Taking a comparative look at real estate prices in Los Angeles and Beijing it’s hard to fathom how the real estate market in China can continue to grow. Let’s take a look.

According to statistics provided by trulia.com the Price of Los Angeles Real Estate ranges from $329k up to $14,000k for listing prices with avg at $493k – $603k, and avg sales price of $240k to $2,112k (with 360k-441k as mid-range), and median sales price as 218k to 1,790k with avg around 327k to 400k.

But on closer look, if we examine the price per square meter (1 square meter =~ 10 square feet) we find the following:

• Average prices/square meter in Los Angeles range from $2,230 to $2,720 (roughly 14,000 RMB to 17,000 RMB)
• In comparison Average prices/sq m in Beijing range from (20,000 RMB to 35,000 RMB, with lowest prices around 18,000)

Morea Reading material:

China Real Estate Price Listings:

http://beijing.aifang.com/loupan/s?m=1&p7=18

http://beijing.aifang.com/loupan/

http://house.focus.cn/

http://bbs.soufun.com/board/salon/

http://www.soufun.com/news/

http://bj.soufun.com/

Analysis on Beijing’s Real Estate:

http://www.chinadaily.com.cn/bizchina/2007-06/07/content_889266.htm

http://www.zerohedge.com/article/chinese-real-estate-bubble-pops-beijing-real-estate-prices-plunge-27-one-month

http://realtybiznews.com/china%E2%80%99s-residential-real-estate-markets-cooling-off/9874726/

http://en.wikipedia.org/wiki/Chinese_property_bubble

Los Angeles Real Estate Heat Map:

http://www.trulia.com/home_prices/California/Los_Angeles-heat_map/

1.  Relationship-based versus transaction-based

Relationships come before economics in China whereas in the U.S. economics generally take a front row seat to relationships. Chinese people do business with people they know and trust.

Rather than getting into business discussion immediately once you meet, take time and get to know your potential partners abroad; invest now for payoff later. Once trust has been built, Chinese business people will gladly share their thoughts with you and will give you honest feedback. One way to build the trust and rapport is to hang out outside the office hour, for instance, invite them to lunch or dinner.

2.  Face to face interactions versus doing business without meeting in person

Most of Chinese business activities and deals are made through face-to-face interactions. To successfully launch in China, you will need to visit China and build relationships with your partners through frequent face-to-face interactions. To accommodate Chinese business culture norms, many American companies have opened offices and hired locals in China to facilitate business in this foreign market. Other American companies form partnerships with local companies to bypass the need to establish a branch or office abroad.

3.  Negotiations: prepare to haggle

There is a huge difference in the way negotiations take place in the U.S versus China. Chinese people tend to haggle and to believe that there is room for negotiation on every deal. U.S companies need to make a padded proposal. Always start with a reasonable proposal regardless and expect multiple rounds of negotiations.

4.  Entertaining is a part of business

In China, entertaining (hosting) is an integral part of the business culture. In most instances, inviting potential partners or employees to dinner is appropriate and considered an informal meeting. A dinner with potential business partners may be used as a way to build trust and deepen a relationship. It may be used as a way to solicit feedback that you may be unable to obtain during the standard workday or in the typical work setting. A dinner or other social outing is also an appropriate way to follow up with deals informally agreed upon.

5.  Communication style

Chinese people tend to be quiet and reserved in business settings while Americans tend to be outspoken and eloquent. This cultural difference may make it challenging for U.S. companies to obtain the information they seek such as concerns, feedback, outright rejections, etc. Many times it may take a series of formal and informal meetings to reach your desired goal.

6.  Closing a deal

Unlike in the U.S., in China the signing of a contract does not mean immediate business.  After a contract is signed, understand that this is the beginning of the arrangement; follow up with your new partner and look for actions.  Actions taken on the Chinese company’s or partner’s parts indicated commitment.  Do not hesitate to suggest specific actions such as having a detailed discussion on next steps or suggesting a trial purchase order.

7.  Gifting

Exchanging gifts has a long history in Chinese social and business culture. The good gifts include something representing the city or state you are from or things with your company logo. Gifts do not have to be expensive. It is something special that this person may not have. When you present a gift to an individual, it should be done privately. You should state that this gift is a gesture of friendship rather than business. When you gift to an organization, it should be presented to the leader of the organization. Gifts to avoid include scissors, clocks, handkerchiefs and others with negative meanings in China. Please run your gift ideas by several Chinese friends, family members, or co-workers before sending them to your current or potential business partners.

** The above content is prepared by Casey Xiao-Morris at Leverage China, LLC, a specialist in China market entry service. Contact casey@xiao-morris.com for any inquiries you may have.

1. Targeting China as one big market
One major error many individuals make is to assume that China is one market; China is NOT one big market. Why not? For 3 reasons:
I. It has over 600 cities. The existing distribution network and infrastructure do not support a product launch simultaneously cross the country
II. The living standard varies from city to city. The average per capita income is about USD 6000. A premium price product seems too expensive in a small city, but it does not seem too expensive in mega-cities like Beijing and Shanghai with much higher per capita income
III. There are distinctions in its culture, cuisines, dialects, climate, buying habits and more

When you introduce a premium product, targeting China as one market will dilute your efforts, if not drain you of resources altogether. You must first identify where viable markets exist within China. For example, you may need to focus on the upper-middle and upper classes of China with larger disposable incomes or perhaps you wish to target a segment of the population who consumes more of one good or product (e.g. a tomato-based food product will perform better if targeted to northern China given that the cuisine in this region uses significantly more tomato-based products in its dishes).

2. Implementing a U.S. marketing strategy in China’s market
One of the most common mistakes U.S. companies make is to take their U.S. marketing strategy and use it cookie-cutter style—copy and paste the strategy into the Chinese market. Big mistake. Different markets, different strategies. One example may be a U.S. company attempting to distribute spirits through grocery stores in China may have little to no success (versus wild success here in the U.S.) given that most spirits in China are consumed in restaurants. Understanding the context of our industry across cultures is crucial to developing a sustainable and effective marketing strategy.

3. Acting without market research
China is a very different market than U.S. in that your success in China depends on your understanding of your unique market. You must first thoroughly understand your market in order to develop a full marketing strategy. Competition in China may look vastly different from your competition here in the states. Marketing across regions in China should vary to match the unique culture and focus of that particular population. Stepping blindly into the Chinese market can be a major downfall for many.

4. Being unwilling to localize the product
It is rare that a product appropriate for U.S market is perfect for a new market; you must modify a product to make sure you’re serving your new market as best you can otherwise your success may be short-lived. Moving your product or service to China is much more than a simple re-packaging process. In China, most, if not all, companies would benefit from localization. Understand your local Chinese consumers and they will value you. For example, Hunt’s spaghetti sauce is sold in 26.5 ounce jars in the U.S. In contrast, this same product is sold in 4.4 ounce jars in China which accurately reflects the smaller family size of Chinese households.

If you exhaust your U.S. market opportunities and feel rushed into stepping into a new market simply to churn sales, slow down and complete your due diligence. Doing so will save you money and time and will produce greater success in the long run.

5. Failing to clarify and verify validity of your reasons to export
A high-end skin care company has an excess of inventory. They never export in the past, but they are looking for ways to liquidate their products by exporting to China. They begin investing money and people resources to making the shift; however they fail to realize that imported beauty products are highly regulated in China and no buyer in China is willing to move through the compliance filing for one-time transaction. Clarify why you wish to export, what your goals are in exporting to China, and how you might handle any bumps you may anticipate in exporting your product or service.

6. Plan to do everything on your own
If your organization has never exported and worked with companies in foreign countries, there is a huge chance that you will make costly and irreversible mistakes along the way. Map out your critical unknowns and the potential impact each might have on our success. Make sure to speak with a sufficient number of individuals regarding your decision such that you are prepared with knowledge and resources required to succeed in a foreign market.

** This above content is prepared by Leverage China, LLC (http://leveragechina.com/), an import and export management consulting firm. We are committed to assisting you until you are successful in Chinese marketplace. Please contact us at casey@xiao-morris.com

Why is the import registration so confusing?

1. The Chinese regulations are ambiguous and conflicting. For instance, dietary supplements have different definitions in the U.S. than they do in China. In the U.S. this refers usually only to vitamins or minerals while in China it can be anything from vitamins, herbs, amino acids or other specialty nutrients. In fact, there is no definitive list of how an ingredient might be classified – food, dietary supplement, TCM (traditional Chinese medicine) or drug. Approvals are made on a case-by-case basis and rely heavily on how the registration paperwork is filled out.

2. Overbearing rules and procedures. Although many major authoritative bodies such as the State of Food and Drug Administration and the Certification and Accreditation Administration have published a good deal of English information online, the lengthy application process and truckload of required paperwork have made many western business people cringe. Furthermore, there is not a quick way to estimate the cost associated with the application.

How do you deal with the initial registration and certification?

1. Find out first if your product is regulated and which agency oversees your product. There is a chance that your product is regulated by the Chinese government. You want to find out right away if your product is required to have any import registration and certifications. I have referenced major agencies overseeing a large variety of products and industries at the end of this article.

2. Outsource to a specialist that can make your life easier.

As I mentioned early, the Chinese import rules and procedures in your industry can be overbearing and confusing. You may consider outsourcing the task to an expert who deals with these issues on a regular basis. There are two types of specialists that can help you; 1) import regulatory requirement consulting services that do nothing but dealing with the government agencies and application paperwork, 2) specialty logistics companies such as import and export custom brokerage houses that specialize in clearing these type of goods and take care of the entire process for you.

3. Your distributor/importer in China should be able to help you with regulatory requirements. Say for instance that you are a premium packaged food manufacturer in the U.S.; it is likely that the distributor you are seeking in China has had experience representing foreign products in your category. They have likely dealt with all sorts of import regulatory requirements in the past. With their support, you may find that overbearing import registration and certification compliances can be accomplished.

References

State of Food and Drug Administration – regulates the imported medical device registration, drug/health food registration, pharmaceutical packaging

Certification and Accreditation Administration – regulates a large group of products, for example, Electrical wires and cables, Circuit switches, electric devices for protection or connection, Low-voltage Electrical Apparatus, Low power motors, Electric tools, Welding machines, Household and similar electrical appliances and more

State Administration of Radio Film and Television – regulates the network access license and CAS/SMS certificate for television and radio broadcasting products

China Railways Product Certification Center – regulates the CRCC certificate for railway and locomotive products

Ministry of Industry and Information Technology – regulates a lot of electronic information products, the network access license for telecommunication products, SRRC license for radio frequency (RF) and satellite products.

Ministry of Public Security – regulates the sales permit of computer information system security hardware and software products.

China Certification Center for Fire Products – regulates the pattern approvals of other fire products, like fire extinguishing agent, fire extinguisher, fire-proof door, fire hydrant, fire nozzle, fire coupling, fire emergency lamp, gas detect & alarm equipment and fire-proof materials, etc.

** The article is prepared by Leverage China, LLC, an import and export consulting firm specializing in China market entry services.

What business lessons can you pick up from this image?

To understand and do business with China it’s extremely important to understand the lessons learned from the World Expo in Shanghai.

Here’s a quick glance at some of the lessons you should try to lookout for when visiting the Expo:

1. From the architecture, one can get an understanding of Chinese mentality. The China Pavilion architecture, aptly placed in the key place of the park, shows the mentality of “Middle Kingdom” with it’s centrally pointing tops, as if it were a backwards pyramid which rested solely on the heart of China. The giant building is an homage to traditional Chinese architecture with a “modern” twist. Read about the architect’s vision here: http://www.expo2010.cn/expo/expo_english/documents/
   em/node2326/userobject1ai49145.html
2. With torrents and torrents of people lining up outside each pavilion waiting to get in and get tickets it’s easy to recognize the differences between the way different countries operate their pavilion.  Obviously, the Chinese one is a major attraction to all Chinese and foreigners, so expect packed crowds. Notice the differences in service from each country.
3. With regards to the shows. It’s easy to see what Chinese people find interesting is definitely different from what the foreigners might find interesting. In fact, Chinese people are so used to seeing masterful performances by Chinese acrobats, or blazing speed demonstrations of Kung Fu by professionals raised to train to perfection from as young as 8 or 9, that certain kinds of demonstrations leave Chinese feeling quite unimpressed. Yet, ironically enough, the easiest steps in a Salsa dance show, or a Tango demonstration, will leave Chinese people breathless. Observe the differences and keep them in mind next time you want to impress your Chinese business partners.
4. Notice the positioning of the buildings. A lot of thought has gone into the exact locations of each of the pavilions. This can help understand the love of face and of giving face that Chinese people practice.

Anyways, there are countless more lessons to be learned. Which ones did you learn from the Expo?

It decided to leave a lot of it’s R&D facilities, as well as mobile and a few other of it’s holdings in the maindland, and the google.cn, although shut down, is now being redirected to it’s Hong Kong servers at google.hk. Allowing Google to still serve Chinese people with uncensored results from within China.

I have to say this was an interesting move and kind of the best option left for Google, after cornering itself with the announcements of pulling out and uncensoring. This will allow it to operate within China, and abide by the unique laws in Hong Kong which allow it to stop censoring it’s results.

It’s not all Green on the other side of China, however. Google now potentially faces being blocked from within the mainland and it’s search results not being available, as well as it faces challenges in transfer speed across the mainland.

To read more about Google’s Official Announcement, check out http://googleblog.blogspot.com/2010/03/new-approach-to-china-update.html

“Google had a strong fourth quarter, with 17% year over year revenue growth,” said Eric Schmidt, CEO of Google. “Given that the global economy is still in the early days of recovery, this was an extraordinary end to the year. Our performance in 2009 underscored the strength of our management team, the resilience of our business model and the pace of innovation within our product and engineering teams, which continued unabated throughout the downturn. As we enter 2010, we remain hugely optimistic about the internet and are continuing to invest heavily in technological innovation for the benefit not only of our users and customers, but also the wider web.”

http://investor.google.com/releases/2009Q4_google_earnings.html

ON CHINA:
Eric mentioned that the China issue has been covered well in the press, so he just summarized 3 separate facts
1. The Cyber attack on google which probably eminated from China, but whose true origins are unknown. He did assure that Google has made changes to prevent attacks.

2. Discovered monitoring of human rights activists.

3. The made a decision for these and other reasons, to no longer willing to apply censorship rules in China. As of today business of China is unchanged. They continue to follow the laws, but within a short time, they will make changes there.
Eric Schmidt assured that they do wish to remain in China, that they like Chinese people and their employees there, but that they want to do business on different terms. He reassured that they are quite committed on staying there.

The gist of the story, if you still haven’t heard of it, basically, they recently suffered cyber attacks from super high-tech hackers, on top of the recent conflicts they’ve been having with Chinese writers with Google Books, not to mention June’s 2009 incident where Google was shut down for a couple of hours due to “porn” being shown through Google results.

Anyways, now Google seems to be completely fed up and willing to walk away from their China operations, which have been rumored to generate around $300 million dollars in revenue in 2009 http://www.nytimes.com/2010/01/15/world/asia/15google.html

Others argue that even though Google’s market share is so low, only around 30 some percent, the Chinese Internet market is huge and growing amazingly fast, so future profits would be too big for Google to leave behind. Google has commented that this isn’t a PR campaign, nor are they considering pulling out because of profits being low or not having enough market share,  but they claim that they are actually doing it because they no longer want to continue censoring their results.

Ultimately, in the west, Google is mistakenly seen as a hero for standing up to a country whose Government and culture we understand very little about and due to that often fear, and show a lot of disrespect towards. Which sets the way very nicely for Google in the future with their plans of “world domination.” All jokes aside, what’s interesting is the show of differences and similarities between both Chinese and American culture.

I’ve read countless of comments praising Google for not willing to follow Chinese law, or for no longer willing to cooperate with what they think to be an “evil” government. On the other side, I’ve heard from Chinese people who feel that they don’t need Google, nor any westerner who thinks himself so righteous and all-mighty to quickly criticize the Chinese way of life and the Chinese government. Keep in mind that western studies held in China have determined the government’s approval rating to be around 70-75%. Some other Chinese think they can do fine and well on their own without a foreign company trying to dictate them how they should do things.

Whether or not Google leaves remains to be seen. What’s a bit scary is the technology that was developed to pull off hacking into Google, Yahoo, and other large corporations. McCafee released a statement in their blog make sure you read up on it, because this truly marks the beginning of a new kind of war looming around if we don’t change our behavior and all start working together as a global community.

So what will it mean for China and the world if Google does leave?

Ultimately, the Chinese government won’t mind much. They will let Google go, but they will try to create new policies to make sure other Multi-national companies do not feel afraid of doing business there. This might pave way for new policies protecting technology companies, since right now China has a huge initiative to encourage technology developments, technological schools, such as the countless software colleges now recruiting foreign talents, etc,  they will make sure that investment is safe.

Furthermore, the Chinese government will probably crack down on these free-for-all proxies that have been a flock of illegal activity to show the world that they are moving forward to responsible development and show the world they would be a suitable country for leadership. Hackers will just end up using Proxies on other countries in the world where policying of the Internet isn’t as strict, and we will continue to battle cyber-espionage, and cyber-wars for years to come.

I’m pretty sure that business will go on as usual. Critics of China will continue to criticize instead of learning to understand the culture better, and China will continue it’s economic trends.

As for the gaps left behind by Google, Baidu will probably increase their share up to 70%, the rest of the people whom had been won over from Baidu to Google will find alterior means of search, which will lead the way to Bing gaining a larger share, probably around 5-10% by 2011.

I expect a larger number of Chinese will learn how to access resources outside of China, or what they call “jumping the [Great] fire-wall,” so they can get unfiltered results from Google.com, and the internet. But I don’t think that will create any instability from within China.

-Edit – 1/16/2010

Inside Story with a word from Google Inc.

Iphone in China can succeed. Here's how...

So Iphone entered China early September. And thus far, no more than a few thousand sales have been registered. Where did Apple go wrong?

The problem isn’t due to the Iphone’s popularity, as there is a huge demand for Iphone’s in China. One can see black-market Iphones all over the place, which sell for anywhere from 4000 RMB to 6000RMB (about $600 to $875 dollars).  It also isn’t the fact that there aren’t enough cell phone users. A China news agency report printed early May 2009 showed that after introduction of 3G technology, mobile users grew to a total of 670 million people. That’s almost twice the population of the U.S.. Also, it isn’t that people don’t want a new phone since they already have one, most people I met there change their phones on a frequent basis. So, shouldn’t Iphone be making a huge blast in China?

A recent Forbes article by Shaun Rein on why Apple is Failing in China outlines some interesting  points. Here are some of my observations and commentary to his article:

1. Apple entered the market assuming China is the same as the U.S.
   • Anyone who’s been in China knows how easy it is to get a pre-paid phone number and keep that as long as one wishes. Iphone is making Chinese consumers lock in to an expensive phone plan without realizing that model, although it works for the U.S., has never been popular in China. Chinese like to change phone numbers quickly and easily, although most don’t. And imiting their “options” isn’t going to win over any new customers, considering they can get a black market iphone for around the same price that doesn’t do that.
2. Apple didn’t understand consumer spending
   • Chinese usually prefer to buy cheaper plans, although they will go all out on getting a phone. They prefer texting over calls, etc. So by having them lock into expensive call plans, they are turning off customers. No pun intended.
3. Apple didn’t understand the competitive marketplace and partnered up incorrectly
   • Partnering up with a telecom (Unicom) that sells to a least wealthy consumer and has lower number registered users was a mistake.
   • Most people believe this company to have worst signal, and most people don’t want to change carriers, let alone change phone numbers.
4. Apple took too long to enter China
   • If you are not in China quickly, then the black market for your products will start becoming the main market and it’ll be harder to get back in when u decide to.

So what can Apple do? They are locked into a contract with Unicom, but have to make the best of it.

• Spend time doing more market research to understand what people want out of a phone.
• Find a way to address needs, such as: being able to keep existing phone numbers, working with Unicom to change the people’s perceptions of their service (ie providing better coverage, affordability, etc)
• Reach out to other businesses and educating them on the power of developing great apps.
• Chinese people don’t want “convenience” through the internet, as much as Americans. They are more interested in developing connections, playing games, and keeping informed, learning English, etc etc . So Apple should develop free apps that work as English dictionaries, news feeds, as well as reviews of restaurants, entertainment, and others. (those would attract the cosmopolitan crowds at least)

The lesson here is find good partners, do your due diligence, and plenty of market research, or partner up with people who understand the market.

Well in the past few years he’s transformed himself into a total underground Hip Hop Artist. He’s actually completed a ton of songs, and will finally get his album out on stores.

Anyways, check out his stuff here http://xennightz.com/enigma_review_kit/ he’s giving out the album for free for halloween.

Speaking of halloween… what will I be doing this halloween? Yup, that’s right. I will be working on my fashion site, trying to recruit several writers to boost our SEO, of which it’s been going great. We already rank on page 1 for our main keyword and have number 1 rankings for several other profit-bringing keywords. Things are great and getting better. Anyways, I will also be setting up several more blogs for our business, as well as trying to get bloggers to write about us .

Finally, plans are on the way to start a new business. Which will be a small business consulting, where I will help small business owners rank highly for google and yahoo and other search engines so that they may be easily found when their clients are trying to look for their products. Gonna be great!