Trading From China

Folks,

Here is a fellow student facing challenges of trading FROM China...
****

About Registered Capital:
Registered capital is the money that you need to have in the bank in
order for the Chinese government to consider letting a company register
here (about 100,000 rmb). I completely agree with you and if I do not
have to worry about that at the moment, then I won’t bother.

***Don't ever put YOUR RMBY100,000 in any bank as a bond at any time. The Chinese are wonderful savers. When you have customers, then find a group of savers who will deposit their money for your bond and you pay double the bank interest rates to them. That will be cheaper than tying up your own money, and safer.***

I would
love to know more about how to identify customers from the exporting
end and work from there. I see what you mean about having buyers and
not mere dreams and expectations.


***Chapter eight in the book lays that out, and I would follow the principles as applying to you in China as an exporter to the USA...***


I have made a database of many different suppliers and businesses
across the U.S, and I am learning more about specific products. I feel
that if I have a competitive price and a good product, then I would
have no apprehension in contacting them all. I have been interested in
these products since I was young and think it is an exciting and noble
industry. I do have a passion to work in that sector.


***Very good... this database makes you valuable to the chinese, you gather market intelligence at a cost lower than they can do it, because you can also analyze it. Sell that to the Chinese. It has two values... 1. possible USA market, and 2. how USA competes in third country markets. Sell what you learn. Or make it valuable by keeping it discreet, and use the info to make money where they cannot because they do not know what you know.***


I see that I must have a customer base first before I continue any
plans to get my business going. What I want to know is how I can
convince buyers to buy from an unregistered trader? Would red flags go
up when I told them that I have no company and no experience? Does this
matter to a potential buyer? Should I use your example from class
(first call, give a price, specs and ask)? I mean similar to going into
the store and asking the owner if they would buy such and such a
product but instead do it with an importer? I have no experience in the
business. Is this a common occurrence in the trade business? If so,
then I will get started!

***I've never heard anyone ask or offer "registered trader" bona fides. I suspect there are few if any people with such documentation. I would say without it you are subject to more "fees" as you export a given item. The "registration” will have a communist party chop on it. I know when I travel on business with an invitation with the communist party chop, things are easier and smoother. Travelling without is still possible, and still fine, but it is different. I suspect this registration is the same thing.

Your “bona fides” are implicit and tested in the payment and shipment anyway, that is where the scrutiny gets close.***


Say, for example, the importer in USA says, “yes”. How do I then proceed
to export the product to him? Can I use the manufacturing company’s name forthe invoice? I feel like then the company would do the same thing as before mentioned. They would keep the invoice in their database and then contact the customer on their own. If I do not have a license,
then I must depend on the company to legally send the product in bulk.
How do I keep my added value from becoming only temporary?

***Work with a freight forwarder outfit like Expeditors International. You get the order, have Expeditors pick it up at the factory, take it to Expeditor's godown, where they label it and cut all the shipping documents. To the Chinese manufacturer it is just another domestic sale. They have no idea where it went, and the USA importer only knows it came from China. But I get back to, “know what your value is,” one that no one will go around.***


A businessman that I know well back home advised me that the supplier will probably have a way of tracking one's orders anyway so I need not worry do much about someone "going around me". I just establish the relationship and if I get snaked on the deal, then I just keep locating new buyers. I also re-read the chapter on exporting so I see your concerns on "making economic sense" with the deal.


***I answered you before I read that...yes...***

My inclinations are that the buyers can establish a trust and relationship
with me and know that I will source and find the product they need at a
good price. I do not feel obligated to use this particular Chinese
factory as my only source. I have already looked at other suppliers and see some items that are quite interesting.

***Yes, you want to be the go-to guy for this Chinese product, and for the Chinese the go-to guy for USA customers.***

That is why I have looked into registering a business. I want to be as
independent of the factories as possible. Like you said, I want to be a
customer and not become an expendable worker for some factory…

***Check that... how does a registration make you independent? Imagine this: You scrape up RMB100,000.... you land USA buyers... they pay $50,000 which you owe $45,000 to a factory. Your partner, you learn, has a gambling problem and paid the factory $500 to put newspapers in your shipment to USA, or somehow otherwise made a switch. Your partner has gambled the money away. The authorities have seized the RMB100,000 bond and are looking for you. You may escape to USA, but if you do, you'll face a civil suit here for shipping newspapers instead of the product ordered and paid for... have I scared you? Good. If you are going to depend on friends in China, make the friend a communist party member.***

Also, the industry is growing pretty fast and I am wondering if
it is too big for my britches. Do you think that it is a good idea to
get into this or do you think big industry will just swallow a beginner
like me up?

***Here is your best line of defense.... get trusted in a small thing. $5000 worth of applied technology power switches. Some thing specially designed, everyone wants and no one can get. Then work on frequency, not volume. I don't care if you have to do 5 shipments a week, splitting them up will be protection inasmuch no one shipment will draw mischief, and if any one shipment goes wrong, you can amortize the cost over all the others...***

Innovation: I have been thinking of unique items of my own that involve heating homes inexpensively. I have considered Korea where many folks use the under the floor piping to heat their apartments.

***Yes... I recall hearing about the korean floor piping back in the 70's when everyone was talking about global cooling.

A key thing to be wary of is if and when you ever feel anyone is doing you a favor. If so, then something is very wrong. You should be clear at all times your role and value. The "friend" thing worries me. If you are not providing a value, don't participate. If you are make sure each knows it. And accept no favors.

Take a super premium on a small thing people need and vcannot get, which likely means your designs. Small frequent shipments. Start with customers and without all of the rigamarole. You cna worry about the rest when you are big and know what you are doing...***

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