Issue Date: February 18, 2008
To China With Eyes Wide Open
The China Opportunity Day Conference at the InformexUSA 2008 trade show last month helped demystify the country by offering practical tips to those seeking to do business with Chinese companies. It also helped clear the air about business practices people find worrisome.
One of the best tips came from Lisa Tang, a commercial specialist at the U.S. Commercial Service in Shanghai: Use the services offered by the U.S. government, many of which are free. A part of the Department of Commerce, the U.S. Commercial Service assists U.S. exporters with trade leads, matchmaking appointments, and other services to facilitate business connections.
Tang emphasized that China is still an importer of chemicals. Among the best prospects for U.S. exporters, she said, are chemicals for the electronics industry, fertilizers, food and feed additives, industrial surfactants, pesticides, pigments, and raw materials for pharmaceuticals.
Echoing Tang was Minghua Lu, conference organizer and the chief executive officer of Pacific Genuity, a San Carlos, Calif.-based consulting firm. "China is the world's largest importer of petrochemicals and polymers," he said. "Chinese chemical output currently is only 21% that of Western Europe or the U.S."
Representatives of Chinese companies also spoke at the conference. They carefully described their companies' credentials and the lengths they would go to ensure the quality of their products and to prove their mettle as business partners. For example, Jimmy J. Tai of Jiangsu Zhongdan Chemical Group described how his company met what seemed to be an impossible customer demand.
An important customer needed 3 metric tons of a compound in hand in just two months, Tai recalled. Zhongdan had never made the compound before, and its synthesis involved four reactions. It was a challenge a big company would have refused, said Tai, who worked for Dow Chemical process R&D from 1984 to 2003.
Tai said he pulled out all the stops at Zhongdan and delivered the material on time with greater than 98% purity, as the customer had specified. "We were determined to impress the customer," Tai said, and the customer has returned for repeat business.
In the lively discussion that followed the formal presentations, audience members raised questions about Chinese business practices. One question concerned Chinese companies sending chemicals under different names. "When I worked at Dow 10 years ago, this happened," Tai said. Something came in labeled as potassium carbonate, but it was a liquid, he recalled.
According to Lu, companies resort to this practice to avoid the hassles in shipping chemical samples outside the country. One problem is a regulation that bans the air shipment of any chemical that is considered even mildly hazardous, he explained. Thus, the ban effectively restricts air shipment to very few chemicals such as sodium chloride or potassium carbonate.
Another problem is the certificate that must accompany any sample leaving China. Not only does it cost about $66, but the issuing agency takes about three days to release the document. So when a company already has secured a certificate for a particular chemical, there can be a business incentive to use the certificate for different materials.
For these reasons, companies use different names on samples for export at times. "They don't see it as unethical, only practical," Lu said. The practice is illegal, of course, but companies find the risk worth taking. When discovered by civil aviation or postal service authorities, falsely labeled chemical samples are simply returned to the senders, Lu said. But if mislabeled samples are discovered by customs officials, fines can be as much as $4,000.
The situation is probably changing already. According to Mingzhu Zhang, the director of business development for the Shanghai contract research organization Medicilon, small amounts of materials labeled "Research Sample" leave the country without difficulty.
Not surprisingly, the safety of intellectual property came up at the meeting. Zhang addressed the concerns as any Western businessperson would: "We sign confidentiality agreements with our clients and our employees," she said. Medicilon practices compartmentalization so that employees have access only to labs and projects they are involved with, and information is distributed only on a need-to-know basis, she said.
Tai was blunt. People take confidentiality of intellectual property seriously; employees can be fired and go to jail, he said. At Zhongdan, he added, "we know if we leak something, if we get one customer pissed off, then we piss off the whole United States."
- Chemical & Engineering News
- ISSN 0009-2347
- Copyright © American Chemical Society