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The Effects of US-China Relations on US

In such a modern world, one nation often is very concerned on the actions of another, since any action one nation takes can affect many other nations.  Today, there is much talk about China, its growth, the effects it is having on American jobs, the problems of the trade deficit and other concerns with American-China relations.  This article will go to showing which areas are actually economically relevant and those that are just ‘political hot air’.

China has become a nation of great importance as a trade partner both to the United States and to the rest of the world.  Currently China has replaced Canada as the largest exporter to the U.S.  China’s importance cannot be ignored, since only a few years ago (2008), America and China were each other’s second largest trading partner.

While China is important overall to the United States, American businessmen need to know the ways in which China affects the United States.  One major area is the trade imbalance between the United States.  The UCLA Asian American Studies Center stated that, “In 2007, the United States sent $65.2 billion worth of exports to China, and imported $321.5 billion worth of goods, running up a trade deficit of $256.3 billion.”  The trade deficit has continued to grow from its -$6 million dollars in 1985 to 226.87 Billion in 2009.  This is not, in itself, a bad thing for the United States. Growing trade gaps are due to the fact that China has a ‘comparative advantage’ in the production of “labor-intensive products (toys, apparel, shoes, furniture) – industries that have largely moved outside of the U.S. for many years now.”  It controls these areas with a very large market share, and as such it is not possible for American companies to ‘compete’ for market share in these areas.

Where Americans should focus solving the trade deficit is in areas where they have their own comparative advantage, such as “skill- and capital-intensive goods such as semiconductors and microprocessors, aircraft, machinery, and petroleum and iron-ore.”  These areas require a more specific skill educated labor force as well as means of large scale capital investment, which is still the American advantage in the global market.  As China grows, their demand for such products will increase, hopefully to the point of balancing out the trade between the United States and China.

Some of the complaints people place against China are nothing more than inaccurate generalizations drawn from a biased standpoint.  For example, the notion that China is restrictive of their imports as the major cause of the trade deficit is false in its entirety.  After joining the WTO in 2001, China has gradually phased out most of its trade barriers in its industries by 2007.   UCLA found that the “U.S. exports to China rose 300% between 2000 and 2007,” which  furthermore destroys this accusation.  The major problem of the trade deficit is that we import so much more of the ‘labor-intensive products’ than we export ‘skill-and capital-intensive goods’ to China that the trade deficit continues to increase, and this causes unskilled Americans to lose their jobs.

There are many other reasons that people blame on the trade gap between China and the US (infringement of intellectual property rights, artificially low Yuan, low wages of China), but any/all of these cannot justify the current trade deficit.

By – Domenic Gabriella for ChinaExports.com

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Doing Business in China

Tips for Business Travel to China

The business world is constantly expanding and developing at different rates in different parts of the world.  To be sure, one could gain both a great insight and advantage from basing a business somewhere other than the United States.  Beijing in particular offers many such opportunities for growth and would be great for an American living abroad.

Being an American operating on foreign soil, one will have to go through various channels of government beforehand.  A good point to start at would be to visit some of the government sites talking about required forms for remaining in a foreign country for several years as well as tax rules and regulations.  The US Government provides an overview of the US tax forms one would still have to file and pay even if one lived in Beijing.

One should also make sure to have all their papers in order before venturing outside of the United States.  China has strict rules and regulations on entering and leaving the Country, and one should know that  a valid passport and visa are required to enter and exit China.  The visas given out by the Chinese government should be secured before traveling since attempt to enter China without both a valid visa and passport will result in a fine and immediate deportation at the traveler’s expense.

It is also important to remember that the visa’s limit your activities when in China.  The Chinese government requires foreigners entering China to undertake only the activity for which their visas were issued. If you decide to partake in an activity not mentioned in your passport, you will need specific permission from the appropriate authorities. If you violate the terms of your Chinese visas, including overstays, you will be subject to a maximum fine of 5,000 RMB, departure delays, and possible detention.

One a more particular note, if one happens to be a dual citizen of both the US and China, one should try to travel as an American.  The US will help either way if there is an issue however, “use of other than a U.S. passport to enter China can make it difficult for U.S. consular officers to assist dual-national U.S. citizens”.  It is also critical to notice that in the case of a problem with the government China does not recognize dual citizenship, which could result in problems with remaining/leaving the country.

Once one has resolved any matters with legal entry and remaining in China, one should observe what the region has to offer in terms of medical treatment.  China in general is, “are not equivalent to those in the United States.”  While medical facilities are not on par with those of the United States, they do have “Medical facilities with international staffs” in major regions, in particular, Beijing.

Beyond entry and health, starting up a business in China has just as much if not more regulation to be concerned with.  Those who are looking seriously to live in a foreign region for the sake of starting a new business or moving a business should do thorough research for up to date rules and laws within the People’s Republic of China.  One good source for this would be  the China business handbook.

By – Domenic Gabriella for ChinaExports.com

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Doing Business in China

Purchasing Business Insurance in China

There are all forms of risk when doing business in a foreign land such as China. To encourage foreign investment, the Chinese government does have establishments in China to offer ‘insurance’ on such ventures. There are also American enterprises that offer insurance when doing business in China.

The American offered insurance when doing business in China comes from the Export-Import Bank of the United States (Exim). The “…insurance program can be used to insure payment under unconfirmed letters of credit” (https://www.export.gov/china/exporting_to_china/GettingPaidforExportsChinaNov2009.pdf). This will protect the investor from the risk associated with the foreign bank.

China insurance for foreign investments has only been around the last decade. Insurance was established in China since 2001, “In compliance with the international practice on trade and investment promotion” (https://www.pri-center.com/documents/south_south/china07.pdf). The first insurance provider established by the rule was Sinosure. They’re major point of promoting foreign financing was “inbound investment insurance” https://www.pri-center.com/documents/south_south/china07.pdf.

One can also purchase insurance from within China. These policies can be purchased from any, “…agencies, brokerages, loss-adjusting companies and their branches” (https://www.circ.gov.cn/web/site45/tab2727/i38817.htm), that are approved by the China Insurance Regulatory Commission (“CIRC”). The CIRC regulates ALL insurances offered. It must “…examines and approves the establishment of insurance intermediaries” for them to be legal within China. This includes foreign insurances.

Apart from covering of foreign letters of credit, there is also insurance for covering equity in an investment. There are, however, more rules for such insurance under the ‘Law of the People’s Republic of China on Chinese-Foreign Equity Joint Ventures’. Article9 states that “…The various kinds of insurance coverage of an equity joint venture shall be furnished by insurance companies established within the territory of China” (https://www.npc.gov.cn/englishnpc/Law/2007-12/13/content_1384083.htm).

The establishment of insurance in China is an added incentive to invest into the Chinese market. While not all risk can be insured, and the purchasing is an extra cost, it does allow one to invest with much more security into a new market.

By – Domenic Gabriella for ChinaExports.com

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Trade Law

US Government Restrictions on Importing Photovoltaic Cells from China

When importing any product, it is important to know the rules and regulations of the government beforehand. In the United States there are different rules, limits, and tariffs depending on what one is importing. One product with a large profit margin when imported from China is photovoltaic cells (PV).

Photovoltaic cells are used in solar panels to, “convert light directly into electrical energy without the need for an external source of current” (https://www.cbp.gov/linkhandler/cgov/trade/legal/bulletins_decisions/bulletins_2010/vol44_03312010_no14/44genno14.ctt/44genno14.pdf). The major benefit is the production of solar energy (used in solar panels). The U.S. is constantly expanding its use of such products as it searches alternatives to fossil fuels.

There are many more benefits to importing photovoltaic cells from China. Production of PV cells in china is subject to less regulation and with demand on the rise, “production capacity is rapidly expanding” (https://www.oregon.gov/ODOT/HWY/OIPP/docs/SafetyConcernsPVPanels012510.pdf). Thanks to the lack of government regulation with respect to waste disposal “…Cost to produce one ton is approximately $84,500. But Chinese companies are making it at $21,000 to $56,000 a ton” (https://www.washingtonpost.com/wp-dyn/content/article/2008/03/08/AR2008030802595.html).

Under the U.S. Customs and Border Protection (CBP), they have photovoltaic cells under, “under heading 8501” https://www.cbp.gov/linkhandler/cgov/trade/legal/bulletins_decisions/bulletins_2010/vol44_03312010_no14/44genno14.ctt/44genno14.pdf, which is a sub-classification of electrical generators. There is currently no quota on how many PV cells as solar panels can enter the U.S. from China. This is no surprise, because of American’s high demand for solar panels and the fact that “in 2007…China was the second largest PV producer” (https://www.seia.org/galleries/pdf/Solar_manufacturing_tax_credit.pdf) behind Japan. Japan, however, has more rigid and enforced standards of safety and waste disposal than China, and thus is more costly than those produced in China.

There is a tariff on the import on PV cell products. The standard tariff imposed on all imports under the section marked ‘electric generators’ “Of an output not exceeding 750 W…The rate of duty will be 2.5%” (https://www.cbp.gov/linkhandler/cgov/trade/legal/bulletins_decisions/bulletins_2010/vol44_03312010_no14/44genno14.ctt/44genno14.pdf). This is the only Federal imposed payment, and of course if selling in the U.S. one will be subject to sales taxes and other such rates.

For rulings on other products imported to the United States, https://www.cbp.gov/linkhandler/cgov/trade/legal/bulletins_decisions/bulletins_2010/vol44_03312010_no14/44genno14.ctt/44genno14.pdf states the classification of all imported products as well as any limits imposed as of May 31, 2010.

By – Domenic Gabriella for ChinaExports.com

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Investing in China

US Government Restrictions on Investing in China

American businessmen are always looking for new markets, cheaper labor and resources to expand their market share.  Investing into China is a great opportunity.  The few US laws and regulations on foreign investments seem Laissez-faire when compared to the regulations of China.

America has a standing policy to, “supports U.S. economic prosperity by strengthening the external environment for U.S. growth” (https://www.treas.gov/offices/international-affairs/offices.shtml).  The government will readily give loans to businesses and corporations to help expansion and promote business.  As a primary capitalist economy, there are few limits on what one can invest in, including foreign investments.

There are tariffs on particular goods from China to promote and protect domestic markets and jobs from Chinese competition.  A recent example would be the “…35 percent tariff on automobile and light-truck tires imported from China” (https://www.nytimes.com/2009/09/12/business/global/12tires.html?_r=1&fta=y).  This was stemmed from the US policy to, “safeguard provision, American companies or workers harmed by imports from China can ask the government for protection” (https://www.nytimes.com/2009/09/12/business/global/12tires.html?_r=1&fta=y), and was a safeguard put in place when China entered the WTO in 2001.

There is, of course points to encourage investments in domestic markets.  The largest is the tax ‘loophole’ for companies doing business overseas.  This ‘loophole’ is  “…a feature of the U.S. tax code that allows domestic companies to defer taxes on … revenue that companies earn through their overseas subsidiaries …as long as it stays off the company’s U.S. books” (https://www.factcheck.org/askfactcheck/what_kind_of_tax_breaks_does_the.html).  The closing of a tax haven will have a similar effect of promoting more domestic investments rather than foreign ones.

A large point of concern for investing into a foreign market such as China is the ‘risk of doing business’ presented with any international financing.  While there are forms of ‘insurance’ one can purchased for China they can only, “…be furnished by insurance companies established within the territory of China” (https://www.npc.gov.cn/englishnpc/Law/2007-12/13/content_1384083.htm).  The rules and regulations of China, being more bureaucratic and arbitrary, can change according to the expediency of the moment.  This risk, along with the lack of ‘private property’ in China can easily make an investor uneasy about entering the market.

By – Domenic Gabriella for ChinaExports.com

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Investing in China

Investing in Starting a Manufacturing Business in China

Investing in a manufacturing project in China is no easy task.  Simply financing a domestic company carries the risk of the investment, as well as liability in some instances.  In China, however, there is the added problem of their regulations on businesses, which are myriad and in many cases arbitrary.

Of the vast array of rules and regulations established by Chinese government, there are some that American businessmen should pay particular interest to.  Before any joint venture can take place, one must go through the process of “…the examination and approval authorities” (https://www.npc.gov.cn/englishnpc/Law/2007-12/13/content_1384083.htm) which “…shall decide to approve or disapprove the venture within three months” (https://www.npc.gov.cn/englishnpc/Law/2007-12/13/content_1384083.htm).

Any investor who wishes to “…open factories or set up various economic undertakings… Guangdong Provincial Committee for the Administration of Special Economic Zones, which shall issue them registration certificates and land use certificates upon examination and approval” (https://www.npc.gov.cn/englishnpc/Law/2007-12/13/content_1384060.htm).  Similar to the two above mentioned certificates and committees’ one must get approval from, there are more similar in nature that must approve of those who wish to do business in China, with relation to the specifics of the business.  For the entire list of all Chinese laws, visit (https://www.npc.gov.cn/englishnpc/Law/Frameset-index.html).

There are, however, some benefits to business in China.  The most obvious is their income tax rate which “…in the special zones is 15 percent” (https://www.npc.gov.cn/englishnpc/Law/2007-12/13/content_1384060.htm).  For a point of comparison, the US corporate tax rate at its highest (net income $15M+) is 38%, over double the tax of China. There is also “Special preferential treatment… with an investment of U.S.$ 5 million or more, or those involving relatively high technology” (https://www.npc.gov.cn/englishnpc/Law/2007-12/13/content_1384060.htm).

While the tax situation is promising, the government will not offer any direct loans to investors.  In fact, according to the law “…the People’s Bank of China may not provide loans to … non-banking institutions, other units or individuals” (https://www.npc.gov.cn/englishnpc/Law/2007-12/12/content_1383712.htm).  The State Council can, of course, approve exceptions, though it does not state how.

While there is a good labor force, resource pool, and market to gain, it is not a simple task to enter into business in China as a foreign entity.

By – Domenic Gabriella for ChinaExports.com

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Doing Business in China

Local Help Starting A Business In China

There are many hurdles to doing business in a place like China.  Businesses from the U.S. are at a disadvantage overseas because of rules and regulations from what one can purchase, to requirements to rent land and sell products within China.  One must also overcome transportation currency exchange, and language barriers.  In order to do all this, it is best for a company to hire a consulting firm with expertise in Chinese trade.

Well-known Consulting Companies

  • EMC Compliance Management
  • TUV America
  • Emerge Logistics
  • Approved Specialists, Inc.

Emerge Logistics Consulting

Emerge Logistics is known for providing US and European companies with high quality distribution operations support in China.  This company has a good grasp of China’s rules and regulations; enough to make a profit as an organization that stores, transports, and (most important to some), deals with the legal requirements of the Chinese government


Emerge Logistics Services

The major service Emerge offers is invoicing services.  Emerge is useful as a licensed trading entity. Emerge provides a local currency invoicing service that enables companies to forego setting up their own legal entity.  This allows business owners to ensure they will have all the needed certifications to do business in China with Emerge Logistics as “…the legal consignee for your inventory or warranty shipment to China”.

This consulting firm also offers storage and transportation of goods.  Having, reliable inventory management for people who need to store products they are planning to source from China is useful.  This saves one the need to get certification from the Government to rest land (this is difficult, as the person who allows you to rend will also need to get a certification from the government), as well as the cost of renting.  Taking care of both storage and transportation, Emerge Logistics can adequately “provide reliable, customer friendly, and web accessible order processing support for …purchasers sourcing from the China market.”

Emerge Logistics Fees

The cost for these services varies greatly.  It is dependent on the amount of product one is seeking, and the regulation and certifications needed for that product, Costs of storing and transporting the good also factor in.  There is no given listing of prices for these services online.  These services will not be cheap, considering it is safer and faster than getting all the proper certifications from the government, (also frees one from the cost of those certifications).

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Doing Business in China

Doing Business In China With Chinese Government Assistance

Foreign markets are a major part of modern business, both as markets for good and pools of untapped labor.  Ventures to booming countries such as China are becoming more and more common.  China, in an attempt to promote such movement of jobs, technology and foreign capital, established a national site to help connect foreign investors and businessmen to domestic businessmen who are ready and willing to do business.

The Chinese Commodity Net (CCN), is China’s site to promote foreign venture into China. This is a large tool, “…to help foreign buyers find Chinese suppliers and other business partners.” It allows members to narrow down general searches of a business by product.

There is no charge to using the CCN network to make business relations.  However, to use the CCN, one must register, inputting “detailed information of the product that you suppose to purchase from China.”

After one has filled in what they are looking for, the CCN will find possible matches.  The standard practice is, “…in 7-10 working days, we would provide 5-10 Chinese suppliers as your request”.  An example, one post is of a person by the name of Budi is looking for “ampere chart recorder with paper (will be used for oil field electrical control panel).”  Of course, any sensitive information is replied via e-mail by the administrators of the site, while other businessmen can reply personally to your post.

The Chinese Commodity Net is a national establishment established by the China’s Ministry of Commerce.  With all the varying regulations, enforcements and other variations from region to region of China, further information is greatly beneficial.  One could establish communication with an operating business from CCN to clarify any concerns, questions, and regulations.  Or one could pay for those who specialize in businesses that help businesses find connections in a foreign market.  There are no such free establishments by the People’s Republic of China that could be found.

Apart from visiting this site for promotion of trade partners, one should also visit the Ministry of Commerce site and search for specific regulation laws for particular products.  The largest one is the ‘China Compulsory Certification’ (CCC).

By – Domenic Gabriella for ChinaExports.com

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Doing Business in China

Foreign Business Investment in China

If you are contemplating investing in a business venture in China a good place to start researching the Chinese government’s requirements and rules for foreign investment is the website of China’s Ministry of Commerce.

The Ministry of Commerce offers helpful articles such as:

The articles are short, and therefore lacking in detail necessary to make decisions, but they do provide a useful starting point and overview of the process of doing business in China.

As in all matters of business – anywhere – it is wise to consult with experienced trade advisers and also with legal counsel informed in the intricacies of trade law, contract and the practices associated with doing business, successfully, in China.