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Doing Business with China - Part 1

Posted June 18, 2007 5:01 PM by Steve Melito

"Their ideas about quality and value are immature", explains Leo Kershteyn, an electrical engineer turned product manager, when asked about Chinese suppliers. Nevertheless, the commercial opportunities in China are "incredible". From his office in Troy, New York, the Russian-born engineer makes a bold prediction. Within 10 years, cars from China's Chery Automobile Co. will be all over America's roads.

Who is Leo Kershteyn?

Leo Kershteyn was born in St. Petersburg, Russia when that city was known as Leningrad and Russia was still part of the Soviet Union. As a boy, he left Russia for the United States, which took him through Austria and Italy as part of the emigration process. After settling in Atlanta, Kershteyn enrolled at Georgia Tech, where he earned a bachelor's degree in electrical engineering. Today, he is working on his Master's in Business Administration (MBA) at the State University of New York (SUNY) at Albany.

Kershteyn's journey from Europe to the United States was the first of many travels. His professional experience includes stints in program management with Susteen Software, a maker of data synchronization applications; and LSI Logic, a leading semiconductor manufacturer. At both companies, Kershteyn managed accounts, met with original equipment manufacturers (OEMs), and worked with cross-functional teams. He also traveled across Asia, visiting all three of China's commercial centers: Hong Kong, Shanghai, and Beijing.

A Tale of Two Chinas

During the Cold War, proponents of "two Chinas" argued that the People's Republic of China (PRC) and the Republic of China (ROC) were separate, independent states. Today, differences within "Red China" itself may be as important as the long-standing dispute between the communist mainland and the island of Taiwan. For observers like Leo Kershteyn, understanding the disparity between China's "pseudo-capitalist" commercial centers and communist-run factories is paramount.

Although businesses in Hong Kong, Shanghai and Beijing regularly interact with foreign companies, most Chinese manufacturers operate under communist rule. Consequently, Kershteyn explains, "the supply chain is not as committed to the corporate environment". Bribery, an enduring feature of the Russian economic system, is a fact in life in China. The right product and the right connections are useful, but payoffs to communist officials are more valuable. "The business culture is laden with bribery", explains Kershteyn, and corruption "goes all the way to the top."

Crime and Punishment

Unfortunately, bribery is just one of the challenges that companies face when they do business with China. Because that ancient nation is still an immature "commercial culture", Chinese suppliers are anxious to "say yes" without regard to consequences. As an example, Kershteyn told the story of a Chinese drug manufacturer with a new product that wasn't ready for testing. Instead of seeking a reprieve from "the Chinese version of the FDA", the manufacturer removed the labeling from a comparable American drug company (Abbott) and submitted the sample. It took years for the Chinese government to address the situation.

So why does Leo Kershteyn believe that the commercial opportunities in China are so "incredible"? And what advice does he have for companies that want to do business with Chinese suppliers? Click here for Part 2 of this interview.

Steve Melito - The Y Files

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Power-User
United States - Member - Popular Science - Evolution - Aren't we still evolving?

Join Date: Feb 2007
Location: Troy, NY
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#1

Re: Doing Business with China - Part 1

06/19/2007 9:17 AM

Interesting article in the NYT today about how every one of 24 toys recalled this year were manufactured in China.

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Anonymous Poster
#2
In reply to #1

Re: Doing Business with China - Part 1

06/19/2007 5:00 PM

Also interesting that in the last 2 years, the staff of the Consumer Product Safety Commission has been cut by 10%. We can blame China all we want (and they deserve it), but the U.S. government has failed us, too.

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Guru
Engineering Fields - Control Engineering - New Member China - Member - New Member

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#3
In reply to #1

Re: Doing Business with China - Part 1

06/19/2007 10:24 PM

I hve to admire, chinse worker works very hard to earn very less salary, especially in the field of toy and clothes. Thats why more and more developed countries investors built up their factories in China to get more benefit.

China hasnt still got perfect law system so far.

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Guru
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#6
In reply to #1

Re: Doing Business with China - Part 1

06/20/2007 11:14 AM

That's a little sacry, 'cause it means 23 out of 24 recalled toys are not made in China! Wonder where they come from?

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Guru
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#7
In reply to #6

Re: Doing Business with China - Part 1

06/20/2007 11:22 AM

Good question, Bill. In Part 2 of this story, Leo Kershteyn explains how China (among Asian nations) is in the middle of pack in terms of quality. I'm not sure how many toys come from Indonesia or the Philipines, but those countries rank lower on Leo's list.

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Anonymous Poster
#9
In reply to #6

Re: Doing Business with China - Part 1

06/20/2007 10:37 PM

It was all 24 not one of 24

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Guru
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#11
In reply to #9

Re: Doing Business with China - Part 1

06/21/2007 7:59 AM

Oops! Wierd how one can misread a sentence . . . I guess that's how some false rumors get started!

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Participant

Join Date: May 2007
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#10
In reply to #1

Re: Doing Business with China - Part 1

06/21/2007 2:57 AM

Dear Sir

I would like to know how to contact the famous consulting plants firms in china .I'd be very grateful to any person who could give or send us their Emails to :

leadassessor1@yahoo.com

Good luck ,and best regards.

Dr.S.Al AbdulRahman

Senior Consultant

EECT

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Power-User

Join Date: Feb 2007
Location: Midwest United States, Evansville, Indiana 37 N, 87 W
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#4

Re: Doing Business with China - Part 1

06/20/2007 1:38 AM

I have to say that they know how to make use of a small piece of land when building a city. It is very interesting to see how they build. I visited Hong Kong in 2003 and it was an amazing and unforgettable trip. The average apartment building is approximately 63 stories tall and when looking on Google Earth you can see that they were conscious about how the city looked from the air as well. It is as if they designed it for someone looking down on the city. If you ever get a chance to go to Hong Kong, jump on it! There is so much to see there, great food, great nightlife, tourist attractions, etc. All for as little as $2000 USD for a week to 10 day trip. I booked my flight several months in advance through AAA Travel and flew on Cathay Pacific airlines for $780 round trip, about $300 to $400 for a hotel for 7 days and the rest was for transportation, food, sightseeing and shopping. It is also a good place for an American to go because there are enough English speaking People and enough British there that you do not have to be fluent in the language. Since it was a British colony for 50 years, almost everything is written in both Cantonese and English. Very fun place to go!

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Commentator

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#5

Re: Doing Business with China - Part 1

06/20/2007 9:28 AM

I have traveled extensively in the far east and love to travel and meet people. also I have done some business in Taiwan. Chinese products have flooded the US market at redicularly low prices. Many US companies have made millions buying low cost clothing and selling at high prices. Mens shirts are my favorite example. Buy at $10-$12 a dozen and sell at $29 - $35. You can ship a lot of shirts in a cargo container for about $2000.

One of the biggest troubles working with Asia is the interpretation of what you want, yes many speak English but their base of understanding is very poor. An example I requested some samples and said send by boat. A couple of weeks later I received an air shipment not only what I requested but additional items they thought I might like. Cost $800 for things I could not use. They thought they were doing me a favor by doing more than I asked.

If you are going to buy in China you need someone there to protect your interests. That is why big companies have agents on site. On a trip to Indonesia I was at the airport and a group of Americans about a dozen came by so we talked, they were from Nike going to a conference, the local American agent was hosting the meeting.

A friend of mine 7 years in China and married to a Chinese is working as an Editor deciphering Chinese regulations into "American" English. for international companies.

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Guru
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#8
In reply to #5

Re: Doing Business with China - Part 1

06/20/2007 8:52 PM

In fact, you can find chinese easily everwhere,

lots of chinese in america and europe, although they are less educated, especially at engerring knowledge, but they are good at business.

Cost $800 for things I could not use

you must met an agent from a big company who has a big money

British colony for 50 years

no, it s more than a century.

Thats why the most of educated hongkongness can speak well english than our mainland. but they hant got as good engineering knowledge as ours. they can be dealers, accountants and asistants etc.

But you can bought very cheap goods in HK.

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Anonymous Poster
#12

Re: Doing Business with China - Part 1

06/22/2007 12:50 PM

"The business culture is laden with bribery", explains Kershteyn, and corruption "goes all the way to the top."

The CCP wants to stay in power at all costs. They stage local elections to give the Illusion of freedom . Every freely elected Mayor has a Vice-Mayor posted by the CCP so you have duplication and a watchful eye. The CCP regulate everything, set the wages for ALL. There's a large wage disparity which is one of the root causes of bribery which has become a way of life in China. If you need something and have the money, there's always a palm you can grease and China is the land of waving palms !

Every once in a while you will see a public example of the CCP bringing a corrupt official to justice but you can be sure they protect their own inner circles. The latest example is the Director of the Chinese FDA was executed for corruption and bribery. Drug companies have a lot of $$$$ to convince Doctors to use their products and Doctor's don't get paid well enough so the cycle continues.

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