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Don't rush your plan - an effective China strategy takes time

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Have a Plan B, in case local government officials impose unexpected changes on your operations, such as an environmental assessment that requires soil cleanup.

Watch out for trade action

Develop a contingency plan in case domestic competitors file "anti-dumping" or other trade complaints in Ottawa against your cheaper Chinese imports. If they are successful, you could face preliminary, and then permanent, duties on your imports if the domestic industry was deemed to be hurt by them.

Hire a trade lawyer to calculate potential duties and determine the financial risk you face should you lose, or whether you could establish a successful defence.

Weigh joint venture vs. subsidiary

Understand the pros and cons of these business structures for your investment in China.

Joint ventures, which can give foreigners a leg up in the market and help defray investment costs, require due diligence to find the right partner. The risk is dealing with someone who ends up being a competitor or is indirectly owned by a competitor.

A wholly owned subsidiary enables you to have control over your business, but you are on your own in cracking the Chinese market. Be sure to plan an exit strategy because foreign companies need government permission to declare bankruptcy and it is more difficult to do so with a partner.

Hire and retain top managers

Make sure that you hire the right personnel, such as Chinese-speaking staff with the appropriate managerial skills.

Your general manager, who will oversee your China operations, should be someone you trust and who is familiar with local rules and regulations.

Because of fierce competition for managers with the right skills from both foreign and Chinese rivals, be sure you are not dependent on a single employee, and offer attractive wage-and-benefits packages to retain key people.

Find ways to protect property rights

Have a strategy to protect your intellectual property because enforcement of rights is difficult in China.

To prevent software or other technology from being duplicated by your Chinese partner, customers or competitors, keep the blueprint for your latest generation in Canada.

Educate your Chinese employees about the importance of protecting property rights.

Take advantage of grants

The Canadian International Development Agency's industrial co-operation program will help finance feasibility studies for ventures that will have a positive impact on job creation, technology transfer, local procurement, capital investment and creating new export markets for that country. Firms with annual sales of at least $700,000 can apply for grants ranging from $100,000 to $150,000.

Another grant is available for the implementation phase to cover costs like training, environmental, social and gender-equality management plans.

Buy credit insurance

Protect yourself from potential non-creditworthy companies when exporting products to China. You can buy export-credit insurance from the Export Development Corp. or private insurers that will pay you most of what is owed in case the Chinese buyer does not pay. China's entry into the World Trade Organization has sparked a host of new, private companies -- some with questionable creditworthiness -- compared with dealing with traditional state-backed firms.

Understand cultural nuances

Pay attention to the importance of personal relationships and other cultural differences that could play a key role in doing business. It can be little things. In Chinese, there is a difference between saying "yes" or "shi" [pronounced "sher" in Mandarin], and "yes, I agree with you." The first "yes" is merely an acknowledgment of something you are saying, and should not be interpreted as the person agreeing to your terms. Otherwise, you could wind up with a rude surprise.

USEFUL RESOURCES

Federal government

Canadian International Development Agency's industrial co-operation program:

http://www.acdi-cida.gc.ca/inc

Export Development Canada: http://www.edc.ca

International Trade Canada: http://www.infoexport.ca

Canada-China business relations

Canada China Business Council: http://www.ccbc.com

Asia Pacific Foundation:

http://www.asiapacificbusiness.ca

Legal firms

Blake, Cassels & Graydon LLP: http://www.blakes.ca

Davies Ward Phillips & Vineberg LLP: http://www.dwpv.com

Ogilvy Renault: http://www.ogilvyrenault.com

Stikeman Elliott LLP: http://www.stikeman.com

McCarthy Tétrault LLP: http://www.mccarthy.ca

Goodmans LLP: http://www.goodmans.ca

Borden Ladner Gervais LLP: http://www.blgcanada.com

Perkins Coie LLP: http://www.perkinscoie.com

Baker & McKenzie: http://www.bakernet.com

Jun He Law Offices: http://www.junhe.com

Accounting firms

Deloitte: http://www.deloitte.com

KPMG: http://www.kpmg.com

Ernst & Young: http://www.ey.com

Pricewaterhouse Coopers: http://www.pwc.com

Dezan Shira & Associates: http://www.dezshira.com

Consultants

The Balloch Group: http://www.ballochgroup.com

Chreod Ltd.: http://www.chreod.com

Dai Group: http://www.daigroup.com

Capgemini: http://www.capgemini.com

McKinsey & Co.: http://www.mckinsey.com

Shanghai Direct: http://www.shanghaidirect.com

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