Archive for January, 2008

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10 Questions You Should Ask About Doing Business in China

Thursday 31 January, 2008

I attended this event the morning of 23 January, 2008:

“Charter One is pleased to invite you to attend a private forum and panel discussion
on conducting business in China.
THE FIELD MUSEUM 1400 S. LAKE SHORE DRIVE
CHICAGO, IL

MODERATOR
Scott C. Swanson, President and Chief Executive Officer-Charter One, Illinois
PANEL
Phil Corse, Chief Executive Officer, Connectables, LLC, Adjunct Professor of Marketing-Northwestern University, Kellogg School of Management
Nelson de Castro, Senior Vice President/Global Trade Director-RBS Citizens, N.A. – Charter One
Joseph J. Italiano III, Chief Financial Officer, Secretary and Treasurer-International Components Corporation
Keith W. Jaffee, Chief Executive Officer-Focus Products Group, LLC
George Qin, Vice President-Bank of China
Preston M. Torbert, Partner-Baker & McKenzie, LLP

The 10 questions answered by the panel were:

1. Please provide a historical perspective on the Chinese form of capitalism.

2. As a manufacturer, could you tell us about your experience and lessons learned while doing business in China ? Would you recommend a joint venture or a WOFE (Wholly Owned Foreign Enterprise)?

3. What advantages do Chinese banks provide over foreign banks located in China and what should I be looking for in a banking partner?

4. With the legal system in China in a rapidly evolving state, how can U.S. companies be assured that they will enjoy necessary rights and protections? What are the key rules and regulations of which companies need to be keenly aware?

5. What capabilities make RBS, Charter One and Bank of China partnership unique for businesses importing and/or exporting and how can this relationship help U.S. companies further grow their business?

6. China has a rapidly developing economy. What are the future strategic risks and marketing trends that a company should be prepared for?

7. What is the best way to go about finding an appropriate business partner in China , be it agent, licensee, supplier or a joint venture partner? What advice would you have for other businesses doing business in China ?

8. What are the foreign exchange considerations?

9. What were the most important lessons learned as you developed new products in the Chinese market? What advice do you have on how to best define and reach your target market in China ?

10. What are the differences in the banking systems between the U.S. and China and how do they affect how companies conduct business in China ?”

I didn’t have time to write down the answers to all of the questions. Suffice it to say that this was a high-quality event with a representative panel which offered an appropriate variety of viewpoints. My 1 concern with it was China was spoken of as if it were 1 homogeneous country/culture/economy. I’ve only been to the south for a short while, but all I’ve learned is that China is quite different, depending on where you go-urban/rural, coasts/inland, north/south, etc. So if you speak of China as 1 entity, what might work well in 1 place could very well fail in another not too far away.
The information packet also contained these articles:

Economist 10 Jan 2008 Those who demand instantaneous revaluation of the Chinese Yuan don’t recognize that it must rise slowly so as not to disrupt financial markets.

Economist 3 Jan 2008 In classic “go local” approach & despite supposedly becoming the manufacturer for the world, many organizations set up in China serve the local market & not just for export.

US Treasury The US treasury divulges that the Chinese began working with the Chicago Mercantile Exchange to offer FX futures in China as far back as 2004.

charter1chinaforumchicago.ppt

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Pakistan Software Export Board visit

Thursday 31 January, 2008

The evening of 23 January, the Trade Consul for Pakistan Asad Hayauddin hosted a reception for the visiting Pakistan Software Export Board There were 10 individuals from 8 companies who visited Chicago after Houston & California, (which sent a bit of a chill up their spines, I’m sure), in addition to representatives from Islamabad & the Pakistani Consulate in Houston. Of those I met, most already had offices in the States, but were considering other locations. I was told they were on a tour to survey where to expand their operations here in North America. There were a number of other folks from the international community as well as representatives of the local Pakistani business community. If you were there, I think some stereotypes would have been broken. With all of the press we get decrying the actions of extremists in that part of the world, I think you might have been surprised to find how similar these visitors are to you & me. I met a banker, formerly with JPMorgan Chase, who is now with the National Bank of Pakistan. He wears a scruffy beard & no tie! If you’re interested in getting in contact with any of the Pakistani software developers I met, just let me know. Thanks.

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Intl Tax event-Canadian Government to Eliminate Withholding Tax on Interest

Wednesday 30 January, 2008

I attended this lunch event on 23 January, 2008 sponsored by Blakes, by the only all-Canadian law firm with an office in Chicago :

“Canadian Government to Eliminate Withholding Tax on Interest: What are the Opportunities?

The elimination of Canadian withholding tax on arm’s-length payments of interest — expected to come into effect on January 1, 2008 — will present significant opportunities for non-Canadian financiers. Deal structures that have not worked historically will now be possible, but attention must be paid to potential traps for the unwary.

You are invited to join us for lunch with a team of some of Canada’s leading banking and tax lawyers where we will discuss:

Which taxes are being eliminated and which remain?
Why does this create new opportunities for non-Canadian financiers?
Canadian regulatory issues
Opportunities in specific sectors, including oil and gas, ABL, mezzanine debt and consumer finance


We are delighted to have the Canadian General Consulate join us to make some brief introductory remarks.
The seminar will be held in both Chicago and New York.”

I’m not an expert in international taxes, & this presentation contained a lot of detail that meant a lot more to accountants & HR Block than to me. Because this event was hosted by lawyers, they simply spoke rather than make powerpoint presentations, & I don’t want to risk misquoting anyone, I’ll intersperse a few tidbits which I think are safe to say & just refer readers to the speakers that day so you can pose any further questions you might have directly to them:

Details of the treaty-Kathleen Penny 416-863-3898

-this pertains to interest & only to unrelated arm’s length parties

-there is no change in other withholding taxes

Regulatory issues in commercial lending to Canada-Paul Belanger 416-863-4284

-opening a branch of a bank in Canada can be more advantageous than opening a “real bank”

-branches are exempt from some regulations

Energy Sector impact-Dan Fournier 403-260-9636 (in Calgary)

-this makes a more level playing field

-Canada is #2 in proven oil reserves, behind only Saudi Arabia

-capital is needed in many areas & foreigners can take the lead on projects

Cross-border lending issues-Michael Harquail 416-863-2929

-contract & legislative rules are similar

-work in C$ only

-in bankruptcy, there is no cramdown like in the US & must be approved by all classes of creditors

-collective agreements can’t be disclaimed

-there can be advantages to stipulating Canadian jurisdiction

-Quebec law can be equated to Louisiana law

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Latin American Investment summit

Monday 28 January, 2008

I attended the Latin American Investment Summit sponsored by Debbie Maue of Big Blue Marble Properties on 21 January, 2008 @ Sheraton Hotel in Chicago. It consisted of a number of presentations, mostly given by developers enticing people to buy residential properties in the countries of Costa Rica, Nicaragua, Panama, & Belize. There was also an exhibition area in the adjoining room. It appeared as if each of the exhibitors were allocated speaking slots. It appeared as if it was attended by a dozen or so real estate agents/brokers. The most valuable content I saw was a presentation given by Mitch Creekmore of Stewart Title  on “Title & Ownership in Latin America.” The former Panamanian Ambassador to the US, Juan Sosa, now of the US -Panama Business Council  also made a good presentation on Panama. Gloria Materre of Handler, Thayer, & Duggan law firm in Chicago  made a presentation on real estate law in Belize & wasn’t afraid to sling a few darts @ her fellow presenters, which added a little objectivity for comparison. Here is the link to Mitch Creekmore’s presentation:

Please find the web address to the site where we have placed Mitch Creekmore ’s presentation from NAR 2007. Please note this is a Stewart copyrighted presentation and must be noted as such when you quote any information from this presentation. We do not own the rights to the videos and you may use them as you please. The PowerPoint and the videos must all be downloaded to the same file in order for the videos to work.

ftp://landfolio.stewart.com/NAR-2007/

login: NAR 2007

pswrd: StewartNAR07

The login and password are case sensitive. Please note the space in between NAR and 2007 in the login.

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“The business of jazz” with the Dutch

Saturday 26 January, 2008

This event took place the evening of 15 January, 2008 @ the Fine Arts Building. It was sponsored by the Netherlands Consulate General, The Netherland-America Foundation-Chicago Chapter, Dutch Chicago Business Exchange & Piano Forte Foundation  As a lover of jazz I was interested to learn about the business side of a struggling musical segment.

The format was a panel discussion, moderated by Neill Tesser, local music journalist and broadcaster. The panel consisted of

Michiel Borstlap, pianist and composer (Netherlands)

-Lauren Deutsch, Executive Director of the Jazz Institute of Chicago

-Michael Frank, CEO Earwig Music (record label)

T.S. Galloway, trombonist, composer and musical director

Mike Reed, drummer and presenter

Here’s the promotional blurb: “What do Jazz & Business have in common? If you really think about it… EVERYTHING. The challenges confronting the Jazz musician and the Business community are surprisingly similar. In a panel discussion we would like to highlight the challenges the Jazz business as a whole faces and how they are being addressed. What better to hear it directly from Artists, Club owners, and Record companies? Representatives from Chicago and the Netherlands will freely discuss the challenges and opportunities!”

Borstlap started by suggesting that listeners should pay to hear jazz & that subsidies were not necessarily a good thing. That didn’t seem to be the way it’s working in Chicago. He has been successful in getting sponsors for CD’s, tours, etc. Deutsch trumpeted the Jazz Institute of Chicago’s role in bringing jazz to new listeners, including youth, which is needed if jazz is going to survive. Frank brought up the issue of the lack of coverage of jazz & blues in the media as opposed to more popular genres such as rock & hip-hop. I think the most valuable contributions were made by Galloway, who well-described the tensions between the artistic/creative drive to make new music vs. the need to make money doing it. I also found Galloway’s opinion valuable as 1 who has lived for years in both the US & abroad (in the Netherlands), so he’s 1 of the few able to make well-informed opinions on the differences between American & others’ support for jazz. As 1 of the organizers of the successful Pitchfork & Umbrella music festivals, Reed was lauded as an example to follow for the future of jazz, by using his combination of old & new technologies to bring out new music cost effectively.

I enjoyed this event immensely, but grew frustrated with Tesser’s lead in the conversation. No mention was made of who’s profitable in the supply/value chain, how the money flows, & who takes how much of their slice of the pie. The business model for distributing music is changing rapidly & little discussion was made of how those changes are affecting the distribution of jazz music. Jazz musicians have to be even more clever in their business dealings, but in different ways than in the past. Even though I love jazz, I would have preferred a little more business analysis & a little less “where is jazz today?” It appeared as if this event was being filmed for television, but I haven’t seen/heard when or where.

The panel discussion was followed by a performance of one of Europe’s most successful Jazz musicians, pianist Michiel Borstlap with his trio, which was great. I can hear why Michiel gets the accolades he does. He plays well both up- & down-tempo & has a couple of great cohorts who know how & when to exert themselves. Check out his link above to get a taste of his music, (& see his sponsors for this CD).

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The Korean wave crashes?

Wednesday 23 January, 2008

I attended (Hallyu) The Korean Wave @ the law offices of Seyfarth Shaw the evening of 10 January, 2008, which was sponsored by the Japan America Society  & the Illinois Humanities Council

This program addressed aspects of “hallyu” — the recent surge of popularity of South Korean popular culture in other countries — in Korea and the United States, and the South Korean government’s involvement in export of Korean cultural products. In recent years, a wave of South Korean pop culture has swept across East & Southeast Asia. In Japan, the wild popularity of Korean television drama called “Winter Sonata” has led to throngs of Japanese women packing tourist buses to sites in Korea. South Korean movies, dramas, & music fly off the shelves in Singapore, China, & the Philippines. This broad phenomenon is referred to as “hallyu” in Korean, meaning Korean Wave. This program will address various aspects of the “hallyu” phenomenon in Korea & the U.S.; the South Korean government’s involvement in the export of cultural products, & the social & economic impact of Korean drama in Japan & East Asia.

Robert Cagle, Asst. Prof. of Cinema Studies @ Univ. IL-Urbana-Champaign, described how the hallyu phenomenon has already crested & suffered from a backlash already. Consul Jung-IL Han of the Korean Consulate General provided the government’s support & perspective. Laura Miller, Prof. of anthropology @ Loyola U. in Chicago added her personal experiences in Korea. Man-Sung Son, President of SMS Productions brought along some of their video.

I wasn’t aware of this hallyu phenomenon, but then I’m not an Asian woman, so I probably shouldn’t have been. That it seems to have subsided says this event might have been outdated even when it was scheduled. From the videos shown, I can see why they are appealing, but consumer sentiment is fickle, so I can also see why it’s no longer so in vogue. I found a couple of things interesting about this: 1. it wasn’t just contemporary stories which were popular, but historical ones as well, 2. women seemed to be portrayed in stronger fashion, against the stereotype we have here in the States. Despite this cultural swoon, I do think Korea is definitely on the upswing economically, & even if the hallyu subsides, we’ll be hearing more from the Koreans. From a business perspective, it looks like it certainly contributed to increased Koran exports & an influx of tourists into the country. Historically, it’s interesting to note that countries which have been fierce rivals are now embracing others’ cultures. Given Japan’s leading role in the region, it’s quite a coup for the Koreans to be so popular there all of a sudden. I think some of this is the accumulation of interest in Asia in general too, & the Koreans benefit by being a democratic capitalistic leader in Asia. btw-I believe The Simpsons tv program is drawn in Korea, so that certainly contributes to a stellar cultural addition. I believe Korean TV in Chicago will broadcast the panel discussion as well.

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crm helper in china

Friday 18 January, 2008

I read this article in the Chicago Tribune Sunday on how Darren Liu helps the Chinese with CRM in China. What stood out to me is that although Darren is a native of China, he emmigrated to America 10 years ago & his language skills are self-admittedly “at a 6th grade level.” Microsoft had Darren provide multiday training sessions on CRM while he was on vacation in Beijing & even named him 1 of 4000 “Most Valuable Professionals.” This is just 1 great example of the need for foreign language education, & Chinese in particular. It blows my mind that someone with those skills is so lauded. It just goes to show what you can do when you’re able to communicate with people in their own language. Although I’ve never claimed to be as fluent as a native speaker, I did live & work in Germany for 2+ years, so I do wonder how my German would be rated.

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Chicago’s place in the world?

Tuesday 15 January, 2008

Last week I was reading Crain’s Chicago Business’ article on the agenda for Chicago

Here are my comments-Transportation is key & Chicago falls down in a couple of ways. Our roads are some of the most congested in the country. Gas is most expensive here in the US. Our public transportation system is 1 of the most heavily used, but because of its inconsistency is still underutilized. I’ve been in much smaller cities in Poland which have bus & tram schedules & they hold to them. There is no excuse to wait for a 1/2 hour & then have 3 buses drive by, the 1st full, the next 2 nearly empty, rather than equally full every 10 minutes. It costs Chicago businesses time & money when employees can’t plan to get to work on time because of inconsistent public transportation. Other businesses won’t locate here if people can’t get to work on time. It needs to be fixed.

Human resources-I’m all for improving education, but I’m skeptical on a couple of points. It’s important to learn foreign languages, but unless you’re going to follow-up classroom instruction with immersion in a local culture, it won’t help much. I learned book German, & when I arrived to work in Germany, they laughed at my language skills. It wasn’t until I hammered the language in for a year or 2 that I achieved any proficiency. I know a woman whose child has taken Chinese in the public schools & I’m told it’s pretty much a joke. I also love listening to music, but the thought that the music industry can save Chicago seems ludicrous. Should it be elevated?-sure. Could music be better utilized to entertain tourists?-yep. Should we spend tons o’money on it? I don’t think so.

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Can the Midwest regain its economic clout?

Friday 11 January, 2008

I read the article titled above by Richard Longworth, formerly foreign correspondent with the Chicago Tribune & now a fellow with the Chicago Council on Global Affairs, in the Chicago Tribune magazine which is a scathing indictment of small-town midwestern governments & economic development organizations dropping the ball in not anticipating the globalization of the 21st century. I can’t deny that all of what he says is true but I guess my biggest problem with the article is that it’s all gloom & doom with no prescriptions for the future. I recognize that people read more bad news than good, but presenting problems without solutions only serves to stir things up. Recounting many different versions of the same story played out in different locations in the Midwest simply hammers the point home. I realize he has a book which possibly presents more solutions than what must be an excerpt, but there aren’t any references to those. The article is a bit of a bait & switch in that it details how the Midwest has lost its clout, but doesn’t provide any means for regaining it.

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legal services international growth

Friday 4 January, 2008

Tribune staff reporter, wrote Emerging markets fuel firms’ global growth
1 of my roommates senior year @ Michigan went on to law school @ UChicago with the ambition of focusing on international law. He ended up bagging that & becoming a litigator with Jenner & Block. 1 of the reasons for that was simply jurisdiction, i.e. what he could do internationally from here in the States. I think that is somewhat analagous to marketers in that it’s 1 profession that is very locally oriented, for lawyers because laws are enforced locally, & for marketers because products/services are marketed locally for the most part.

I find it interesting that law firms are very much mirroring their clients, in that they are aggressively expanding abroad & using M&A to do it. For example, a few of the largest law firms in Chicago are not that big internationally, & a few of the biggest US-based law firms are in Chicago with smaller offices than the biggest local firms. Chicago is a huge professional services hub & it’s interesting to see this dichotomy.
This also illustrates the classic “go local” approach. It’s very difficult for even very well-educated attorneys to practice in places in which they don’t know the local details of the law. Therefore, it makes more sense to hire or acquire locals rather than training ex-pats or others to parachute in to do the work.

It’s also interesting to note that they are simply following the money, i.e foreign direct investment, so in a sense they are simply following their customers, just like other businesses. I wonder if law firms will suffer from some of the other major pratfalls of international acquisitions, such as problems with integration, execution, etc. Since they are privately held, I doubt we’ll ever hear of any of those problems.

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Brazilian economy really grown up?

Friday 4 January, 2008

of the Tribune Newspapers/Los Angeles Times wrote: Brazil’s economy grows up

I remember the saying a little differently than the author, i.e. “Brazil is the country with the greatest potential…& always will be.” In other words, is so messed up, it will never fulfill its potential. This is becoming less true all the time. Given its abundant resources, geographical position similar to the United States, just south of the equator, & large population, the potential will always be there. The question is whether or not they can fulfill it on a consistent basis over time. Historically, government bureaucracy & corruption, hyperinflation leading to currency depreciation, & crime in the favellas have deterred Americans from doing business there. The bureaucracy has declined, currency has stablilized (relatively), & the Pan American games last summer showed crime is under control. Brazil’s inclusion as 1 of the fast-growing developing BRIC countries is well-founded. It’s interesting to note that Brazil’s stock index has grown faster than those in Russia & South Korea even though its GDP is not growing as fast as those other countries. I think that speaks to what investors think of its relative potential. However, there are still issues there. For example, Brazil is not a signatory to the WTO multilateral agreement on government procurement, so working with the governments there could be problematic. I think lack of investment in infrastructure could be a reflection of this.

I interviewed Jim Bergamini, CEO of Daitan Labs who had some interesting insights into telecom R&D in Brazil.  part 1, 2, 3

I visited Sao Paulo & Rio de Janiero a few years ago & will post information about the Brazilian economy on my website soon.copacabana beach