Enforcing contracts 1
Zhejiang
Shanghai
Fujian
Guangdong 2
Jiangsu 3 4
Shandong 5
Shaanxi … 26
Ningxia
Shanxi
Xinjiang
Anhui 27
Henan
Hunan 28
Guangxi
Guizhou
Qinghai 29
Gansu
Yunnan 30
Note: Hong Kong, Macau, Taiwan and Tibet are excluded from the rankings.
Source: Annex B.

12. 14.3 Understanding China’s business culture
Collectivism versus individualism What can(not) be done in China

13. Remember that:
4 is regarded as unlucky, as “four” it sounds similar to the word for death.
8 is regarded as very lucky, as “eight” sounds similar to the words for prosperity and wealth. 3 is also lucky, as it sounds similar to the word for “life” in Cantonese.
9 is also positive as it sounds like the word for “eternity” or “long term”, while 6 sounds similar to “good progress.”
Red and yellow/gold are regarded as lucky, but avoid white, which is associated with mourning.
Use images of auspicious animals: dragon, phoenix, unicorn, tortoise (the Buddhist symbol of learning), crane and fish.
Images of the Great Wall indicate stability and reliability.
Also avoid black borders around names or photos of people, since this is also associated with death.

14. 14.4 Managing cultural differences
Obstacles to cross-cultural exchanges Tips in cross-cultural negotiations

15. Table 14.5 Eastern versus Western cultures: communication styles
Western styles
Eastern styles
Direct
Indirect
Blunt
Diplomatic
Polite
Very courteous
Talkative
Reserved
Extrovert
Introvert
Persuasive
Recommendations
Medium-strong eye contact
Weak eye contact
Unambiguous
Ambiguous
Decisive
Cautious
Problem solving
Accepting of the situation
Interrupt
Does not interrupt
Half listens
Listens carefully
Quick to deal
Courtship dance
Concentrates on power
Concentrates on agreed agenda
Source: Lewis (2003).

16. Remember that:
Senior managers enter into the meeting room first, followed by junior staff;
In formal occasions, only senior members on both sides are expected to talk, unless junior members are invited to do so;
expect a long lunch breaks;
“face” is important;
the power of the negotiator may be limited, and sometimes assistants and secretaries to top managers are even more useful.

17. Indicators for the ease of doing business in China
Annex
Indicators for the ease of doing business in China

18. Cost (% of provincial GDP per capita)
B.1 Starting a business
Province
Procedures (number)
Time (days)
Cost (% of provincial GDP per capita)
Rank
Anhui 14 42
19.4 27
Beijing 37
3.2 10
Chongqing 39
9.5 17
Fujian 12 40
6.7 7
Gansu 47
14.1 29
Guangdong 13 28
6.3 3
Guangxi 46
16.5
Guizhou 50
26.6 30
Hainan 38
12.1
Heibei
9.8 16
Heilongjiang
11.9 18
Henan 41
11.6
Hubei 36
13.6 15
Hunan
14.6
Inner Mongolia 45
7.9 11
Jiangsu 31
5.8 2
Jiangxi 21
Jilin 8
Liaoning 6 9
Ningxia 55 26
Qinghai 51 23
Shaanxi 43
15.2 25
Shandong 33 4
Shanghai 35
3.1 5
Shanxi
9.3 20
Sichuan
19.1
Tianjin
3.7
Xinjiang 44
Yunnan
13.9
Zhejiang
5.7 1
Note: Each province is represented by its capital city. Hong Kong, Macau, Taiwan and Tibet are excluded. Source: World Bank (2008, p. 38).

19. Cost (% of property value)
B.2 Registering property
Province
Procedures (number)
Time (days)
Cost (% of property value)
Rank
Anhui 10 46
5.6 17
Beijing 59
3.1 12
Chongqing 7 28 9
Fujian 37
4.1 3
Gansu 78
7.8 29
Guangdong 8 35
3.7 2
Guangxi 68
6.8 30
Guizhou 77
12.6
Hainan 16 76
4.8 23
Heibei 58
3.2 21
Heilongjiang 55
6.1 14
Henan 11 60
5.1 27
Hubei
6.2 25
Hunan 53
6.9 24
Inner Mongolia 47
4.6 18
Jiangsu 31 5
Jiangxi 50 20
Jilin
4.2
Liaoning 51
Ningxia
4.4
Qinghai
5.3 19
Shaanxi
Shandong 39 4
Shanghai
3.6 1
Shanxi 62
5.4 26
Sichuan
3.9
Tianjin 42 6
Xinjiang 45 13
Yunnan 66 22
Zhejiang
Note: Each province is represented by its capital city. Hong Kong, Macau, Taiwan and Tibet are excluded.
Source: World Bank (2008, p. 38).

20. B.3 Getting credit – creating and registering collateral
Province
Time (days)
Cost (% of loan value)
Rank
Anhui 20
2.8 14
Beijing 15
2.7 7
Chongqing 5 19
Fujian
2.3 1
Gansu 8 29
Guangdong 11
2.4 3
Guangxi 47
3.9 30
Guizhou 17
6.9 25
Hainan
5.1 18
Heibei 9
Heilongjiang 13
3.1 10
Henan 16
3.3
Hubei 12
Hunan
3.7
Inner Mongolia
Jiangsu
2.1 2
Jiangxi
5.9 24
Jilin 22 21
Liaoning
Ningxia
3.6 27
Qinghai
3.8
Shaanxi 4 28
Shandong
2.9
Shanghai
Shanxi
Sichuan
3.2
Tianjin 6
Xinjiang
3.4 26
Yunnan 23
Zhejiang
Note: Each province is represented by its capital city. Hong Kong, Macau, Taiwan and Tibet are excluded.
Source: World Bank (2008, p. 39).

21. Chapter conclusion: Although the laws and regulations are fundamentally the same throughout the country, provincial and local officials have a large degree of discretion in terms of the enforcement of national legislation. This resulted in the fact that investment climate varies widely across provinces. In this chapter, in addition to demonstrating the fundamentals of doing business in China, we will compare, internationally and interprovincially, four key indicators (starting a business, registering property, getting credit, and enforcing contracts). While these indicators are not a full reflection of the local investment climate, they do suggest that coastal areas scored highest overall on the ease of doing business. At last, this chapter gives some details about China’s business culture.

22. Suggested reading
Clarke, Donald C. (2007). “Legislating for a Market Economy in China,” The China Quarterly, Volume 191, Du, Julan, Yi Lu, Zhigang Tao (2008). “Economic institutions and FDI location choice: Evidence from US multinationals in China,” Journal of Comparative Economics, Volume 36, Issue 3, pp Graham, John L., N. Mark Lam (2003). “Chinese Negotiation”, Harvard Business Review, Oct 1. Greeven, Mark and Frieder Munk (2010). “Remade in China: Foreign Investors and Institutional Change in China,” Regional Studies, Volume 44, Issue 8, October, pp Greif, Avner and Guido Tabellini (2010). “Cultural and Institutional Bifurcation: China and Europe Compared,” American Economic Review, Volume 100, Issue 2. Hornstein, Abigail S. (2011). “Where a contract is signed determines its value: Chinese provincial variation in utilized vs. contracted FDI flows,” Journal of Comparative Economics, Volume 39, Issue 1, pp Javidan Mansour, and Nandani Lynt (2005). “Changing Face of Chinese Executives,” Harvard Business Review, Dec 1. Liebman, Benjamin L. (2007). “China's Courts: Restricted Reform,” The China Quarterly, Volume 191, pp

23. Suggested reading
Magni, Max, and Yuval Atsmon (2010). “A Better Approach to China's Markets,” Harvard Business Review, Mar 1. Potter, Pitman B. (2007). “China and the International Legal System: Challenges of Participation,” The China Quarterly, Volume 191, pp. 699 – 715. Qin, Julia Ya (2007). “Trade, Investment and Beyond: The Impact of WTO Accession on China's Legal System,” The China Quarterly, Volume 191, pp. 720 – 741. Scot, Murray Tanner and Eric Green (2007). “Principals and Secret Agents: Central versus Local Control Over Policing and Obstacles to ‘Rule of Law’ in China,” The China Quarterly, Volume 191, pp Tse, Edward (2010). “Is It Too Late to Enter China?” Harvard Business Review, Apr 01. Vanhonacker, Wilfried (1997). “Entering China: An Unconventional Approach,” Harvard Business Review, Mar 1. World Bank (2008). Doing Business in China Washington, DC: The World Bank Group and Beijing: Social Science Academic Press (China). World Bank (2011). Doing Business Washington, DC: The World Bank Group.