China:Country Report by Tanisha Johnson

China: Country Report

Executive Summary China has increasingly become the focus of the global economy. With more companies investing in China, having the right people in place to meet the needs of the business is a challenge for many companies.

China is a polychronic country which means when doing business with them, it is important to build relationships first. As a country, China has a masculine basis of culture. Currently, China has a population that is majority male.

Negotiations in China tend to be very lengthy. When negotiating in China, be prepared for the negotiation to last for hours. Keep in mind that in Chinese culture, it is difficult of them to say no.

The Chinese have a high context and non verbal style of communication. It is high context in the sense that certain knowledge is already assumed. The Chinese also make significant use of non verbal means of communication, such as implied meanings, non verbal cues, indirect statements and symbolic language,

Cover image source: Orient Alliance

Table of Contents Introduction..............................................................6 Country Overview..........................................................7 Political............................................................8 Economic............................................................10 Social..............................................................13 Labor & Labor Laws.......................................................14 State of the Textile Industry............................................26 State of the Manufacturing Industry......................................31 Textile & Apparel Associations...........................................35 Trade Agreements and Law.................................................40 Business Etiquette.......................................................47 Type of Culture..........................................................48 Negotiation Styles & Strategies..........................................49 Relationship Building....................................................58 Social & Cultural Elements...............................................59 Business Entertainment & Dining..........................................82 Communication Types......................................................89 Sourcing Guidelines......................................................90 Manufacturing & Production...,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,.96 Costing.................................................................102 Import Classification...................................................106 Logistics & Importation.................................................108 U.S. Importing Requirements & Country Exporting Requirements............122 Conclusion..............................................................144 Appendix................................................................151

List of Figures Figure 1:China: Slowing Economy..........................................8 Figure 2:China Textile Mills Market Value................................28 Figure 3: Textile Mill Category Segmentation.............................28 Figure 4:Textile Mill Geography Segmentation.............................29 Figure 5:Textile Mill Market Value Forecast..............................29 Figure 6:Manufacturing Market Value......................................35 Figure 7:Manufacturing Category Segmentation.............................35 Figure 8:Textile Mill Geography Segmentation.............................34 Figure 9:Manufacturing Market Value Forecast.............................34 Figure 10:Masculinity in China...........................................48 Figure 11:Total Population 2009-2019....................................159 Figure 12:Age Structure 2010............................................162 Figure 13:Projected Age Structure.......................................162 Figure 14:China Imports.................................................189 Figure 15:China Exports ................................................190 Figure 16:Energy Production.............................................223

Source: Jim Whitmer Photography

Introduction This is an informative report that aims to provide potential investors, particularly Comfort Act, with an outline of the legal framework and other vital information for manufacturing and conducting business in China. The goal of this report is to provide key guidelines for foreign companies and investors entering China as well as warning them about the risks inherent to this developing and complex market. In this context, and based on the laws and directives currently in force in China in the most relevant areas, this report provides general information about China and detailed information and analyses of Chinaâ&#x20AC;&#x2122;s financial data and projections. The report also looks into the socio-economic state of China and determines how viable China is as a place to manufacture apparel.

Country Overview

Source: Jim Whitmer Photography

Political 8

Source: Reuters

Political risk in China is relatively low in comparison to other emerging markets, but legal and regulatory transparency is a key risk for foreign companies in the region (Collins). “The political risk situation in China is interesting because while there is stability with the one-party system, there is also very little transparency in rules and other aspects of doing business, which make it challenging for a foreign investor,” said Corina Monaghan, New York-based vp of the political risk practice at Aon Risk Solutions, part of Aon Corp (Collins). According to an article in New York Times, China introduced new restrictions on what the government has called “critical” news articles and barred Chinese journalists from doing work outside their regions, putting further restraints on reporters in one of the world’s most controlled news media environments (Forsythe). Reporters in China must now seek permission from their employers before undertaking “critical reports” and are barred from setting up their own websites, the State Administration of Press, Publication, Radio, Film and Television announced in new rules in june 2014 (Forsythe). With China’s severe pollution, food-safety worries and widespread official corruption, high-quality journalism is needed more than ever, said Sophie Richardson, the China director for Human Rights Watch (Forsythe). Currently, their are protests going on in relation to an upcoming election in 2017. What’s going on in Hong Kong right now is a very big deal. Hong Kong’s citizens are protesting to keep their promised democratic rights, which they feel could be taken away by the central Chinese government in Beijing (Fisher). This moment is a standoff between Hong Kong and China over the city’s future, a confrontation that they have been building toward for almost 20 years (Fisher).

Economic 10

Source: SkyNews

According to a report written by World Bank, economic growth in China is gradually slowing as a structural transformation of the economy continues. China’s annual economic growth remained robust in 2013, but growth continues to gradually slow down (“Economic Update”). The economic growth was stable at 7.7% for the year, matching 2012’s rate and exceeding the government’s target of 7.5% (“Economic Update”). Moderation of growth rates from a decade of average annual growth of about 10% reflects a structural transformation of the country’s growth model. A rebalancing of growth from investment to consumption and from industry to services continues, but there are challenges and rebalancing is sluggish (“Economic Update”). According to World Bank, investment returned as the main growth driver, assisted by a rise in investment in infrastructure and real estate in 2013 (“Economic Update”). Quarterly economic growth has become more volatile indicating that rebalancing is not a smooth process. The first half of 2013 marked a deceleration of economic activity, which in great part was related to a weakening of domestic demand, though an economic support program centered on boosting public infrastructure expenditures and tax incentives for small and medium enterprises lifted growth in the second half (“Economic Update”).The growth momentum has since started to slip again as

fiscal and monetary policy impulses are fading.

Growth in the first quarter of 2014 decelerated to 7.4% (year on year) or 1.4% (quarter on quarter) from 7.7% or 1.7%(quarter on quarter) in the last quarter of 2013 (“Economic Update”). Recent monthly indicators suggest that growth has stabilized and growth momentum is expected to accelerate in the second quarter of 2014 (“Economic Update”).

The slower momentum in the first quarter of 2014 was mainly due to investment growth slowing down,and a worsening external balance (“Economic Update”). On the demand side, net exports continued to pull down the growth numbers, subtracting 1.4 percentage points from growth in the first quarter (“Economic Update”). World Bank states that, “Gross capital formation continued to weaken, contributing only 3.1 percentage points to growth in the first quarter of 2014 against 4.2 percentage points in the whole of 2013 (refer to the figure below). As a result of weaknesses in demand growth in manufacturing and services slowed in the quarter, but agriculture saw a slight improvement” (“Economic Update”).

Figure 1

Lifestyle Despite a much-reported growth â&#x20AC;&#x2DC;slowdownâ&#x20AC;&#x2122; and political upheavals, China continues to grow. it is expected that Chinese consumersâ&#x20AC;&#x2122; desire for less conspicuous consumption and unique experiential pursuits to gain further momentum this year (Red Luxury). Other lifestyle trends to watch in 2014 include: -E-Commerce/M-Commerce Becoming the Norm Consumers (especially younger consumers) have quickly become comfortable buying online. These consumers are more knowledgeable about brands and products, and more trusting of certain e-commerce sites. Buying over the Internet and with their mobile phones have become common. With new technologies making online shopping easier and more enjoyable, as well as integrating online and offline

Luxury). -Lower Tiered Cities Become Major Battlefield Luxury brands have moved into lower tier cities and these new markets are getting crowded. New marketing strategies are needed to target consumers in these lower

Social

channels, online and mobile shopping could see explosive growth (Red

tiered markets. Brands that are trying to get in the market will also be confronted with new challenges such as higher cost of entry(Red Luxury).

-Growth of “Lifestyle” Brands As Chinese consumers become increasingly sophisticated, they are looking to express their identity and status through fashion.

They

are

also

“seeking

unique

and

personalized shopping

experiences, and also brands that can represent themselves on an emotional level(Red Luxury). -Second Hand Luxury Boom second-hand stores and shopping have been gaining popularity due to a slowing economy and changing consumer attitudes(Red Luxury). A new breed of shoppers – fashionably chic yet budget-conscious – are no longer concerned that a luxury handbag is “gently used” if it can be bought at a fraction of the price(Red Luxury). With the government cracking down on corruption and displays of wealth by officials, expect the reselling of luxury “gifts” to continue, further increasing the supply of affordable secondhand goods (Red Luxury). -China to Become Greener given China’s current environmental predicaments, Chinese

consumers

will

embrace

the

latest

and

greatest

health

safety

innovations in (Red Luxury).

ATTITUDE TOWARDS WORK According to a study, native Chinese employees currently have higher job satisfaction and lower organizational commitment (Xiaohui). This feature can imply that present labor market dynamics and the employee-company linkage in Chinese society have been similar to their counterparts in western society (Xiaohui). The comparatively high job satisfaction indicates that both Chinese employees and employers have sufficient freedom to choose each other, and the overall person-environment fit is fairly relevant (Xiaohui).The comparatively low organizational commitment indicates that the previously forced loyalty in employee-organization relation has been changed to flexible loyalty(Xiaohui). As social and economic restrictions have been disappearing, Chinese employees have become increasingly mobile and flexible in job market (Xiaohui).

EMPLOYMENT LAWS Reform of the Hukou The Chinese law requires individuals to have household registration to be identified as a resident of that area--a system known as Hukou. Amid growing urbanization, this system has sparked inequality between resident population and 250,000 rural migrants (as of 2014) as a lack of urban Hukou deprives of welfare services provided by the government at subsidized costs. In order to bridge this inequality, the government announced a reform of the Hukou system in February 2012, which allowed thousands of migrant workers to apply for residency permits in small and medium cities. In its urbanization plan unveiled in March 2014, the government also set quantitative benchmarks to this effect. It aims to increase the proportion of urban population to 60% by 2020, out of which, it wants 45% to have full urban Hukou. In absolute terms, this amounts to providing urban Hukou to 40% of the existing rural migrant population by 2020. As of 2014, around 54% of the population lives in urban areas and only 36% of them qualify for an urban Hukou. The reforms would give migrant workers access to social security and other benefits. The reform would solve many of the issues that migrant workers face over residence permits and schooling for their children. The reform would also help businesses, as it would lead to a reduction of turnover rates. Moreover, workers would get access to all government benefits in their place of work in contrast to the pre-reform period where they were given social security benefits only where they were domiciled. Businesses would have better access to the vast pool of migrant workers as wages are rising in the cities. The measures may also help ease real estate prices in cities, as migrant workers will not have to purchase a house to get Hukou.

Labor laws and regulations in the Peopleâ&#x20AC;&#x2122;s Republic of China have undergone marked changes in recent years. These changes are part of Chinaâ&#x20AC;&#x2122;s redesign of its legal framework to support the development of its socialist market economy, a process that began close to three decades ago. At the national level, numerous specialized regulations and notices have followed the promulgation of the Labor Law. The Labor Law and national

Labor & Labor Laws

regulations are further supplemented by local regulations in many cases. For example, provinces, major cities (such as Beijing and Shanghai), and special economic zones (such as Shenzhen) have their own employment contract regulations.

Problems under the Labor Law Regime Despite these statutory protections, abuses of employee rights under the new system continued to persist, mainly attributable to blatant violations

the

law

unscrupulous

employers,

inconsistent

and

loose administrative enforcement at the local level, employeeâ&#x20AC;&#x2122;s lack of knowledge of their rights or simple fear of employer retribution if those rights were asserted. Common problems included failure to sign employment contracts, extending working

hours

overtime,

beyond

delaying

statutory

the

payment

limits of

without

wages,

paying

providing

the

unsafe

required working

conditions, failing to pay social insurance contributions and tax, etc.. These problems, combined with mass lay-offs and private companies that are trying to cut labor costs, have contributed to increasing levels of labor unrest throughout the country, which has become one of the major areas of concern for the Chinese Communist Party.

New Regime under Employment Contract Law In order to address the increasing labor unrest and widespread media reports of employer abuse of employee rights, the National Peopleâ&#x20AC;&#x2122;s Congress (NPC), on June 29, 2007, passed the Employment Contract Law, with effect from January 1, 2008. While the Labor Law still is in effect and remains the foundation piece of legislation for the employment law regime of China, the Employment Contract Law included significant changes to the existing legal framework. The most significant changes being: specific penalties for not signing employment contracts with employees; limits on the use of fixed-term contracts to increase job security of employees; specific employee consultation procedures in order to adopt company rules, policies, and regulations; and greater protection for employees who are hired through employment service agencies. The overall effect of the Employment Contract Law will be to increase individual employee rights as well as strengthen the structures for collective employee representation. While employment contracts signed before the effective date of the Employment Contract Law will continue to be valid and effective, the new requirements in the Employment Contract Law will prevail in the case of any conflict with the provisions in existing employment contracts. This plethora of legal sources has not answered all of the issues or questions facing businesses, employers and practitioners of law in China. Not only the legislation itself but also the interpretation of that legislation and local practice play important roles in Chinaâ&#x20AC;&#x2122;s labor market today.

Applicable Laws China’s current legal system concerning employment was established with the promulgation in 1995 of the Labor Law and in 2008 of the Employment Contract Law, together with their respective supplementing legislation. The main laws and regulations governing the employment arena include, among others, the following: -Labor Law of the People’s Republic of China, effective July 1,1995. -Employment Contract Law of the People’s Republic of China,effective January 1, 2008, amended with effect from July 1,2013. -Employment Promotion Law of the People’s Republic of China,effective January 1, 2008. -Law of the People’s Republic of China on the Mediation and bitration of Employment Disputes, effective May 1, 2008(Employment Disputes Law). -Labor Union Law of the People’s Republic of China, effective October 27, 2001. -Implementing Regulations for the Law of the People’s Republic of China on Employment Contracts, effective September 18, 2008 (ECL Implementing Rules). -Opinion on Several Questions Regarding the Implementation of the Labor Law of the People’s Republic of China, issued August 4, 1995 (Labor Law Opinion). -Law of the People’s Republic of China on Entry and Exit Control, effective July 1, 2013 (Immigration Law). These State-level laws and regulations form the basis of the employment contract system in China. However, locally promulgated legislation may also govern, from such places as major municipalities (Beijing, Shanghai, Tianjin, and Chongqing),

Special Economic Zones (such as Shenzhen Special Economic Zone), open coastal cities, and provinces. . Local legislation should be consistent with national legislation, but if conflicts are found, they should be carefully examined to determine, under law and in practice, which rule should be applied in a particular case.

Relevant Government Authorities The Ministry of Human Resources and Social Security (MOHRSS) is the main government authority in charge of employment and social insurance issues. Local labor bureaus are responsible for enforcing the national and local labor and employment regulations at the local level.

Key Employment Law Compliance Issues Working Hours Chinese regulations provide for a standard working hours system under which employees should not work more than eight hours per day and 40 hours per week. However, Chinese law also provides for alternative working hours systems. Upon government approval, an employer may institute the Comprehensive Working

Hours

System

the

Flexible

Working

Hours

System.

Under

the

comprehensive working hours system, employers may require employees to work longer hours without paying for overtime so long as the average hours worked in a certain period do not exceed the limit on total hours for that period. If the limit is exceeded, then overtime compensation must be paid. Under the flexible working hours system, an employer may require certain staff, such as high-ranking managerial staff and sales staff, to work in excess of 40 hours per week without paying overtime compensation. Local rules may have specific provisions concerning alternative working hours systems.

Rest days The statutory minimum is one rest day per calendar week, which can be any day of the week. Saturdays and Sundays are generally rest days in China. An employer can arrange to have its employees take rest days on any other days(“China Staff”).

Overtime & overtime payment Under the standard working hours system, employees that work over eight hours per day or 40 hours per week are entitled to the following compensation: -Overtime on workdays – 150% of normal wages -Overtime on rest days – compensatory leave or 200% of normal wages -Overtime on statutory holidays – 300% of normal wages Employees working under the comprehensive working hours system or the flexible working hours system are usually not entitled to overtime payment. Before having employees work overtime, employers must consult with the employees and the labor union (if any). Overtime hours generally should not exceed one hour per day, or three hours per day under special circumstances, and no more than 36 hours per month(“China Staff”).

Annual leave Employees who have worked between one year and less than 10 years are entitled to five days of paid annual leave(“China Staff”). Those who have worked at least 10 years but less than 20 years are entitled to 10 days of annual leave. Finally, employees will be entitled to 15 days of annual leave once they have worked for at least 20 years(“China Staff”). Employees should take their entire annual leave entitlement each year. If an employee does not use all of the employee’s annual leave in a certain year, and does not agree to carry the leave forward, then the employer must

pay the employee 200% of the employee’s average daily wage for each day of unused annual leave, in addition to regular salary(“China Staff”).

Minimum wage requirement Under China’s minimum wage system, minimum wage levels are fixed by the local governments and are adjusted regularly(“China Staff”).

Maternity benefits Female employees are entitled to not less than 98 days of maternity leave, commencing 15 days prior to the projected birth. In the event of difficult labor, the maternity leave is extended by an additional 15 days. Where the female employee bears more than one child in a single birth, she shall be granted an extra maternity leave of 15 days for each additional child born(“China Staff”). In some localities such as Shanghai, an extra 30 days of leave is granted for late childbirth, defined as a first pregnancy occurring after the age of 24(“China Staff”). A female employee is also entitled to two half-hour nursing breaks each working day during the first year after her child’s birth, and those nursing breaks are considered working time(“China Staff”).

Retirement The national retirement age for male workers is 60, and the national retirement age for female workers is 50 (55 if in managerial or technical positions) (“China Staff”).

Employment Contracts Written Contract An employer must conclude an individual written employment contract with each full-time employee. An employment contract may be in a foreign

language. However, in the event of a conflict with a Chinese version, the Chinese version will prevail(“China Staff”).

Indirect Employment Representative offices are not permitted to directly employ their staff. Instead, representative offices obtain their Chinese nations staff through arrangements with labor service companies. Expatriate (non-Chinese) staff generally are employed by the foreign parent company and assigned to work at the representative office(“China Staff”). Mandatory Provisions in Employment Contracts Employment contracts must include the following basic mandatory terms: 1) the name, domicile and legal representative or main person in charge of the Employer; 2) the name, domicile and number of the resident ID card or other valid identity document of the worker; 3) the term of the employment contract; 4) the job description and the place of work; 5) working hours, rest and leave; 6) labor compensation; 7) social insurance; 8) labor protection, working conditions and protection against occupational hazards; and 9) other matters which laws and statutes require to be included in employment contracts. Also, relevant local regulations may stipulate additional matters to be included in employment contracts. Moreover, in practice, employers generally wish to supplement the minimum applicable requirements with other commercial terms(“China Staff”). Employers also have the option of providing supplemental explanations concerning the mandatory terms and other terms in an employee handbook.

De Facto Employment While employment contracts should be in writing, Chinese law recognizes the concept of de facto employment relationships(“China Staff”). Where a de facto employment relationship is deemed to exist,employers generally owe most of the same duties to an employee as are required by law where a written contract is in place(“China Staff”). Local regulations, such as those for Shanghai, may provide special treatment concerning employment contracts-infact as opposed to written employment contracts(“China Staff”).

Consequences for Failure to Conclude a Written Contract If an employment contract is not signed with an employee within one month of the employee beginning to work for the employer, then the employee is entitled to 200% of the employee’s wage. If no employment contract is signed within one year of the employee’s commencement of work for the employer, then the parties shall be deemed to have concluded an open-term employment contract(“China Staff”).

Termination No at-will Termination In China, there is no concept of “at will” employment as in some other countries. While employees generally may resign upon 30 days’ prior notice to the employer, employers in China are permitted to unilaterally terminate employees only in accordance with circumstances stipulated in relevant laws and regulations(“China Staff”).

Termination Grounds Under six statutory termination grounds, an employee can be dismissed with no notice and no severance: - if the employee has not satisfied the conditions of employment during the probation period(“China Staff”).

-if the employee seriously violates the company’s rules or regulations; -if the employee commits serious dereliction of duty or graft resulting in major harm to the company’s interests; -if the employee is prosecuted for a criminal offense according to law(“China Staff”). -the employee has additionally established an employment relationship with another employer which materially affects the completion of his tasks with the first-mentioned employer, or he refuses to rectify the matter after the same is brought to his attention by the employer; or(“China Staff”). -the employee uses such means as deception or coercion, or takes advantage of the employer’s difficulties, to cause the employer to conclude an employment contract, or to make an amendment thereto, that is contrary to the employer’s true intent(“China Staff”).

Under three of the statutory termination grounds, an employee must be provided 30 days’ prior written notice and severance: -if the employee has fallen ill or sustained a non-industrial injury and, at the end of the medical treatment period, can neither engage in the original work nor in other work arranged by the company;(“China Staff”). -if the employee is incompetent and remains incompetent after training or assignment to another post; or (“China Staff”). -if performance of the original employment contract becomes impossible due to a major change in the objective circumstances upon which the employment contract was based at the time of its conclusion and consultations between parties fail to produce agreements on amendments of the employee contract (“China Staff”).

An employer must give notice to the labor union prior to any unilateral termination by the employer, regardless of the particular grounds for the unilateral termination. The labor union has a right to raise objections to termination, but it cannot directly overturn the termination (â&#x20AC;&#x153;China Staffâ&#x20AC;?).

Source:Reuters

*Additional Labor Laws can be found in the Appendix

State of the Textile Industry

Source: Chris Payne

According to a Markeline Report, the Chinese textile mills market has experienced very strong growth in recent years. The market is predicted to grow at a slightly decelerated but strong rate through to the end of the forecast period. The Chinese textile mills market had total revenues of $180.6 billion in 2013, representing a compound annual growth rate (CAGR) of 8.6% between 2009 and 2013. In comparison, the Japanese and Indian markets grew with CAGRs of 6.4% and 5.5% respectively, over the same period, to reach respective values of $21.4bn and $177.0bn in 2013 (MarketLine). The fabrics segment was the market’s most lucrative in 2013, with total revenues of $137.8bn, equivalent to 76.3% of the market’s overall value. The yarns segment contributed revenues of $42.7bn in 2013, equating to 23.7% of the market’s aggregate value. The performance of the market is forecast to decelerate, with an anticipated CAGR of 8.3% for the five-year period 2013 - 2018, which is expected to drive the market to a value of $268.9bn by the end of 2018. Comparatively, the Japanese and Indian markets will grow with CAGRs of 6.9% and 12.5% respectively, over the same period, to reach respective values of $29.9bn and $318.4bn in 2018 (MarketLine).

Market Value The Chinese textile mills market grew by 7.1% in 2013 to reach a value of $180,559.9 million. The compound annual growth rate of the market in the period 2009–13 was 8.6%.

Figure 2 Market Segmentation Fabrics constitute the largest segment of the textile mills market in China, accounting for 76.3% of the market's total value. The yarns segment accounts for the remaining 23.7% of the market (MarketLine).

Figure 3

Geography Segmentation China accounts for 42.7% of the Asia-Pacific textile mills market value. India accounts for a further 41.8% of the Asia-Pacific market (MarketLine).

Figure 4 Market Outlook In 2018, the Chinese textile mills market is forecast to have a value of $268,928.7 million, an increase of 48.9% since 2013. The compound annual growth rate of the market in the period 2013â&#x20AC;&#x201C;18 is predicted to be 8.3%.

Figure 5

According to China Energy Group, the textile and clothing industry is the largest manufacturing industry in China with about 24,000 enterprises. China is the largest clothing producer in the world and has the largest production capacity for textile products consisting of cotton, man made fibers and silk (â&#x20AC;&#x153;Textile Industryâ&#x20AC;?).

State of the Manufacturing Industry

Source: Fashion Design Solutions

The Chinese apparel & non-apparel manufacturing market grew healthily over the last few years. The market is expected to accelerate in the forthcoming years up to 2017. The Chinese apparel & non-apparel manufacturing market had total revenues of $246.9bn in 2012, representing a compound annual growth rate (CAGR) of 7% between 2008 and 2012. In comparison, the Japanese market declined with a compound annual rate of change (CARC) of -0.1%, and the Indian market increased with a compound annual growth rate (CAGR) of 7.3%, over the same period, to reach respective values of $54.4bn and $57.6bn in 2012. The non-apparel products segment was the market’s most lucrative in 2012, with total revenues of $124.9bn, equivalent to 50.6% of the market’s overall value. The apparel segment contributed revenues of $122bn in 2012, equating to 49.4% of the market’s aggregate value (MarketLine). The performance of the market is forecast to accelerate, with an anticipated CAGR of 10.1% for the five-year period 2012 - 2017, which is expected to drive the market to a value of $400.4bn by the end of 2017. Comparatively, the Japanese markets will decline with a CARC of -0.6%, and the Indian market will increase with a CAGR of 10.6%, over the same period, to reach respective values of $52.8bn and $95.4bn in 2017 (MarketLine).

Market Value The Chinese apparel & non-apparel manufacturing market grew by 5.5% in 2012 to reach a value of $246.9 billion. The compound annual growth rate of the market in the period 2008â&#x20AC;&#x201C;12 was 7% (MarketLine).

Figure 6 Category Segmentation Non-apparel products is the largest segment of the apparel & non-apparel manufacturing market in China, accounting for 50.6% of the market's total value (MarketLine). The Apparel segment accounts for the remaining 49.4% of the market.

Figure 7

Geography Segmentation China accounts for 59.9% of the Asia-Pacific apparel & non-apparel manufacturing market value. India accounts for a further 14% of the Asia-Pacific market (MarketLine).

Figure 8 Market Outlook In 2017, the Chinese apparel & non-apparel manufacturing market is forecast to have a value of $400.4 billion, an increase of 62.2% since 2012. The compound annual growth rate of the market in the period 2012â&#x20AC;&#x201C;17 is predicted to be 10.1%.

Figure 9

China National Garment Association (CNGA) was founded in 1991 as a nationwide organization of China’s garment industry, and is among China’s first 4A industry associations. With an aim of fostering a sustainable garment industry, CNGA strives to provide various services related to garment industry for the government, industry, enterprises and society. At present, CNGA has over 1,200 members, which include most of China’s outstanding original garment brands, regional garment industry associations and major industrial clusters. It provides services for tens of thousands of enterprises and has played an active role in terms of technology development, brand building, international communication and cooperation, industrial upgrade and development and so on. It has established committees in eight sub-sectors: Men’s Wear, Women’s Wear, Children’s Wear, Sports & Casual Wear, Underwear, Accessories, Downwear & related products and Garment Auxiliary & related industry; as well as a few professional institutions including Marketing Expert Committee, Technical Expert Committee, National Apparel Standardization Technical Committee, Industrial Economy Research Institute, Business Wear Research Center and Beijing Fashion-Expo Co., Ltd. The CNGA publishes monthly and annual reports to keep their members up

Textile & Apparel Associations

China National Garment Association

to date and abreast of what is going on in their respective industries.

China Dying and Printing Industry Association Established in 1988, the Sub-Council of Textile Industry, China Council for the Promotion of International Trade (CCPIT TEX) is named at the same time “Textile Industry Chamber of Commerce, China Chamber of International Commerce ” and “Textile International Trade Promotion Center”, which belongs to China National Textile & Apparel Council (CNTAC). CCPIT TEX is under the leadership of China Council for the Promotion of International Trade (CCPIT) and China National Textile & Apparel Council (CNTAC). After its establishment , CCPIT TEX is devoted to the promotion of trade contact and economic cooperation in textile and garment industry and enterprises, CCPIT TEX is doing all the best for the continuous development of the textile industry. The prime mission of CCPIT TEX: 1. Organizing various textile and garment exhibitions and trade fairs both at home and abroad. 2. Organizing activities on international trade and professional programs in textile circle. 3. Contacting international textile, garment and trade circles; inviting and hosting foreign technical personnel and trade delegations of textile and garment circle to China for international cooperation. 4. Organizing domestic delegation of international trade and technicians to abroad for business and extending international market, enlarging export and investment to overseas. 5. Undertaking collection and researching of trade and investment information; providing

information

and

consultation

service

trade

and

economic

cooperation to domestic and foreign enterprises and organizations. 6. Handling various matters relating to the promotion of foreign trade, economic and technology cooperation.

China Dyeing and Printing Industry Association China Dyeing and Printing Industry Association was founded in March 1995, is a non-profit social organization of printing and dyeing industry enterprises, relevant

industry

enterprises,

institutions,

social

organizations

and

professionals with some experience of voluntarily formed. The purpose of this association is to abide by the constitution, laws, regulations and policies, safeguard the overall interests and the legitimate rights and interests of members of the industry, give full play to the role of bridge and link industry organizations to assist government departments to strengthen the industry, for business, industry, government services and the promotion of sustained, stable and healthy development of printing industry. The main goal of China Dyeing and Printing Industry Association is to carry out research on the industry, to government departments to reflect the industry, We want to participate in the formulation industry development plan,

improve

industry

industry;industry

management,

business

and

promote

advisory

the

development

organization,

the

diagnosis,

identification, verification and the professional management, production techniques, marketing, communication, training courses of various types of services for the industry and improve the quality of the industry. We assist in trade brand development, quality management and product development work. CDPA members participate in relevant international conferences, study abroad organization, access, and promote foreign economic and trade, technology.

China Chamber of Commmerce for Import and Export of Textile and Apparel Established in 1988, the Sub-Council of Textile Industry, China Council for the Promotion of International Trade (CCPIT TEX) is named at the same time “Textile Industry Chamber of Commerce, China Chamber of International Commerce ” and “Textile International Trade Promotion Center”, which belongs to China National Textile & Apparel Council (CNTAC). CCPIT TEX is under the leadership of China Council for the Promotion of International Trade (CCPIT) and China National Textile & Apparel Council (CNTAC). After its establishment , CCPIT TEX is devoted to the promotion of trade contact and economic cooperation in textile and garment industry and enterprises, CCPIT TEX is doing all the best for the continuous development of the textile industry. The prime mission of CCPIT TEX: 1. Organizing various textile and garment exhibitions and trade fairs both at home and abroad. 2. Organizing activities on international trade and professional programs in textile circle. 3. Contacting international textile, garment and trade circles; inviting and hosting foreign technical personnel and trade delegations of textile and garment circle to China for international cooperation. 4. Organizing domestic delegation of international trade and technicians to abroad for business and extending international market, enlarging export and investment to overseas. 5. Undertaking collection and researching of trade and investment information; providing

information

and

consultation

service

trade

and

economic

cooperation to domestic and foreign enterprises and organizations. 6. Handling various matters relating to the promotion of foreign trade, economic and technology cooperation.

Trade Agreements & Laws

Source: Jennifer Freedman

Agreements Specific to China The Chinese Government deems Free Trade Agreements (FTAs) as a new platform to further opening up to the outside and speeding up domestic reforms, an effective approach to integrate into global economy and strengthen economic cooperation with other economies, as well as particularly an important supplement to the multilateral trading system. Currently, China has 20 FTAs under construction, among which 12 Agreements have been signed and implemented already.

China-ASEAN (Associations of South East Asia) FTA The leaders of both China and ASEAN members (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam) signed the framework agreement on China-ASEAN Comprehensive Economic Cooperation at the sixth China-ASEAN Summit in November 2002. In November 2004, Chinese Premier Wen Jiabao and leaders of AMS witnessed the signing of the Agreement on Trade in Goods of the China-ASEAN FTA which entered into force in July 2005. In January 2007, the two parties signed the Agreement on Trade in Services, which entered into effect in July of the same year. In August 2009, the two parties signed the Agreement on Investment. The establishment of China-ASEAN free trade area enhances the close economic and trade relations between the two parties, and also contributes to the economic development of Asia and the world at large.

China-Pakistan FTA In April 2005, China and Pakistan announced the launch of the negotiations on free trade area during Premier Wen Jiabaoâ&#x20AC;&#x2122;s visit to Pakistan. The two countries reached the Free Trade Agreement in November 2006. The Agreement took effect in July 2007. On February 21, 2009, Chinese State Councilor Dai Bingguo and Pakistani President Asif Ali Zardari witnessed the signing of the Agreement on Trade in Service of the China-Pakistan FTA which would enter into force since October 10,2009.

China-Chile FTA In November 2005, Chinese President Hu Jintao and former Chilean President Ricardo Lagos witnessed the signing of the China-Chile Free Trade Agreement. The Agreement entered into force in October 2006. Under the Agreement, China and Chile will extend zero duty treatment phase by phase to cover 97 percent of products in ten-year time. The two countries will also further strengthen exchange and cooperation in such areas as economy, SMEs, culture, education, science and technology, and environmental protection. On April 13, 2008, Chinese President Hu Jintao and Chilean President Michelle Bachelet witnessed the signing of The Supplementary Agreement on Trade in Services of the Free Trade Agreement between the Government of the Peopleâ&#x20AC;&#x2122;s Republic of China and the Government of the Republic of Chile, in Sanya, Hainan Province. At present, the two parties are pushing ahead negotiations on investment.

China-New Zealand FTA On April 7, 2008, Chinese Premier Wen Jiabao and Prime Minister Helen Clark of New Zealand witnessed the signing of the China-New Zealand Free Trade Agreement in Beijing, which entered into force on October 1, 2008. Covering such areas as trade in goods, trade in services and investment,

the Agreement is the first comprehensive FTA that China has ever signed as well as the first FTA that China signs with a developed country.

China-Singapore FTA China and Singapore signed the China-Singapore Free Trade Agreement on October 23, 2008, during Singaporean Prime Minister Lee Hsien Loongâ&#x20AC;&#x2122;s visit to China. Under this Agreement, the two countries will accelerate the liberalization of trade in goods on the basis of the Agreement on Trade in Goods of the ChinaASEAN FTA and further liberalize the trade in services.

China-Peru FTA On April 28, 2009, the Chinese and Peruvian governments signed the China-Peru Free Trade Agreement in Beijing in the presence of Chinese Vice President Xi Jinping and Peruvian Vice President Luis Giampietri Rojas. The China-Peru Free Trade Agreement is the first comprehensive FTA China has signed with a Latin American country. It is a new landmark in the bilateral relations. The Agreement will further strengthen the traditional friendship between the two countries and deepen the economic and trade cooperation. Particularly in the context of the worsening global financial crisis, the China-Peru FTA agreement sends a positive message of deepening cooperation and tiding over difficulties. It demonstrates the firm commitment of the two countries to opening up and fighting protectionism.

Mainland,Hong Kong and Macau Closer Economic and Partnership Arrangement In 2003, the Central Government of China signed the Closer Economic Partnership Arrangement (CEPA) with the Government of the Special Administrative Region of Hong Kong and the Government of the Special Administrative Region of Macao respectively. Supplement I, II, III, IV, V and VI were signed in 2004, 2005, 2006, 2007, 2008 and 2009, respectively.

The CEPA is a successful application of the “One Country, Two Systems” principle, a new pathway for the institutional cooperation between the mainland and Hong Kong and Macao, and an important milestone in the economic and trade exchange and cooperation between the mainland and Hong Kong and Macao. It is a Free Trade Agreement signed by the Central Government with the separate customs territories of Hong Kong and Macao , and also the first FTA to be fully implemented in the Chinese mainland.

China-Costa Rica FTA Costa Rica is China ‘s second largest trading partner in Central America while China is the second largest trading partner of Costa Rica . In recent years, bilateral trade between the two countries has grown rapidly. In June 2007, China and Costa Rica established diplomatic relations. In November 2008, Chinese President Hu Jintao visited Costa Rica and announced with Costa Rican President Oscar Arias the launch of China-Costa Rica free trade negotiations. Related provisions in the FTA enable over 60 percent of the two countries’ products to enter each other’s market duty-free immediately, and will allow tariffs to be removed from another 30 percent of products gradually in the next 5 to 15 years (“China Briefing”). According to information from the web site of China’s Ministry of Commerce, China’s main exports that will benefit from the FTA include textiles, machines, electric appliances, vegetables, fruits, automobiles, chemical products, raw fur and leather (“China Briefing”). At the same time, products of coffee, beef, pork, fruit juices and jam from Costa Rica will also be able to debut on the Chinese market at lower prices thanks to the tariff cuts (“China Briefing”). In addition to a tariff-free entry for products, the two countries have agreed to open service sectors to each-other for bilateral free trades and mutual investments. Costa Rica will allow free service trades in 45

Future Fair Trade Agreements China currently has eight Fair Trade agreements in the works. These agreements include: -China-GCC(Gulf Cooperation Council) FTA -China-Australia FTA -China-Norway FTA -China-Korea FTA -China-Japan-Korea FTA -Regional Comprehensive Economic Partnership, RCEP -China-ASEAN FTA Upgrade Negotiations -China-Sri Lanka FTA

Business Etiquette

Introduction When doing business, it is very important to practice proper business ettiqute. In order to do this, one must study the country they plan to do business with to get a sense of their culture and what they value as people. Cultural sensitivity is key when doing business globally. Over 70% of business deals taking place across cultures fail due to cultural

misunderstandings

(Reamy). In this section, we will discuss the cultural and business ettiqute of China. Source: Singapore School of Etiquette

According to Hofstede, China is a masculine society â&#x20AC;&#x201C;success oriented and driven. The need to ensure success can be seen in the fact that many Chinese will sacrifice family and leisure priorities to work (Hofstede). Service people will provide services until very late at night. Leisure time is not so important.

The migrated farmer workers

will leave their families behind in faraway places in order to obtain better work and pay in the cities (Hofstede). Another example is that

Type of Culture

Chinese students care very much about their exam scores and ranking as this is the main criteria to achieve success or not (Hofstede).

Figure 10 Source: Hofstede

Negotiation Styles & Strategies

Source: Singapore School of Etiquette

The Chinese word for negotiation—tan pan—combines the characters meaning “to discuss” and “to judge” (Neidel).Chinese view negotiations primarily as a mechanism for building trust so that two parties can work together for the benefit of both (Neidel). Trust is built through dialogue that lets each party judge or evaluate the partner and the partner’s capabilities and assess each other’s relative status (Neidel). The negotiation process also enables parties to reach an understanding on a specific issue, condition, or transaction, in a way that lets each side feel that “a good deal” was brokered. But the concept of negotiation hinges on creating a framework for long-term cooperation and problem-solving much more than on drafting a onetime agreement (Neidel). According to an article written in

negotiation in China Business Review,

negotiations in China are viewed as an ongoing, dynamic process that takes into account practical matters and context (Neidel). Many Chinese prefer this approach over creating contract-based absolutes, which many Chinese perceive as the primary purpose of Western-style negotiations (Neidel). Significant differences in negotiation style and culture can be accompanied by mutually unfavorable perceptions. Americans may see Chinese negotiators as inefficient, vague, and perhaps even dishonest, while Chinese perceive American negotiators as impersonal, impulsive, and overly focused on immediate gains. When

adapting

Chinese-style

negotiations,

task-based,

time-conscious

foreign partners must balance the need for quick settlement on specific issues and contract terms with the slower-paced and seemingly abstract building of interpersonal relationships (Neidel). Competing effectively within a Chinese negotiation framework means understanding and accommodating the Chinese-style approach in order to craft a strategic plan that works on a local level.

While Westerners are generally results-oriented (focusing on tasks at hand, specific terms and conditions, and time efficiency) Chinese are relationshiporiented (Rodriguez). They focus on harmony and flexibility, and are patient in getting the job done. They do all they can to avoid ‘tong chuan yi meng’ which translates to ‘same bed, different dreams’(Rodriguez). Chinese are known to be tough negotiators. Building trust - Begin to build trust based on mutual respect, modesty, equality and harmony. Chinese are not comfortable being rushed, or jumping right into business discussions without proper introduction (Rodriguez). They believe getting to know each other and building trust is necessary in negotiations. Rationale – Chinese take time to understand the reason, logic and motivating factors in a holistic manner – connecting the dots. They must be convinced there’s a win-win deal to be made. They think long term. A bottom line approach or a quick fix may be perceived as simplistic and short-term thinking. Cultural priorities – In negotiations, Chinese cultural priorities are relationship first followed by rationale, and legal (Rodgriguez). Style – Chinese listen more than they talk. They may appear to be delaying, but

they

are

gathering

pertinent

details

issues

and

personalities.

The indirect, unemotional style accompanied by vagueness allows room for maneuverability and outs. Silence is ‘constructive ambiguity’ (Rodriguez). It is rude to interrupt. To build a productive relationship each side must accept different styles of team building and group dynamics. Compromise – Chinese know what they want and are willing to compromise. ‘Give and take’ is a means to achieve harmony in Chinese culture (Rodriguez). As such, compromise is not considered weak or giving in. Revisiting agreed items or terms – It is not unusual for Chinese to revisit items previously discussed and agreed upon, and try to renegotiate

52 Source: Getty Images

(Rodriguez). If this happens, graciously enter into talks, be flexible and well prepared for what you are willing and unwilling to do, and prepare your organization that there may have to be changes (Rodriguez). According to an article in Forbes,the ten keys to successful negotiation in China are as follows: 1. Manage your own and your boss’s expectations. “Maintaining balance and harmony is an important aspect of Chinese thought. Chinese do not want to “lose face,” and they also do not want to cause you to “lose face.” Therefore, they will rarely disagree with you in public, and will instead emphasize friendly relations and cooperation. When your boss comes to town and is treated with a great deal of respect and lavished with compliments, he or she will assume that your job negotiating a deal will be easy given such a cooperative and friendly atmosphere. Likewise, you will be favorably impressed by the comments and compliments of your Chinese counterparts, and may come to believe that there is agreement where there isn’t”(Perkowski). 2. Have a negotiating strategy — your counterpart certainly will. “China is a marathon, not a sprint, and your negotiations are likely to take place over a longer period of time than in the West. Many negotiations may be carried out over the telephone in places like the United States, but this is virtually unheard of in China. The requirement for face to face meetings alone extends the time for negotiations, the need for translation, as well as the time necessary to get to know your potential partner are other factors that make them longer. Have a clear idea of where you want to end up, and how you plan to get there. Because memories tend to change over time, it’s important to keep accurate records of the results of each round of negotiations. It’s also a good idea for both sides to sign off on meeting notes”(Perkowski).

3. Understand that negotiating in China is a team sport. “When negotiating in China, you will likely face a team of negotiators across the table. A key challenge will be to identify the real decision maker in the group — there is usually only one — and the individual or individuals who can influence the decision maker”(Perkowski).

4. Assemble a capable Chinese team and enlist the support of third parties, most importantly the government. “A capable Chinese team can help to bridge cultural differences and help you to understand the nuances of what is being said by your counterpart. A good team can also develop useful back channels with the other side that can smooth negotiations. By all means, use your guanxi, or the relationships that you have developed with the local government, to develop support for your position”(Perkowski). 5. Remember that in China, a yuan is a buck. “The Chinese have a different, and lower, cost perspective than people who have grown up in countries like the United States. When Americans come to China and see a 100 yuan bill, they automatically divide by 6.5 (the current exchange rate) and what they really see is $15. When Chinese, even wealthy ones, see that same 100 yuan bill, what they see is the equivalent of a $100 — a fundamentally different way of looking at the same material object. If your Chinese counterpart differs with you on money issues, he or she may not be being difficult, they may just have a different cost perspective”(Perkowski). 6. Leave your ego at home. “Just like citizens of Missouri, the “show me” state, the Chinese pay attention to what you do, not what you say. Chinese don’t like “big talkers,” so it’s better to be more understated and modest here. Show your Chinese counterparts respect, and make an effort to get to know

them on a more personal level. This will help you to gain their empathy for your position. Much is made of the baijiu drinking sessions in China. There are, of course, other ways to bond with your Chinese counterparts, but drinking baiiju together is certainly one of them”(Perkowski).

7. Patience is a virtue in China; learn to listen more and speak less. “Be patient and practice the “cold shower” approach to decision making. Just when you think you know enough to make a decision and react, stop, think, listen some more, sleep on it and then perhaps make your decision”(Perkowski).

8. Don’t set artificial deadlines; control your emotions. “Setting artificial deadlines, threatening to walk out of negotiations, or giving in to displays of anger seldom work in China. Among other things, they call into question the sincerity of your desire to cooperate”(Perkowski).

9. Be fair, reasonable and diplomatic. “If your Chinese counterpart believes that you are being unreasonable, they may not openly say so, but your negotiations are likely to stall and go nowhere. If you disagree with your counterpart, don’t simply reject their position out of hand, but carefully explain your reasoning”(Perkowski). 10. Nothing succeeds like indifference. “In love and in business, it’s never a good idea to be an overly anxious suitor. Even though you may feel otherwise, a bit of indifference can help preserve your leverage in any relationship”(Perkowski).

Source: BNI

Initial Meetings

As with initial meetings in most culture, it is common to shake hands upon meeting. Chinese may nod or bow instead of shaking hands, although shaking hands has become increasingly common (Brosrock).Senior persons begin greetings. Greet the oldest, most senior person before others (Brosrock). During group introductions, line up according to seniority with the senior person at the head of the line. During the initial meeting, it is very important for you to present your business card. The business card must be printed with English on one side and simplified Chinese on the other (Brosrock). The business card must be presented with both hands. When receiving business cards, ensure that you take the time to look at their card and read it. Chinese generally introduce their guests using their full titles and company names (Brosrock). You should do the same. Example: Doctor John Smith, CEO of American Data Corporation.

Relationship Building

Many executives say that business is all about relationships.This saying

is even truer in China (“Relationship Building”). The word “guanxi” in Chinese means “relationship,” but it also a concept or a philosophy (“Relationship Building”).

If you have “guanxi,” you are fortunate enough to have a strong network of contacts(“Relationship Building”). These contacts are often more intense than what is considered a contact in the West(“Relationship Building”). Rather than just knowing some cursory information, a contact in China is often bound to you by personal obligation(“Relationship Building”). In other words, they owe you one. The value in the contacts lies in the ability to call in these favors(“Relationship Building”).

Building relationships in China takes time. It takes place over the course of years, not days or months. To develop “guanxi” one must provide at least as many favors as you accept(“Relationship Building”).

Social & Cultural Elements

Introduction The social and cultural values and standards of a country effect the way they conduct business. This section goes in to detail on how to conduct business in China. Source: Ann Lu

Appropriate Dress 60 Source: Gallery Hip

Appropriate Attire Knowing the right business attire in China is essential to making a good first impression when doing business with Chinese colleagues. Due to the population and size of China, and China's growing economy, many individuals may find themselves doing business in China. Being properly dressed is essential for success. According to World Business Culture, there are several important rules for proper business attire in China. First, you should never wear shorts (Rakoczy). Shorts are considered appropriate for exercise and never for the workplace. Even during the summer, you will rarely see shorts worn in China by anyone other than tourists (Rakoczy). Avoid wearing bright fabrics, as bright colors are considered inappropriate in the Chinese workplace. Dark or muted colors are considered appropriate. Both men and women should dress in a conservative manner.

Business Attire For Women If you are a woman, special style rules apply. Chinese business women dress quite conservatively, and you should mimic this style. Revealing clothing is not permitted. If you choose to wear a dress, the hem needs to be below the knee or the dress is considered inappropriate (Rakoczy). High necklines are the norm for Chinese business women. Avoid wearing extremely high heels, regardless of what you are wearing. A shoe with a low heel is acceptable, but the heel must be extremely small (Rakoczy). If your hosts are shorter than you, do not wear a heel at all. It will be considered a sign of disrespect and rudeness. In China,only closed-toe shoes are worn. Open-toe shoes are inappropriate for the Chinese workplace.

Flashy or large jewelry is not permitted in the business area, regardless of what you wear (Rakoczy). If you choose to wear jewelry, choose pieces that are small and appropriate. Do not wear large earrings, large jeweled rings, or bulky necklace (Rakoczy). If possible, wear a business suit, and try to wear colors such as beige, brown, or navy. Sleeves on your shirt should be full or three-quarter length. Chinese women do not wear short sleeves in the workplace (Rakoczy). A woman who reveals too much skin is considered offensive by Chinese businessmen (Rakoczy). It is frowned upon to wear too much makeup. If you choose to wear makeup, your makeup should be modest and natural (Rakoczy). Nail polish should not be worn. If you must wear nail polish, make sure it is not a bright color (Rakoczy). Your nails should be neatly trimmed, and fake nails should not be worn to any Chinese business event (Rakoczy).

Business Attire for Men The proper business attire for men in China is not much different from conservative companies in the West. You should wear a conservative suit and tie. Always wear a tie, and choose ties in neutral colors (Rakoczy). Avoid bright, flashy ties and patterns. In China, one also needs to keep the suit jacket on at all times (Rakoczy). It is considered rude and inappropriate to remove the jacket during the meeting, and it will be thought of as a sign of disrespect to the hosting company (Rokoczy).A suit should be worn to any business social event. Even for formal events, a business suit is appropriate; tuxedos are rarely worn (Rakoczy). Much like shoes for women, only closed-toe shoes are worn by businessmen. Never wear casual footwear, athletic footwear, or sandals in an office environment (Rakoczy).

Do not wear jewelry other than a good quality watch and perhaps a wedding band (Rakoczy). If you donâ&#x20AC;&#x2122;t own an expensive or a nice watch, do not wear a replica watch. It is likely that your host will be able to spot the fact that the watch is a fake (Rakoczy). Instead, opt for no watch at all.

Source: Visual Photos

Introductions 64

Source: Professional Image Management

Addressing others: Seniority is valued in China. It is important to address your counterparts by their title (Chairman, Director, etc.). Find out who the most senior person in the room is, and address them first(“Business Etiquette in China”). Introducing yourself: Say your name clearly, and remember to state both the company you work for and your position (“Business Etiquette in China”). As a point of reference, know that Chinese will refer to their company first, then their title, and then their name when introducing themselves to others(“Business Etiquette in China”).. Handshakes: Meetings in China often start with handshakes. Ensure that you are not too aggressive with your handshake. Don’t be surprised if you are at the receiving end of a decidedly non-aggressive handshake. If things go well, you may also be on the receiving end of a prolonged handshake: anything goes. In western business contexts, you have probably found yourself in “squeezing” contests (among men): who has the stronger grip? In China, the question will be “who lets go first?” Don’t be shy about holding on if your counterpart is enjoying the contact – it is meant well. Giving/Receiving business cards: Similar to introductions, hand out business cards to the most senior official first(“Business Etiquette in China”). Chinese use both hands when giving and receiving anything of value, including gifts and particularly business cards; you should do the same as this is one of the first points at which you will make an impression (“Business Etiquette in China”). Take a moment to look at and acknowledge the individual’s card (“Business Etiquette in China”). Have your own cards translated into Chinese on one side. Your title is important; this is how your hosts will determine who should be invited to meetings, what weight your words carry, and where you will be seated (“Business Etiquette in China”). Your name: Having a Chinese name, ideally one with meaning rather than a transliteration of your English or French name will be taken as a sign of respect as well (“Business Etiquette in China”). The best approach is to have a local contact or native speaker help create one for you

(“Business

Etiquette in China”).

Gestures 66

Source: Jupiter images

Chinese don’t gesture very much and regard a lot of hand movement as excessive. Below are a list of gestures one should be aware of and know their meaning: -Winking and whistling are considered rude. -Eye contact tends to be indirect. -Both the thumbs up sign and tugging on the earlobe are signs of excellence. An outward pointing and raised pinky means you are nothing, poor quality or not very good at something. -Some Chinese point with their middle finger without realizing that it has a vulgar meaning in the West. Conversely, a thumb placed between the middle and index fingers (the “nose stealing” gesture) is on obscene gesture in some parts of China. -Don’t point or use your finger to beckon someone (this gesture is used for dogs). To get someone’s attention and tell them to “come here” place your palm down and move your fingers towards you. This gesture is used with children, taxis or waiters but is considered very rude when directed at an older person. The most polite way to attract someone’s attention is to make eye contact and bow slightly. -Holding your fist up is an obscene gesture in Hong Kong and some parts of southern China. Also in southern China, people say thank you by tapping two fingers on the table. Many people in the north, however, are not familiar with this gesture. -The Chinese dislike being touched by strangers. Do not touch, hug, lock arms, back slap or make any body contact. -Never put your feet on a desk or a chair. Never gesture or pass an object with your feet. -Blowing one’s nose in a handkerchief and returning it to one’s pocket is considered vulgar by the Chinese. -Sucking air in quickly and loudly through lips and teeth expresses distress or surprise at a proposed request. Attempt to change your request, allowing the Chinese to save face.

Colors & Numbers 68

Source: Dreamstime

Chinese Lucky Numbers Number 1 - it means to love only one person a whole life - one heart, the whole heart loves only you forever. One Chinese bridegroom gave his new wife 111 roses on their wedding day to let her know he would never love another (“Traditions and Culture’). Number 3 - in Mandarin, this number sounds like the word “life”, so it is considered a good number (“Traditions and Culture”). Number 8 - this number signifies money. This is probably the most popular number - and the more 8’s you can get- the more money is sure to come your way. Chinese people will pay a lot of money to get a telephone number or license plate that has a lot of 8’s in it. Some people will buy up phone numbers and license plates with lucky numbers, advertise them for sale, and make a nice little profit on the transaction. Street poles are often covered in telephone numbers for sale (“Traditions and Culture’). Number 9 - this number signifies happiness and long life. It is common to see young people instant messaging and sign off with the numbers 8899.(double money and double happiness) (“Traditions and Culture”).

Chinese Unlucky Numbers Number 4 - when the number 4 is spoken in Mandarin - it sounds like the word death. Chinese will shy away from anything with 4’s (“Traditions and Culture”). Number 13 - This unlucky number comes from a North American superstition that the Chinese have adopted in some parts of the country. As can be seen in the image below of an elevator in a hotel, the Chinese take their superstitions so seriously that they don’t have floors associated with the unlucky numbers (“Traditions and Culture”).

Source: Steve LePoidevin

Colors & Their Meaning in Chinese Culture Regarding colors with the understanding of the Five Element theory allows to understand the five ‘main’ colors as a process, showing the Chinese Taoistic thought of the Five Elements as a further and more refined step to understand and analyze the Yin-Yang philosophy, as the Theory of the Five Elements describes the interaction and relation between Yin and Yang, between phenomena (“Traditions and Culture”). Below a brief list of associations. Note that colors are ‘in motion’ as well. A color can consist of a “main, dominating” color and a shade of another color. Such a mixture of a colors can lead to a combined interpretation (“Tradition and Culture”). BLACK - color for young boys (who will continue the family/ ancestor lineages), delving into the depth of something, flowing, dormant, conserving, immortality, stability, knowledge, trust, adaptability, spontaneity, power, career, will, emotional protection, BLUE-conserving,

calmness vs lack of will (“Traditions and Culture”).

healing,

relaxation,

exploration,

trust,

calmness,

immortality(“Traditions and Culture”). BROWN-industrious, grounded(“Traditions and Culture”). GOLD-completeness, wealth, metal, God consciousness(“Traditions and Culture”). GREEN-growing,

generating,

sprouting,

striving,

refreshing,

balancing,

calming, healing, self assurance, foundation, benevolence, health, harmony, sensitivity, patience vs anger (“Traditions and Culture”).

GREY-dull, indefinite, though also silver, hence income(“Traditions and Culture”).

ORANGE-indicating change, adaptability, spontaneity, strengthens concentration (“Traditions and Culture”).

PINK-love(“Traditions and Culture”).

PURPLE-spiritual awareness, physical and mental healing, hence strength, abundance, red purple brings luck and fame. Purple refers to the North Star (Polaris), which in ancient China was called the Ziwei Star, the North Star was in traditional Chinese astrology the abode of the Celestial Emperor(“Traditions and Culture”).

RED-traditional bridal color, expansive, blooming, dynamic, enthusiastic, reaching upwards, good luck, celebration, happiness, joy, vitality, long life; red purple brings luck and fame, money, recognition, propriety, creativity, joy vs. over excitation(“Traditions and Culture”).

SILVER-metal

(income,

wealth),

trustworthiness,

romance(“Traditions

and

Culture”).

WHITE-mourning, contracting, withering, righteousness, pureness, confidence, intuition, strength, organization, death, ancestral spirits, ghosts, courage vs sadness(“Traditions and Culture”).

YELLOW-nourishing, reliability,sunbeam,

supporting, warmth,

stabilizing,

clarity,

ripening,

royalty,

good

grounded, faith,

solid,

empathy

anxiety(“Traditions and Culture”).

Throughout the years, and even today, colors are very important to the existence of the Chinese people.

Today: 1. Yellow is still reserved for royalty. Clothing and objects that are yellow in color still resemble a higher social status. Although each dynasty designated each official rank with their own color, yellow is reserved or the emperor himself. The color yellow and its shades are also the main color of Buddhism; thus it represents being free from worldly cares(“Traditions and Culture”).

2. Red is still used for happiness and joy. In fact, after the Ming Dynasty, only the Emperor’s close relatives could have homes with red walls and yellow roof tiles. Peasants could only live in homes made with blue bricks and roof tiles. Today though, most houses are made of black tiles and white walls(“Traditions and Culture”).

3. Blue-green is still a symbol of spring when everything is filled with vigor and vitality. Therefore, someone that is hoping for longevity and harmony will decorate with blue-green colors(“Traditions and Culture”).

4. White is a symbol of the unknown and purity. The color white is used during the time of mourning, death, and during ghost festivals. Therefore Chinese people will wear white during a funeral or while summoning ghosts(“Traditions and Culture”).

5. Black is used as the symbol of winter and the westerly skies which beholds the heavens. It is used for times of the unknown and for the winter months(“Traditions and Culture”).

Gift Giving 74 Source: Shutterstock

Gift giving is a common Chinese custom that business visitors to China should prepare for and use to advantage

(“Business Etiquette in China”).The advice

of a Chinese friend or colleague is invaluable in doing this properly, but here are some simple guidelines (“Business Etiquette in China”).: Who: Typically, a single large group gift is presented to the chief person or leader of a Chinese organization (“Business Etiquette in China”). Gifts should be presented from the boss/CEO of the foreign company to the lead of the Chinese delegation and vice versa (“Business Etiquette in China”). What: Gifts should not be too expensive. The gifts you receive will often have strong local associations that are a matter of real meaning (local identity) and therefore pride to the giver (“Business Etiquette in China”). The best gifts to offer in return will be items that are unique to your country: small paintings, carvings, or books (keep your host’s English capabilities in mind) are appreciated and reasonable as gifts (“Business Etiquette in China”). The Chinese are fond of dark red, gold or blue, which are all appropriate colors for gift-wrapping (“Business Etiquette in China”). When: Gifts are usually given at the end of an introductory meeting or at a banquet (“Business Etiquette in China”). Delegations visiting China are normally expected to offer gifts to their hosts, and the opposite is true for Chinese travelers to other countries

(“Business Etiquette in China”). How:

Always give and receive gifts or anything of value with two hands (“Business Etiquette in China”). Note that it is common in China for the recipient to refuse the offer of a gift at first

(“Business Etiquette in China”). The

giver should persist, and the recipient will eventually accept (“Business Etiquette in China”). What Not to Give: Gifts to avoid include clocks and scissors or other sharp items such as knives or letter openers (“Business Etiquette in China”). Avoid wrapping gifts in white or black, which are colors associated with funerals (“Business Etiquette in China”).

Space 76 Source: Libb Thims

Chinese people value their personal space. They Chinese dislike being touched by strangers. Do not touch, hug, lock arms, back slap or make any body contact (“Traditions and Culture”). The Chinese are not keen on physical contact especially when doing business (“Business Etiquette in China”).

The only

circumstance in which it may take place is when a host is guiding a guest. Be sure not to slap, pat or put your arm around someone’s shoulders (“Business Etiquette in China”).

Time Source: Cedric Thual

The Chinese value punctuality, so arrive on time or even slightly early for meetings or other occasions (“Business Etiquette in China”). If attending a dinner meeting in China, do not arrive early. Doing so will cause the host to think that you are hungry (“Business Etiquette in China”).

Joke Telling 80 Source: Shela Dean

Relationships in China are very formal. When doing business you are representing your company so always keep dealings at a professional level. Never become too informal and avoid humor. This is not because the Chinese are humorless but rather jokes may be lost in translation and hence be redundant (â&#x20AC;&#x153;Business Etiquette in Chinaâ&#x20AC;?).

Business Entertaining & Dining

Business often gets conducted during meals. As with business meetings, food and seating are determined by the hosts(“Business Etiquette in China”). The following points should be kept in mind when dining formally with the Chinese: Beginning to eat: Follow cues from your hosts and start eating when the hosts begin(“Business Etiquette in China”).. There will be cold dishes placed on the table when you are seated; wait to be invited before you dig in(“Business Etiquette in China”).

Keeping pace: At formal banquets and high-end restaurants, serving staff may keep up an almost constant rotation of dishes. They will also change your plate frequently with a clean one, so as not to mix dishes and flavors(“Business Etiquette in China”). While at first this may be distracting, accept the rhythm and you will soon cease to notice it. In order to have a sense of what is coming next, know that the meal will proceed with meats of various varieties and peak with a fish course, followed by a staple (rice, dumplings, noodles) and wind down with a sweet or dessert.

Refusing food: The Chinese tend to offer a lot of food, and it is acceptable to refuse food if you have dietary restrictions or allergies (“Business Etiquette in China”). However, it is a sign of politeness to accept some of everything, and sample (even a little of) all dishes served (“Business Etiquette in China”). But don’t eat or drink all of something you don’t like, since this may be taken as a sign that you want more (“Business Etiquette in China”). This is where the rotation of plates can serve to your advantage: a nod to the wait staff to remove a plate will allow for your preferences to be accommodated unobtrusively(“Business Etiquette in China”).

Drinking: While local wine can be preferred at banquets, the Chinese more frequently offer strong distilled alcohol called baijiu or maotai (a very special type of baijiu) for toasts – and there may be many toasts during a meal(“Business Etiquette in China”).Never drink from the toasting glass except during a toast – and don’t let the size of the glass fool you as to the power of the contents (“Business Etiquette in China”).The Chinese know that their alcohol is considered strong for foreigners, and under normal circumstances, they will not push you to drink(“Business Etiquette in China”). Some hosts will provide drinking yogurt to help protect your stomach, which can be helpful to slow the effects of the alcohol. Try to avoid drinking baijiu on an empty stomach as you will feel the effects of the alcohol quickly – it’s a good idea to eat something before the toasts begin (“Business Etiquette in China”). If you cannot or do not drink for medical or personal reasons, this is respected but you should advise your host or your working level contact of this at the beginning of the banquet, or even beforehand (“Business Etiquette in China”). Your hosts will note it and arrangements will be made to avoid embarrassing you.

Toasting: Your host will start off the banquet with a toast to your presence / friendship/ cooperation / getting to know each other / clinching a deal (“Business Etiquette in China”). You may choose to reciprocate, toast for toast, or to wait until the host, his or her colleague, and one other member of the hosting party has toasted(“Business Etiquette in China”). Typically, the principal guest is expected to toast a few courses after the host toasts(“Business Etiquette in China”). If you are toasting, your comments should be warm and sincere, and your toast should not be any longer than your host’s(“Business Etiquette in China”). When toasting, the Chinese normally say gan bei, which translates to “bottoms up”. Note that drinking is sometimes expected as proof of a close relationship where partners can

reveal their true selves, even in a business context (“Business Etiquette in China”). While this expectation is slowly changing and may vary by region, it is something to be aware of. If the group at the banquet is very comfortable with each other, it is also not uncommon to go around the table toasting each member of the party (“Business Etiquette in China”). Take your cue from your hosts and from your local contact or interpreter. **Note: There are great differences in dining and toasting customs among different regions in China (“Business Etiquette in China”). When in doubt, ask your host. He or she will be very happy to explain them to you and will be impressed at your interest in and respect for local customs.

Conversation: The banquet is generally a social event in a formal context. Discussion will likely center around pleasantries, background information on the region or the company, but it is not a time for negotiating or challenges (“Business Etiquette in China”). The focus may not be the food per se, but there will be pride in the offerings provided (“Business Etiquette in China”).

Paying the bill: The host pays. If you are hosting a meal, do not show money in front of your guests. Either have someone slip out and settle the tab or wait until your guests have left before paying (“Business Etiquette in China”).

Hosting the banquet: It is not common business practice to be expected to host a banquet at the conclusion of a deal

(“Business Etiquette in China”).

Certainly if you would like to host a banquet this is your prerogative, but it would be considered bad form in a business context for the Chinese company to insist you do so or provide you with the bill at the end of the meal (“Business Etiquette in China”).

Concluding: There is little lingering at banquets. Formal dinners often end suddenly, when the senior member of the hosting party stands up (quickly followed by staff and subordinates), briefly thanks the guests for attending, and proceeds to leave the room (“Business Etiquette in China”).This may appear abrupt the first few times you witness it, but is simply a decisive and useful way to bring the occasion to a close

(“Business Etiquette in

China”).If there is a dessert / fruit course, you can expect this to follow fairly shortly before the senior member of the hosting party departs. Gifts (see below) are usually offered at the conclusion of the banquet, prior to departure (“Business Etiquette in China”).

Proper Use of Utensils: During business meals in China, traditional Chinese dishes are usually served. It is important to make yourself aware of the proper etiquette for using chopsticks. Serving chopsticks are used to take food from serving dishes (Lininger). These chopsticks are to be returned to the dishes after one has served oneself, and are often a different color from individuals’ chopsticks. In China, it is normal to hold the rice bowl up to one’s mouth and use chopsticks to push rice directly into the mouth. (Lininger). It is considered poor dining etiquette to point rested chopsticks towards others seated at the table (Lininger). Below are general guidelines to follow: -Do not use chopsticks to make noise, draw attention, or gesture (Lininger). -Do not use chopsticks to move plates or bowls (Lininger). -Generally, do not use chopsticks to impale food (Lininger). -Do not leave chopsticks standing vertically in a bowl of rice or other food. In China, it is normal to hold the rice bowl up to one’s mouth and use chopsticks to push rice directly into the mouth (Lininger). It is considered poor dining etiquette to point rested chopsticks towards others seated at the table (Lininger).

Source: Maru

Unless you speak Chinese, (Mandarin being the most common as well as the official dialect), it can be difficult to do business in many parts of China without the aid of a translator. English language levels are very patchy and although some fluent English speakers exists, the layer is quite thin and levels fall away very quickly. Communicating in China can, therefore, be a slow, laborious activity and fraught with constant dangers in terms of misunderstanding and mistranslation(“Communication Styles”). Don’t assume comprehension. Cover the same ground several times and constantly check for understanding(“Communication Styles”).

Communication

World Business Culture believes that one of the reasons that communication can be such a problem in China is that along with many other Asians, the Chinese find it extremely difficult to say ‘no’ (“Communication Styles”). Saying ‘no’ causes both embarrassment and loss of face and it is therefore better to agree with things in a less than direct manner(“Communication Styles”). Thus anything other than an unequivocal ‘yes’ probably means ‘no’. Be very wary of phrases such as ‘Yes but it might be difficult’ and ‘Yes, probably’(“Communication Styles”). It is also difficult to deliver bad news and this is often done through the use of an intermediary who can soften the blow and try to preserve as much good-will within the relationship as possible(“Communication Styles”). The Chinese have a reputation for ‘impassiveness’ and this is largely based on Western misinterpretation of Chinese body language(“Communication Styles”). As with the Japanese, the Chinese use a very limited amount of visual body language and Westerners interpret this rigidity as a lack of responsiveness and emotion(“Communication Styles”). Lack of overt body language does not

mean that the Chinese do not show their reactions and/or emotions - but more so that westerners are not skilled at reading it across the cultural divide(“Communication Styles”). Finally, don’t always assume that just because someone happens to speak ‘good’ English that they will automatically be more competent than someone who doesn’t.

Sourcing Guidelines

Introduction When develping Comfort Actâ&#x20AC;&#x2122;s sourcing guidelines, we wanted them to match our company beliefs and values. Comfort Act strives to provide quality and comfort not only in our products but also in the facilities that our products are produced in.

Source: Arab European Company

Comfort Act values the Sourcing Guidelines as a foundation of ethical responsibility and excellence. Comfort Act sources products internationally, which means our suppliers, contractors, business partners and employees come from different backgrounds and principles. Comfort Act is committed to providing a humane and sustainable working environment among all aspects of the company. In order to pursue work or business with Comfort Act, employees must agree to terms of the Sourcing Guidelines and Code of Conduct. Suppliers shall communicate Comfort Actâ&#x20AC;&#x2122;s morals and requirements to all workers during training and evaluating periods.

CHILD LABOR Children under the age of 15 or children who are of age to be in school are not permitted to work. Comfort Act suppliers and contractors should adhere to local laws and regulations in regards to child labor.

FORCED LABOR Comfort Act suppliers and contractors should make certain workers are employed voluntarily. The use of forced, bonded, or prison labor is prohibited. Comfort Act generates an environment where workers are free from violence, threats, or financial consequences, as well as slavery, human trafficking, or indentured labor.

COMPLIANCE WITH LAWS Comfort Act suppliers and contractors are required to work under local, national and international laws and industry standards in all business facilities. Adhering to these laws ensures the health, safety, and wellbeing of Comfort Act workers, as well as the environment.

ETHICAL STANDARDS Comfort Act will not tolerate business partners or workers who disrespect, hurt, deceive, or mistreat others. We value implementation of professional relationships and respectful decorum during and outside of business practices. Workers must adhere to all ethical standards in the code of conduct.

DISCRIMINATION Differences in gender, sexual orientation, race, culture, religion, age, nationality, politics and ethnic origin are respected at Comfort Act. Suppliers and contractors are prohibited against discriminatory acts when hiring or working with employees.

HEALTH AND SAFETY A healthy and safe environment shall be provided to workers. Comfort Act contractors and suppliers shall follow applicable laws and regulations that ensure access to potable water, sanitary areas, fire safety, lighting, and ventilation.

ENVIRONMENTAL STANDARDS Suppliers and contractors are required to adhere to applicable environmental laws and regulations throughout manufacturing, production and distribution facilities. Comfort Act incorporates lean manufacturing to maintain efforts toward sustainability.

WAGES AND BENEFITS Comfort Act suppliers and contractors shall fulfill the legal requirements concerning wages and benefits. Workers are granted payment that is aligned with local industry policies or at the minimum wage amount. Suppliers and

contractors will choose the higher amount. Overtime work always shall be compensated in its full rate according to legal standards.

MAXIMUM WORKING HOURS Comfort Act business partners shall not exceed local legal limits on work hours. Overtime should be compensated to all workers according to local policy standards. Comfort Act allows workers to conduct business no more than 60 hours per week, which includes overtime. It is the responsibility of suppliers to provide workers at least one day off per week.

COMPENSATION Comfort Act enforces all compensation laws in regards to meals, transportation, health care, childcare and medial, family or religious leave. All workers must receive compensation of wages, overtime premiums and benefits. These payments should meet or exceed the rate according to legal requirements or shared agreements.

FREEDOM OF ASSOCIATION Employees can freely join or form organizations and have the right to bargain collectively. Suppliers and contractors are forbidden from unlawfully interfering with these rights that the employees have. It is the responsibility of the suppliers and contractors to communicate with workers if the law does not enforce these rights.

HARASSMENT AND DISCIPLINARY PRACTICES All employees must be treated with equally and respect. Comfort Act will never use or tolerate corporal punishment, physical and verbal abuse, sexual harassment or physical, psychological, and cyber bullying. Using monetary methods as a disciplinary practice is prohibited.

MONITORING AND COMPLIANCE TRANSPARENCY Comfort Act records should be complete, accurate, and open for suppliers and contractors. Comfort Act shall work with business partners in evaluating manufacturing and production processes. We are committed to improving the effectiveness of our business and quality of our product.

INTERNAL MONITORS Comfort Act will

implement and maintain a system for continuously reviewing

the ability of all parts of its supply chain to comply with the Comfort Act Ethical Standards. As part of this process,suppliers will be risk-assessed based on available information e.g. self-assessment questionnaires, sites assessments, Comfort Act audits as well as audits carried out on behalf of third parties. Other information such as quality and delivery performance will also be taken into consideration. Comfort Act will use this information to assess both suppliers and manufacturing sites. The outcome of these assessments will be communicated to the relevant suppliers (and agents where applicable) and will influence our commercial sourcing and purchasing decisions.

EXTERNAL MONITORS Any issues a supplier may have with Comfort Actâ&#x20AC;&#x2122;s actions in relation to our Ethical Standards should immediately be reported to the Comfort Act Ethical Trade Manager at ethicaltrade@comfortact.com. All such emails will be confidential. Comfort Act will not permit or tolerate any retaliatory action against suppliers who report any such concerns or issues in good faith. Comfort Act will work with reporting suppliers to address any issues raised. It is the responsibility of suppliers at all times to monitor their own compliance with all of their obligations under Comfort Actâ&#x20AC;&#x2122;s Ethical Standards. If any supplier at any time is struggling to meet those

obligations or discovers any breach or non-compliance with these Ethical Standards, that supplier is encouraged to immediately report that actual or likely non-compliance to the Comfort Act Ethical Trade Manager at ethicaltrade@ comfortact.com as an urgent matter.

Manufacturing & Production

Potential Manufacturers 1) Ningbo Shenzhou Knitting Co., Ltd. 18, Yongjiang Road, Ningbo Economic And Technical Development Zone, Ningbo, Zhejiang, China, 315800 Tel: +86 574 8698 0888 Website: www.ishenzhou.com/english/ Customers: -Nike -Puma -Dick’s Sporting Goods -Adidas -Uniqlo -GIII Apparel Group Areas of Expertise -Athletic clothing, except uniforms: men’s, youths’ and boys’ -Athletic clothing: women’s, misses’, and juniors’ -Men’s and Boys’ Cut and Sew Other Outerwear Manufacturing -Women’s and Girls’ Cut and Sew Other Outerwear Manufacturing Evaluation Fits into our company sourcing guidelines because they

do the following:

-Utilize imported non-pollution dye -Import German-made (green environment protection) steam dyeing ma chines, which have low water consumption, low electricity consumption, and low waste discharge. -Donated 2,000,000 Yuan to build nursery school in Shao Xing. -Shenzhou financially supported more than 600,000 Yuan to help the natural disasters around the

city.

-Prohibitions on child labor -Prohibitions on forced labor About the Company: Ningbo Shenzhou knitting co. Ltd, is established in 2002. Having more than 20 thousand staffs, it has registered capital of 30 million USD. The company consists of administration department, production management department, financial department, quality controlling and developing department,knitting department,dyeing

and

finishing

department,

several

sewing&cutting

departments, and comprehensive department. Our company has been devoting to the quality of product and standardized modern management since its foundation. Backed by the powerful researching and developing center, and with the faith of “New product, Low Cost, Good Service, and Quick Delivery”, our company won excellent fame in the international market. What’s more, We have passed the ISO quality system certification and the ISO 140001 environment system certification. Besides, we are the recommended company of Dupont Lycra and got the certification of ITS and was awarded of the company with best product quality. We were honored as excellent foreign investment company and the Custom’s Good credibility company. We are the AAA enterprise assessed by Ningbo Capital Credibility Assessment Committee. Looking beyond, Shenzhou will continue to strive for its development and innovation to make a more brilliant world!

2) Sabrina Fashion Industrial Corp. East Kongxiang Rd Lujia Town Jian China Tel: 0512 57670082 Website: http://www.sabrina.com.tw/ Customers: -Nike -Lululemon USA Inc. Areas of Expertise: •

Active Sportswear

Evaluation Fits into our company sourcing guidelines because they

do the following:

-Prohibitions on child labor -Prohibitions on forced labor -Fair Wages About the Company: Experienced

over

three

decades

top

quality

sports-active

apparel

manufacturing, Sabrina Fashion Industrial Corporation is upholding high industry standard in vertical manufacturing. Over the years, Sabrina’s OEM capacity had maintained steady growth in production output. It is consistently improving manufacturing standard in which harmonized major changes in global economy. The excellent factory operation design and efficient production mechanisms are highly dedicated for buyers’ OEM mission. The company’s prominent leading teamwork and our nearly 4000 production members are fully committed in efficient OEM operation. Work force: 1,300 workers Monthly Capacity: 800,000 pieces Sabrina collaborates hand in hand in Global Manufacturing Code of Conduct. Every factory we operate is fully complied with Global Environmental Standards and humanitarian requirement.

3) Yantai Ne Apparel Co., Ltd. No 26 Yantai Str Haiyang Economic And Technology Development Zone Yantai Cn 265100 Tel: 0535-3203997 Website: http://www.yantaineapparel.com Customers: -Adidas -Nike Areas of Expertise: -Apparel -Active Sportswear Evaluation: Fits into our company sourcing guidelines because they

do the following:

-Prohibitions on child labor -Prohibitions on forced labor -Fair Wages Work force: 1600 workers

4) Far Eastern Apparel Group Tian Ling Road,Wu zhong economic Development District,Suzhou China Tel:(0512)65621888-1888 Website: www.feasz.com.cn Customers: -Nike -Columbia Areas of Expertise: -Knitting garments -POLO shirts -T-shirts

100

215128

Evaluation: Monthly Capacity: 5,000,000 pieces Fits into our company sourcing guidelines because they

do the following:

-Prohibitions on child labor -Prohibitions on forced labor -Fair Wages Monthly Capacity: 5,000,000 pieces

5) Dalian Sport Tech Apparel 3 F 152liaohexi Rd Development Area Dalian China Tel: 41187619000 Website: www.sportechapparel.com Customers: -New Balance -Triumph -Nike Areas of Expertise: -Active Sportswear -Beachwear -Sports Bras Evaluation: Fits into our company sourcing guidelines because they

do the following:

-Prohibitions on child labor -Prohibitions on forced labor -Fair Wages Monthly Capacity: 208,333 pieces

101

Costing

Introduction This section displays the cost of all componets that will go into producing the garments for Comfort Act.

102 Source: Nicholas Financial Services

Style #:

CAA104

Season:S/Sâ&#x20AC;&#x2122;2015

Style Name:V-Neck Long Sleeve Description:Athletic Top

Fabric(s): Knit Fabric

Made of:84% Polyester, 16% Spandex

$/yard

Date:October 11,2014

Yield

$2.525

.75

$1.913

$3.525

.25

$2.670

TOTAL FABRIC COST:

Components:

$4.583

$/Unit

Thread

$.200

Care Label

$.06

Size: T:24

TOTAL COMPONENT: COSTS

PACKAGING:

Total

Quantity

Total

100yd.

$.200

1 Per Top

$.06 $.26

$/Unit

Quantity

Total

Paper Hang Tag

$.06

1 Per Top

$.06

Plastic Tag Fastner

$.02

1 Per Top

$.02

TOTAL PACKAGING: COSTS

$.08

$/Unit

Quantity

Total

Carton(24x24x24)

$.0062

Sealed Poly Bags (12x11) Tape

$.040

1 Per Top

$.040

36 inches(per

$.219

Labels

$.06

$.415

PACKING:

TOTAL PACKING:COSTS

$.219

box

$.957

LABOR: Sewing

$.5600

Pattern Making

$.0056

Cutting

$.0560

TOTAL LABOR:

$.6216

(7 min.x$.08 per min)

103

Style #:

CAA104

Season:S/Sâ&#x20AC;&#x2122;2015

Style Name:V Neck Long Sleeve Description: Athletic Top

Date:October 11,2014

Total

OTHER: Freight

$.0329

Duty

$1.021

Broker

$.01

Insurance

$.0034

(per unit)

OTHER COST TOTAL:

$1.0673

GRAND TOTAL:

$7.6559

(Fabric,Components, Packaging, Packing, Labor & Other)

PAGE 2 of 2

104

As a company, we evaluated the prices of our competitors in order to establish our retail prices. Below is the retail price established by competitive pricing.

Retail Price: $85 Profit Margin: $77.36 Gross Margin %: 90.99 Markup %: 1009.88

105

Import Classification Flats: Tanisha Johnson Print: Briana Young

Introduction Comfort Act strives to provide quality support for the active voluptuous woman. We provide a variety of athletic tops that will leave out customer comfortable and satisfied.

106

HTS Code:6106.20.20 Base Rate: 32% From China: 17.5%

107

108

Source: Total Car Concepts

Logistics & Importation

China has created a comprehensive transportation system of railways, highways, and airports. China has a great highway and road system though the conditions of the roads worsen the farther away from the city you travel (Reuters). Usually goods from factories in China are transported to the ports utilizing a freight truck (Reuters). With 497 airports,50 heliports, 86,000 km of railway, 4,106,387 km of roadways and 110,000 km of navigable waterways China has all the necessary routes to export to any country(Reuters). However, to move

transportation when considering both time and cost. To ship at 40 foot container to the United States from China, it will cost approximately $3,971.23 and will be delivered within 15-18 days depending on which port it is sent from. Air freight on the other hand takes a significantly shorter amount of time but the cost is significantly higher than ocean freight (â&#x20AC;&#x153;Freight Calculatorâ&#x20AC;?).

Ease of Transport

product to the United States,ocean freight is the most sensible form of

109

1) China Shipping Container Lines Co. Ltd. China Shipping Container Lines Co., Ltd. (CSCL), affiliated to China Shipping Group, is a global container liner service provider involved in a diversified business. Founded in 1997, the Shanghai based company is listed on both the Hong Kong and Shanghai Stock Exchanges. With a capital of RMB 11.683125 billion, CSCL is registered at No. A-538, International Trade Center, China (Shanghai) Pilot Free Trade Zone.

Freight Companies

CSCLâ&#x20AC;&#x2122;s business spectrum spreads from container shipping to vessel

110

chartering, cargo conversing and booking, custom clearance, warehousing, container depot, manufacturing, trading and repairing of containers and ship management.

CSCL operates a young, modern and environmental friendly fleet with a large capacity providing safe, reliable and efficient liner service to its customers globally. As of May31, 2014, the number of ships reached 148 representing a total capacity of 656,000 TEU. CSCL is the NO.7 largest global container shipping liner by capacity. 83 out of the 148 ships are above 4,000 TEU, totaling 574,000 TEU, accounting for 86.4% of the total capacity. The companyâ&#x20AC;&#x2122;s fleet average capacity is 6,910 TEU and the, average vessel age stands at 6.78 years.

Shipping Routes & Maps

111

112

113

114

115

2) China Shipping (North America) Holding Co., Ltd. CSNA Holding was founded in February 2000. It is wholly owned by China Shipping (Group) Company (“CSG” of Shanghai and fully represents the interests of China Shipping Container Lines Co., Ltd. (“CSCL”, the core business of CSG, in North America.

CSNA Holding, while serving the interests and monitoring the assets of CSCL in North America, is responsible for service planning, key vendor contract control and oversight, auditing of account payables and account receivables, and business planning and development for CSG in a variety of areas related to international freight transportation. Among its key duties are pricing for North American freight, marine operations and intermodal, claims, equipment control, marketing, e-commerce development, and tariff maintenance.

CSNA Agency is a wholly owned company of CSNA Holding, maintains offices in 6 USA cities with 218 employees. It is responsible for providing day-to-day agency functions, including booking, marketing, sales, equipment management, documentation, account payables and account receivables.

The CSNA companies have rapidly expanded and today employ over 291 people in 7 locations throughout the United States. Visit the directory in this website for a complete listing of office locations for all CSG related companies throughout the United States.

116

Shipping Routes & Maps

117

118

119

Timelines

120

121

Importing Requirements & Country Exporting Requirements

Source: National Tile & Settlements Group 122

Importerâ&#x20AC;&#x2122;s Documents:

1. THIS FORM MUST BE TYPED. 2. DO NOT ALTER THIS FORM. 3. ORIGINAL TO BE SUBMITTED

DEPARTMENT OF HOMELAND SECURITY

U.S. Customs and Border Protection

CORPORATE TO CBP. (See Option explained in Instruction No. 2.) GRANT CHANGE to Grant on file (Instruction (Instruction No. 3b.) No. 3a.) NAME

GRANTEE:

GRANTOR:

OMB No. 1651-0050 Exp. 03/31/2014

CBP USE ONLY DATE RECEIVED

SURETY POWER OF ATTORNEY REVOCATION. The below-described powers previously granted are hereby revoked. (Instruction No. 3c.) This is a name change

ADDRESS

EFFECTIVE DATE

This is an address change

SOCIAL SECURITY NUMBER SURETY COMPANY'S CORPORATE NAME

SURETY NO.

STATE UNDER WHOSE LAWS ORGANIZED AS A SURETY

Port code(s) for CBP port(s) in which authorized to do business and limit on any single oblligation -OR- port(s) being added to the original grant. LIMIT LIMIT LIMIT LIMIT LIMIT LIMIT PORT PORT PORT PORT PORT PORT

Grantor appoints the above-named person (Grantee) as its attorney in fact to sign its name as surety to, and to execute, seal, and acknowledge any bond so as to bind the surety corporation to the same extent as if done by a regularly elected officer, limited only to the extent shown above as to Customs and Border Protection port and amount on any single bond obligation. This grant, or change to a grant on file, or revocation, as specified, shall become active on the effective date shown provided the CBP Form 5297 is received at a port office 5 days before the effective date shown; otherwise the specified actions will be come active at the close of business 5 working days after the date of receipt at the port office. In witness whereof, the said Grantor, by Date Attested Name and Title Name and Title virtue of authority conferred by its Board of Directors, has caused these presents to be sealed with its corporate Use a facsimile of corporate seal and attested by any two principal seal, and not impression seal. Signature: Signature: officers.

Distribution: 3 copies

CBP Form 5297 (06/08)

123

U.S.Ports and Codes Anchorage,AK Baltimore,MD Boston, MA Buffalo, NY Charleston, SC Cleveland, OH Chicago, IL Dallas-Ft. Worth, TX Detroit,MI Duluth, MN El Paso, TX Great Falls, MT Honolulu, HI Houston-Galveston,TX Laredo, TX Los Angeles, CA Miami, FL Milwaukee, WI Minneapolis, MN Mobile, Al New York,NY New Orleans, LA Nogales, AZ Norfolk,VA Ogdensburg, NY Pembina, ND Philadelphia, PA Portland, ME Portland, OR Port Arthur, TX Providence, RI San Diego,CA San Francisco,CA San Juan, PR Savannah,GA St. Albans,VT St. Louis, MO Seattle, WA Tampa, FL Virgin Islands,U.S. Washington,DC Wilmington, NC

31 13 04 09 16 41 39 55 38 36 24 33 32 53 23 27 52 37 35 19 10 20 26 14 07 34 11 01 29 21 05 25 28 49 17 02 45 30 18 51 54 15

Explanations: 1. A Corporate Surety Power of Attorney, CBP Form 5297, must be executed for each of the following actions; grant an individual a power of attorney; change a name and/or address, and/or add districts to a power on file; revoke a power previous granted. 2. Form submission option: Each of the following conditions will require filing a copy of the CBP Form 5297: (a) if the port director permits the submission of the form to be made at any port within the district. (b) If the grantee desires to use the power of attorney at a location covered by the power, but other than the locations where the power was submitted, before CBP computer processing has been completed. For example: If both conditions are applicable, two copies of the CBP Form 5297 must be submitted with the original. 3. The box adjacent to the action executed on this CBP Form 5297 must be checked. The effective date for the action checked should be shown. (a) If grant is checked: The information required to grant a power of attorney are self-explanatory with the exception of the following: Port Information: Each port in which the power is granted must be shown except if the power both applies to all ports and the amount limit is the same in every one of those ports, enter the word “ALL” on the first line under “Port." Limit Information: (1) If any amount limit differs between any of the ports in which the power is granted, individual amount limits must be shown for each of the ports listed. (2) If all the amount limits are the same for each district in which the power is granted and the amounts equal the surety company limit published in the Treasury Department Circular 570, enter the word "”Equal" on the first line under “Limit." (3) If all of the amount limits are the same for each port in which the power is granted and the amounts are not equal to the surety company limit published in the Treasury Department Circular 570, enter the amount limit on the first line under “Limit” and enter the word “SAME” on the second line. Surety: The number required is the 3 digit identification code assigned by CBP Headquarters to a surety company, listed on Treasury Circular 570, at the time the surety company initially give notice to CBP that the company will be writing CBP bonds. (b) To change a Corporate Surety Power of Attorney already on file, the previously field power granted must be revoked and a new power (CBP 5297) must be filed EXCEPT changes to the name and/or address and the addition of districts to a power on file. (1) To make a name and/or address change, the same information that was submitted to establish the existing power on file is required except the new name and/or address must be shown in the space provided and the port code(s) and related obligation limit(s) can be left blank. (2) To add ports, the same information that was submitted to establish the existing power on file is required except only the new districts and related obligation limits are necessary in the space provided. (c) If revocation is checked: A revocation divests the designated agent's or attorney's power of attorney in all ports. Except for the following, the information required to revoke the power of attorney is self-explanatory: The ports in which authorized to do business and the associated single obligation limits do not have to be shown. Privacy Act Statement: The following notice is given pursuant to section 7(b) of the Privacy Act of 1974 (5 U.S.C. 552a). Furnishing the information on this form, including the Social Security Number is mandatory. The primary use of the Social Security Number is to verify, in the CBP automated system, at the time an agent submits a CBP bond for approval that the individual was granted a Corporate Surety Power of Attorney by the Surety Company on the bond. Section 7 of Act of July 30, 1947, chapter 390, 61 Stat. 646, authorizes the collection of this information. Paperwork Reduction Notice: The Paperwork Reduction Act says we must tell you why we are collecting this information, how we will use it, and whether you have to give it to us. We ask for this information to carry out U.S. Customs and Border Protection laws of the United States. We need it to ensure that persons transacting business with Customs have the proper bond coverage to secure their transactions as required by law and regulation. Your response is required to enter into any transaction in which a bond is a prerequisite under the Tariff Act of 1930, as amended. Statement Required by 5 CFR 1320.21: The estimated average burden associated with this collection of information is 15 minutes per respondent or recordkeeper depending on individual circumstances. Comments concerning the accuracy of this burden estimate and suggestions for reducing this burden should be directed to U.S. Customs and Border Protection, Information Services Division, Washington, DC 20229, and to the Office of Management and Budget, Paperwork Reduction project (1651-0050). CBP Form 5297 (06/08)

124

Form Approved OMB No. 1651-0022 EXP. 08-31-2014

DEPARTMENT OF HOMELAND SECURITY

1. Filer Code/Entry No.

2. Entry Type

3. Summary Date

U.S. Customs and Border Protection ENTRY SUMMARY

4. Surety No. 5. Bond Type 6. Port Code

7. Entry Date

8. Importing Carrier

9. Mode of Transport

10. Country of Origin

11. Import Date

12. B/L or AWB No.

13. Manufacturer ID

14. Exporting Country

15. Export Date

16. I.T. No.

17. I.T. Date

21. Location of Goods/G.O. No.

18. Missing Docs 19. Foreign Port of Lading

22. Consignee No.

23. Importer No.

25. Ultimate Consignee Name and Address

City 27. Line No.

State

Zip

City

A. Entered Value B. CHGS C. Relationship

35. Total Entered Value

$ 36. DECLARATION OF IMPORTER OF RECORD (OWNER OR PURCHASER) OR AUTHORIZED AGENT Importer of record and that the actual owner,

or purchaser or agent thereof. I further declare that the merchandise

33. A. HTSUS Rate B. ADA/CVD Rate C. IRC Rate D. Visa No.

CBP USE ONLY

Total Other Fees

purchaser, or consignee for CBP purposes is as shown above, OR

State 32.

I declare that I am the

24. Reference No.

26. Importer of Record Name and Address

28. Description of Merchandise 29. 30. 31. A. HTSUS No. A. Grossweight Net Quantity in B. ADA/CVD No. B. Manifest Qty. HTSUS Units

Other Fee Summary for Block 39

20. U.S. Port of Unlading

Zip 34. Duty and I.R. Tax Dollars

Cents

TOTALS

A. LIQ CODE

B. Ascertained Duty

37. Duty

REASON CODE

C. Ascertained Tax

38. Tax

D. Ascertained Other

39. Other

E. Ascertained Total

40. Total

owner was obtained pursuant to a purchase or agreement to purchase and that the

prices set forth in the invoices are true, OR was not obtained pursuant to a purchase or agreement to purchase and the statements in the invoices as to value or price are true to the best of my knowledge and belief. I also declare that the statements in the documents herein filed fully disclose to the best of my knowledge and belief the true prices, values, quantities, rebates, drawbacks, fees, commissions, and royalties and are true and correct, and that all goods or services provided to the seller of the merchandise either free or at reduced cost are fully disclosed. I will immediately furnish to the appropriate CBP officer any information showing a different statement of facts.

41. DECLARANT NAME

TITLE

42. Broker/Filer Information (Name, address, phone number)

SIGNATURE

DATE

43. Broker/Importer File No.

Paperwork Reduction Act Notice CBP Form 7501 (06/09)

125

DEPARTMENT OF HOMELAND SECURITY ENTRY SUMMARY CONTINUATION SHEET

U.S. Customs and Border Protection

27. Line No.

1. Filer Code/Entry No.

28. Description of Merchandise 29. A. HTSUS No. B. ADA/CVD No.

30. A. Grossweight B. Manifest Qty.

OMB No. 1651-0022 EXP. 08-31-2014

32. 31.

Net Quantity in HTSUS Units

A. Entered Value B. CHGS C. Relationship

33. A. HTSUS Rate B. ADA/CVD Rate C. IRC Rate D. Visa No.

34. Duty and I.R. Tax Dollars

Cents

CBP Form 7501 (06/09)

126

DEPARTMENT OF HOMELAND SECURITY ENTRY SUMMARY CONTINUATION SHEET

U.S. Customs and Border Protection

27.

1. Filer Code/Entry No.

28. Description of Merchandise 29.

Line No.

A. HTSUS No. B. ADA/CVD No.

30. A. Grossweight B. Manifest Qty.

OMB No. 1651-0022 EXP. 08-31-2014

32. 31.

Net Quantity in HTSUS Units

A. Entered Value B. CHGS C. Relationship

33. A. HTSUS Rate B. ADA/CVD Rate C. IRC Rate D. Visa No.

34. Duty and I.R. Tax Dollars

Cents

CBP Form 7501 (06/09)

127

DEPARTMENT OF HOMELAND SECURITY ENTRY SUMMARY CONTINUATION SHEET

U.S. Customs and Border Protection

27. Line No.

1. Filer Code/Entry No.

28. Description of Merchandise 29. A. HTSUS No. B. ADA/CVD No.

30. A. Grossweight B. Manifest Qty.

OMB No. 1651-0022 EXP. 08-31-2014

32. 31.

Net Quantity in HTSUS Units

A. Entered Value B. CHGS C. Relationship

33. A. HTSUS Rate B. ADA/CVD Rate C. IRC Rate D. Visa No.

34. Duty and I.R. Tax Dollars

Cents

CBP Form 7501 (06/09)

128

DEPARTMENT OF HOMELAND SECURITY ENTRY SUMMARY CONTINUATION SHEET

U.S. Customs and Border Protection

27. Line No.

1. Filer Code/Entry No.

28. Description of Merchandise 29. A. HTSUS No. B. ADA/CVD No.

30. A. Grossweight B. Manifest Qty.

OMB No. 1651-0022 EXP. 08-31-2014

32. 31.

Net Quantity in HTSUS Units

A. Entered Value B. CHGS C. Relationship

33. A. HTSUS Rate B. ADA/CVD Rate C. IRC Rate D. Visa No.

34. Duty and I.R. Tax Dollars

Cents

CBP Form 7501 (06/09)

129

OMB No. 1651-0016 Exp. 02-28-2015

DEPARTMENT OF HOMELAND SECURITY

1. PORT

U.S. Customs and Border Protection 2. DATE

CERTIFICATE OF ORIGIN

4. NAME OF PERSON COMPLETING CERTIFICATE

(ARTICLES SHIPPED FROM INSULAR POSSESSIONS, EXCEPT PUERTO RICO, TO THE UNITED STATES 1 )

5. NAME OF FIRM

19 CFR 7.3 6. SHIPPERS EXPORT DEC. NO.

7. DATE FILED

9. DESTINATION (Port of)

8. CARRIER (Vessel or Airline)

10. CONSIGNED TO

12. MARKS AND NUMBERS

3. CERTIFICATE NO.

11. LOCATION OF CONSIGNEE (City and State)

13. QUANTITY

14. DESCRIPTION OF ARTICLES

FOREIGN MATERIALS 2 15. Description

16. Value

MATERIALS DESCRIBED IN GENERAL NOTE 3 (a)(iv)(B)(2) 3 19. 18. 17. Date Incorporated into Date Imported into Description Imported Goods Insular Possession

20. INSULAR POSSESSION WHERE MERCHANDISE WAS PRODUCED OR MANUFACTURED 21. INSULAR POSSESSION OF WHICH MATERIALS ARE THE GROWTH, PRODUCT, OR MANUFACTURE I declare that I am the person named above, acting in the capacity indicated; that the description and other particulars of the merchandise specified above are correct as set forth in this certificate; that the said merchandise was produced or manufactured in the insular possession named above, and from the materials grown, produced, or manufactured in the insular possession also named above, or of the United States, or of both; that if foreign materials were used therein, their description and value are shown above.

22. ADDRESS OF SHIPPER

23. SIGNATURE OF SHIPPER

VERIFICATION OF CBP OFFICER

I hereby certify that I have investigated the foregoing 24. DATE statements and am satisfied that they are correct to the best of my knowledge and belief.

25. SIGNATURE OF CBP OFFICER

CBP Form 3229 (06/09)

SEE BACK OF FORM FOR FOOTNOTES AND PAPERWORK REDUCTION ACT NOTICE.

Paperwork Reduction Act Statement: An agency may not conduct or sponsor an information collection and a person is not required to respond to this information unless it displays a current valid OMB control number and an expiration date. The control number for this collection is 1651-0016. The estimated average time to complete this application is 22 minutes. If you have any comments regarding the burden estimate you can write to U.S. Customs and Border Protection, Office of Regulations and Rulings, 799 9th Street, NW., Washington DC 20229.

FOOTNOTES 1 General Note 3(a)(iv), Harmonized Tariff Schedule of the United States (HTSUS). 2 Each "foreign material" (i.e., a material which originated in sources other than an insular possession or the United States) shall be listed on a separate line under columns 15 and 16. Columns 15 and 16 do not apply to materials which are not considered "foreign" under General Note 3(a)(iv)(B)(1), (2), HTSUS.

cost of transporting those materials to the insular possession, but excluding any duties or taxes assessed by the insular possession and any charges which may accrue after landing; If the materials used in an article originated only in an insular possession or the United States, state "none" in column 15 and leave column 16 blank.

3 Columns 17, 18, and 19 shall be completed if the article incorporates any material "VALUE" as used in this certificate, refers to the sum of (a) the actual purchase price of each described in General Note 3(a)(iv)(B)(2), HTSUS, which is not considered "foreign foreign material used, or where a material is provided to the manufacturer without charge, or at material" under General Note 3(a)(iv). Each such material shall be listed on a separate less than fair market value, the total of all expenses incurred in the growth, production, or line. If no such materials are used, state "none" in column 17 and leave columns 18 manufacture of the material, including general expenses, plus an amount for profit; and (b) the and 19 blank.

EXCERPT FROM GENERAL NOTES, HARMONIZED TARIFF SCHEDULE OF THE UNITED STATES General Note 3(a)(iv) (iv)

Products of Insular Possessions (A) Except as provided in additional U.S. note 5 of chapter 91and except as provided in additional U.S. note 2 of chapter 96, and except as provided in section 423 of the Tax Reform Act of 1986, goods imported from insular possessions of the United States which are outside the CBP territory of the United States are subject to the rates of duty set forth in column 1 of the tariff schedule, except that all such goods the growth or product of any such possession, or manufactured or produced in any such possession from materials the growth, product or manufacture of any such possession or of the CBP territory of the United States, or of both, which do not contain foreign materials to the value of more than 70 percent of their total value (or more than 50 percent of their total value with respect to goods described in section 213(b) of the Caribbean Basin Economic Recovery Act), coming to the CBP territory of the United States directly from any such possession,

and all goods previously imported into the CBP territory of the United States with payment of all applicable duties and taxes imposed upon or by reason of importation which were shipped from the United States, without remission, refund, or drawback of such duties or taxes, directly to the possession from which they are being returned by direct shipment, are exempt from duty. (B) in determining whether goods produced or manufactured in any such insular possession contain foreign materials to the value of more than 70 percent, no material shall be considered foreign which either (1)

at the time such goods are entered, or

(2)

at the time such material is imported into the insular possession.

may be imported into the CBP territory from a foreign country, and entered free of duty; except that no goods containing material to which (2) of this subparagraph applies shall be exempt from duty under subparagraph (A) unless adequate documentation is supplied to show that the material has been incorporated into such goods during the 18-month period after the date on which such material is imported into the insular possession.

130 CBP Form 3229 (06/09)

Freight Carrierâ&#x20AC;&#x2122;s Documents

131

BILL OF LADING

Account Name and Logo Here (include phone, fax and OTI license number) BOOKING NO:

SHIPPER/EXPORTER (provide complete name and address)

BILL OF LADING NO:

EXPORT REFERENCES:

FORWARDING AGENT / FMC NO:

CONSIGNEE (please provide complete name and address)

POINT AND COUNTRY OF ORIGIN: NOTIFY PARTY (please provide complete name and address)

FOR DELIVERY OF GOODS PLEASE PRESENT DOCUMENTS TO:

MODE OF INITIAL CARRIAGE

PLACE OF INITIAL RECEIPT

DOMESTIC ROUTING/EXPORT INSTRUCTIONS

VESSEL NAME

PORT OF LOADING FREIGHT PAYABLE AT

PORT OF DISCHARGE

TYPE OF MOVEMENT

PLACE OF DELIVERY BY CARRIER PARTICULARS FURNISHED BY SHIPPER

MARKS & NOS/CONT. NOS

NO. OF PACKAGES

DESCRIPTION OF PACKAGES AND GOODS

GROSS WEIGHT

MEASUREMENT

TOTAL NUMBER OF PKGS.

Liability Information

Clause 20 on the reverse side hereof limits the carrier’s liability to a maximum of US$500 per package or customary freight unit by incorporation of the Carriage of Goods by Sea Act. To protect for a higher value, you may declare a higher value and pay the ad valorem freight charge or purchase cargo insurance. Declared Value: The shipper may increase the carrier’s liability by declaring a higher value in the “Declared Value” box to the right and paying the additional charge that accompanies this. Insurance: The shipper may also purchase insurance on the goods listed on this bill of lading by indicating this in the box to the right and paying the additional premium. FREIGHT RATES, CHARGES, WEIGHTS AND/OR MEASUREMENTS SUBJECT TO CORRECTIONS

PREPAID

COLLECT

DECLARED VALUE: $__________ If shipper enters a value, carrier’s limitation of liability shall not apply and the ad valorem rate will be changed.

SHIPPER REQUESTS INSURANCE: Yes

No Must check one box!

Amount: $________________________________

RECEIVED FOR SHIPMENT from the MERCHANT in apparent good order and condition unless otherwise stated herein, the GOODS mentioned above to be transported as provided herein, by any mode of transport for all or any part of the Carriage, SUBJECT TO ALL THE TERMS AND CONDITIONS appearing on the face and back hereof and in the CARRIER’S applicable Tariff, to which the Merchant agrees by accepting this BILL OF LADING. Where applicable law requires and not otherwise, one original Bill OF LADING must be surrendered, duly endorsed, in exchange for the GOODS or CONTAINER(S) or other PACKAGE(S), the others to stand void. If a ‘Non-Negotiable’ BILL OF LADING is issued, neither an original nor a copy need be surrendered in exchange for delivery unless applicable law so requires.

BY ____________________________________________ AS CARRIER DATED _________________________________________

132

1. DEFINITIONS a) [insert] is a trade name for [insert name and address]. b) “Bill of Lading” as used herein includes conventional bills of lading, as well as electronic, express and laser bills of lading, sea waybills and all like documents, howsoever generated, covering the Carriage of Goods to, from or through the United States, whether or not issued to the Merchant. c) "Carriage" means the whole of the operations and services undertaken or performed by or on behalf of the Carrier with respect to the Goods. d) "Carrier" means the Company named on the face side hereof and on whose behalf this Bill of Lading was issued, whether acting as carrier or bailee. e) "Charges" means freight, deadfreight, demurrage and all expenses and money obligations incurred and payable by the Merchant. f) "Container" means any container (closed or open top), van, trailer, flatbed, transportable tank, railroad car, vehicle, flat, flatrack, pallet, skid, platform, cradle, sling-load or any other article of transport and any equipment associated or appurtenant thereto. g) "Goods" means the cargo received from the shipper and described on the face side hereof and any Container not supplied by or on behalf of the Carrier. h) "Merchant" means the shipper, consignee, receiver, holder of this Bill of Lading, owner of the cargo or person entitled to the possession of the cargo and the servants and agents of any of these, all of whom shall be jointly and severally liable to the Carrier for the payment of all Charges, and for the performance of the obligations of any of them under this Bill of Lading. i) "On Board" or similar words endorsed on this Bill of Lading mean that in a Port to Port movement, the Goods have been loaded on board the Vessel or are in the custody of the actual ocean carrier. In the event of intermodal transportation, if the originating carrier is an inland or coastal carrier, mean that the Goods have been loaded on board rail cars or another mode of transport at the Place of Receipt or are in the custody of a Participating carrier and en route or are intended to be transported to the Port of Loading named on the reverse side. j) "Participating carrier" means any other carrier by water, land or air, performing any stage of the Carriage, including inland carriers, whether acting as sub-carrier, connecting carrier, substitute carrier and/or bailee. k) "Person" means an individual, a partnership, a body corporate or any other entity of whatsoever nature. l) "Vessel" means the ocean vessel named on the face side hereof, and any substitute vessel, feedership, barge, or other means of conveyance by water used in whole or in part by the Carrier to fulfill this contract.

10. CARRIER’S EQUIPMENT:INDEMNITY Whenever the Merchant, or an agent, servant, contractor or anyone else acting on its behalf, directly or indirectly, takes possession of or exercises control over a Container and/or any equipment whatsoever owned or leased by, or the use of which is provided to, the Carrier, any Participating Carrier, their agents, servants or independent contractors, the Merchant agrees to defend, indemnify and hold harmless the Carrier, any Participating Carrier, their agents, servants and independent contractors from and against any loss or damage to said Container and equipment, as well as to any third-party property, and for any injury to or death of persons arising out of the use of said Container and equipment. 11. OPTION OF INSPECTION. The Carrier and any Participating carrier shall be entitled, but under no obligation, to open any Container at any time and to inspect the contents. If it thereupon appears that the contents or any part thereof cannot safely or properly be carried or carried further, either at all or without incurring any additional expense, the Carrier and Participating carrier may abandon the transportation thereof and/or take any measures and/or incur any reasonable additional expenses to continue the Carriage or to store the Goods, which storage shall be deemed to constitute due delivery under this Bill of Lading. The Merchant shall indemnify the Carrier against any reasonable additional Charges so incurred. 12. DECK CARGO. Deck cargo (except that carried in Containers on deck) and live animals are received and carried solely at Merchant's risk (including accident or mortality of animals), and the Carrier will not in any event be liable for any loss or damage for or from which he is exempt, immune or exonerated by applicable law, or from any other cause whatsoever not due to the fault of the Carrier, any warranty of seaworthiness in the premises being hereby waived, and the burden of proving liability being in all respects upon the Merchant. Except as may be otherwise provided, such shipments shall be deemed Goods and shall be subject to all Terms and Conditions of this Bill of Lading.

13. METHODS AND ROUTES OF TRANSPORTATION. With respect to the Goods or Containers or other packages, the Carrier may at any time and without notice to the Merchant: a) use any means of transport (water, land and/or air) or storage whatsoever; b) forward, transship or retain on board or carry on another vessel or conveyance or by any other means of transport than that named on the reverse side hereof; c) carry Goods on or under deck at its option; 2. CARRIER'S TARIFFS. The Goods carried hereunder are subject to all the terms and conditions of the Carrier's applicable tariff or tariffs on file d) proceed by any route in its sole and absolute discretion and whether the nearest, most direct, customary or advertised route or in or with the Federal Maritime Commission, Interstate Commerce Commission or any other regulatory body which governs a particular portion of the out of geographical rotation; carriage and said terms and conditions are hereby incorporated herein as part of the Terms and Conditions of this Bill of Lading. Copies of the e) proceed to or stay at any place whatsoever once or more often and in any order or omit calling at any port, whether scheduled or not; relevant provisions of the applicable tariff or tariffs are obtainable from the Carrier, Federal Maritime Commission, Interstate Commerce f) store, vanned or devanned, at any place whatsoever, ashore or afloat, in the open or covered; Commission or other regulatory body upon request. In the event of any conflict between the terms and conditions of such tariff or tariffs and the g) proceed with or without pilots; Terms and Conditions of this Bill of Lading, this Bill of Lading shall prevail. h) carry livestock, contraband, explosives, munitions, warlike stores, dangerous or hazardous goods or goods of any and all kinds; i) drydock or stop at any unscheduled or unadvertised port for bunkers, repairs or for any purpose whatsoever; 3. WARRANTY/ACKNOWLEDGMENT. The Merchant warrants that in agreeing to the Terms and Conditions hereof, it is, or is the agent and has the j) discharge and require the Merchant to take delivery, vanned or devanned; authority of, the owner or person entitled to the possession of the Goods or any person who has a present or future interest in the Goods. k) comply with any orders, directions or recommendations given by any government or authority or by any person or body acting or The Merchant acknowledges that the Carrier is a non-vessel operating common carrier ("NVOCC"), and that it neither owns nor charters purporting to act with the authority of any government or authority or having under the terms of the insurance on the vessel or other vessels, as a result of which the Carrier or any sub-carrier, connecting carrier or substitute carrier (which may be a NVOCC) will be required to conveyance employed by the Carrier the right to give such orders, directions or recommendations. contract with an actual ocean carrier to accomplish the Carriage contemplated by this Bill of Lading and does so as agent of the Merchant. l) take any other steps or precautions as may appear reasonable to the Carrier under the circumstances. The Merchant further acknowledges that by identifying the carrying Vessel on the face side hereof, it knows or can determine the name of the The liberties set out in subdivisions a) through l) may be invoked for any purpose whatsoever even if not connected with the Carriage actual ocean carrier and the terms and conditions of the actual ocean carrier's bill of lading and applicable tariff(s) and agrees to be bound covered by this Bill of Lading, and any action taken or omitted to be taken, and any delay arising therefrom, shall be deemed to be within thereby. the contractual and contemplated Carriage and not be an unreasonable deviation. In no circumstance whatsoever shall the Carrier be liable for direct, indirect or consequential loss or damage caused by delay. 4. RESPONSIBILITY a) Except where the Carriage covered by this Bill of Lading is to or from a port or locality where there is in force a compulsorily applicable 14. MATTERS AFFECTING PERFORMANCE. In any situation whatsoever and wheresoever occurring and whether existing or anticipated ordinance or statute of a nature similar to the International Convention for the Unification of Certain Rules Relating to Bills of Lading, dated at before commencement of, during or after the Carriage, which in the judgment of the Carrier is likely to give rise to any hindrance, risk, Brussels, August 25, 1924, the provisions of which cannot be departed from, and suit or other proceeding is instituted and litigated in such port or capture, seizure, detention, damage, delay, difficulty or disadvantage or loss to the Carrier or any part of the Goods, or make it unsafe, locality, this Bill of Lading shall have effect subject to the Carriage of Goods by Sea Act of the United States ("COGSA"), approved April 16, 1936, imprudent, impracticable or unlawful for any reason to receive, keep, load, carry or discharge them or any part of them or commence or and nothing herein contained, unless otherwise stated, shall be deemed a surrender by the Carrier of any of its rights, immunities, exemptions, continue the Carriage or disembark passengers at the port of Discharge or at the usual or intended place of discharge or delivery, or to give limitations or exonerations or an increase of any of its responsibilities or liabilities under COGSA or, as the case may be, such compulsorily rise to danger, delay or difficulty of whatsoever nature in proceeding by the usual or intended route, the Carrier and any Participating applicable ordinances or statutes. The provisions of COGSA or such compulsorily applicable ordinances or statutes (except as otherwise carrier, without notice to the Merchant, may decline to receive, keep, load, carry or discharge the Goods, or may discharge the Goods and specifically provided herein) shall govern before loading on and after discharge from the vessel and throughout the entire time the Goods or may require the Merchant to take delivery and, upon failure to do so, may warehouse them at the risk and expense of the Merchant and Containers or other packages are in the care, custody and/or control of the Carrier, a Participating carrier or independent contractor (inclusive of Goods or may forward or transship them as provided in this Bill of Lading, or the Carrier may retain the Goods on board until the return of all subcontractors), their agents and servants, whether engaged by or acting for the Carrier or any other person, as well as during the entire time the Vessel to the Port of Loading or to the Port of Discharge or any other point or until such time as the Carrier deems advisable and the Carrier is responsible for the Goods. In the absence of compulsorily applicable legislation, COGSA shall apply during the entire time the thereafter discharge them at any place whatsoever. In such event, as herein provided, such shall be at the risk and expense of the Carrier remains responsible hereunder. Merchant and Goods, and such action shall constitute complete delivery and performance under this contract, and the Carrier shall be free b) The Carrier shall not be liable in any capacity whatsoever for any delay, non-delivery, mis-delivery or other loss or damage to or in from any further responsibility. For any service rendered as herein above provided or for any delay or expense to the Carrier or Vessel connection with the Goods or Containers or other packages occurring at any time contemplated under subdivision a) of this Clause. caused as a result thereof, the Carrier shall, in addition to full Charges, be entitled to reasonable extra compensation, and shall have a lien c) The Carrier shall, irrespective of which law is applicable under subdivision a) of this Clause, be entitled to the benefit of the provisions of on the Goods for same. Notice of disposition of the Goods shall be sent to the Merchant named in this Bill of Lading within a reasonable Sections 4281 through 4286, inclusive, and 4289 of the Revised Statutes of the United States and amendments thereto. time thereafter. d) The rights, defenses, exemptions, limitations of and exonerations from liability and immunities of whatsoever nature provided for in this Bill All actions taken by the Carrier hereunder shall be deemed to be within the contractual and contemplated Carriage and not be an of Lading shall apply in any action or proceeding against the Carrier, its agents and servants and/or any Participating carrier or independent unreasonable deviation. contractor, whether in tort, contract or otherwise. 15. DELIVERY. If delivery of the Goods or Containers or other packages or any part thereof is not taken by the Merchant when and where 5. THROUGH TRANSPORTATION. When either the Place of Receipt or Place of Delivery set forth herein is an inland point or place other than the and at such time and place as the Carrier is entitled to have the Merchant take delivery, whether or not the Goods are damaged, they shall Port of Loading (Through Transportation basis), the Carrier will procure transportation to or from the sea terminal and such inland point(s) or be considered to have been delivered to the Merchant, and the Carrier may, at its option, subject to its lien and without notice, elect to have place(s) and, notwithstanding anything in this Bill of Lading contained, but always subject to Clause 4. hereof, the Carrier shall be liable for loss or same remain where they are or, if containerized, devanned and sent to a warehouse or other place, always at the risk and expense of the damage of whatsoever nature and howsoever arising to the following extent, but no further: Merchant and Goods. a) Upon proof that the loss or damage arose during a part of the Carriage herein made subject to COGSA or other compulsorily If the Goods are stowed within a Container owned or leased by the Carrier, the Carrier shall be entitled to devan the applicable legislation, as set forth in Clause 4. a) hereof, said legislation shall apply; or contents of any such Container, whereupon the Goods shall be considered to have been delivered to the Merchant, and the Carrier may, at b) Upon proof that the loss or damage not falling within a) above, but concerning which the law of any country, state or its option, subject to its lien and without notice, elect to have same remain where they are or sent to a warehouse or other place, always at subdivision thereof contains provisions that are compulsorily applicable and would have applied if the Merchant had made a separate and direct the risk and expense of the Merchant and Goods. contract with the Carrier, a Participating carrier or independent contractor, as referred to herein, relative to a particular stage of transport or other At ports or places where by local law, authorities or custom, the Carrier is required to discharge cargo to lighters or other handling wherein the loss or damage occurred and received as evidence thereof a particular receipt or other document, then the liability of the craft or where it has been so agreed or where wharves are not available which the Vessel can get to, be at, lie at, or leave, always safely Carrier, Participating carrier and independent contractor shall be subject to the provisions of such law. afloat, or where conditions prevailing at the time render discharge at a wharf dangerous, imprudent, or likely to delay the Vessel, the c) If it should be determined that the Carrier bears any responsibility for loss or damage occurring during the care, custody and/ Merchant shall promptly furnish lighters or other craft to take delivery alongside the Vessel at the risk and expense of the Goods. If the or control of any Participating carrier or independent contractor, their agents and/or servants, and be subject to law compulsorily applicable to Merchant fails to provide such lighters or other craft, Carrier, acting solely as agent for the Merchant, may engage such lighters or other their bills of lading, receipts, tariffs and/or law applicable thereto, then the Carrier shall be entitled to all rights, defenses, immunities, exemptions, craft at the risk and expense of the Merchant and Goods. Discharge of the Goods into such lighters or other craft shall constitute proper limitations of and exonerations from liability of whatsoever nature accorded under such bill of lading, receipt, tariff and/or applicable law, provided delivery, and any further responsibility of Carrier with respect to the Goods shall thereupon terminate. however, that nothing contained herein shall be deemed a surrender by the Carrier of any of its rights, defenses and immunities or an increase of any of its responsibilities or liabilities under this Bill of Lading, the Carrier's applicable tariff or laws applicable or relating thereto. 16. CHARGES, INCLUDING FREIGHT. The Charges payable hereunder have been calculated on the basis of particulars furnished by or on d) Except as hereinabove provided, the Carrier shall have no liability for loss or damage to the Goods. behalf of the Merchant. The Carrier shall, at any time, be entitled to inspect, reweigh, remeasure or revalue the contents and, if any of the particulars furnished by the Merchant are found to be incorrect, the Charges shall be adjusted accordingly, and the Merchant shall be 6. SUBCONTRACTING:BENEFICIARIES responsible to pay the correct Charges and all expenses incurred by the Carrier in checking said particulars or any of them. a) The Carrier shall be entitled to subcontract on any terms the whole or any part of the Carriage, loading, unloading, storing, warehousing, Charges shall be deemed earned on acceptance of the Goods or Containers or other packages for shipment by the Carrier handling and any and all duties whatsoever undertaken by it in relation to the Goods or Containers or other packages or any other goods. and shall be paid by the Merchant in full, without any offset, counterclaim or deduction, cargo and/or vessel or other conveyance lost or not b) It is understood and agreed that if it should be adjudged that any person or entity other than or in addition to the Carrier is under any lost, and shall be non-returnable in any event. responsibility with respect to the Goods or any other goods, regardless of the port or place where any loss or damage shall occur and without The Merchant shall remain responsible for all Charges, regardless whether the Bill of Lading states, in words or symbols, regard to whether the Goods covered hereby or any other goods are being handled or are damaged directly or indirectly during any handling, and that it is "Prepaid," "To be Prepaid" or "Collect." even if the Goods or other goods are transported on free in, stowed and/or free out terms, all exemptions, limitations of and exonerations from In arranging for any services with respect to the Goods, the Carrier shall be considered the exclusive agent of the liability provided by law or by the Terms and Conditions hereof shall be available to all agents, servants, employees, representatives, all Merchant for all purposes, and any payment of Charges to other than the Carrier shall not, in any event, be considered payment to the Participating (including rail and other inland) carriers and all stevedores, terminal operators, warehousemen, crane operators, watchmen, Carrier. carpenters, ship cleaners, surveyors and all independent contractors, inclusive of all persons providing any service whatsoever. In contracting for The Merchant shall defend, indemnify and hold the Carrier, any Participating carrier, independent contractor, their agents the foregoing exemptions, limitations of and exonerations from liability, the Carrier is acting as agent and trustee for and on behalf of all persons and servants, harmless from and against all liability, loss, damage and expense which may be sustained or incurred relative to the above. described above, all of whom shall to this extent be deemed to be a party to the contract evidenced by this Bill of Lading, regardless for whom acting or by whom retained and paid, it being always understood that said beneficiaries are not entitled to any greater or further exemptions, 17. CARRIER'S LIEN. The Carrier shall have a lien on the Goods, inclusive of any Container owned or leased by the Merchant, and all limitations of or exonerations from liability than those that the Carrier has under this Bill of Lading in any given situation. equipment and appurtenances thereto, as well as on any Charges due any person, and on any documents relating thereto, which lien shall c) The Carrier undertakes to procure such services as necessary and shall have the right at its sole discretion to select any mode of land, sea survive delivery, for all sums due under this contract or any other contract or undertaking to which the Merchant was party or otherwise or air transport and to arrange participation by other carriers to accomplish the total or any part of the carriage from Port of Loading to Port of involved, including, but not limited to, General Average contributions, salvage and the cost of recovering such sums, inclusive of attorneys’ Discharge or from Place of Receipt to Place of Delivery, or any combination thereof, except as may be otherwise provided herein. fees. Such lien may be enforced by the Carrier by public or private sale at the expense of and without notice to the Merchant. d) The Merchant agrees that the Carrier shall be deemed to be a beneficiary of the actual ocean carrier's bill of lading and of all exemptions, The Merchant agrees to defend, indemnify and hold the Carrier, any Participating carrier, independent contractor, their limitations of and exonerations from liability therein contained even though the Carrier acts as agent of the Merchant in contracting with the actual agents and servants, harmless from and against all liability, loss, damage or expense which may be sustained or incurred by the Carrier ocean carrier for the Carriage of the Goods. Notwithstanding, under no circumstances shall the Carrier be responsible for any damages to an relative to the above and the Merchant agrees to submit to the jurisdiction of any court, tribunal or other body before whom the Carrier may extent greater than the actual ocean carrier or any beneficiaries of its bill of lading. be brought, whether said proceeding is of a civil or criminal nature. e) No agent or servant of the Carrier or other person or class named in subdivision b) hereof shall have power to waive or vary any of the terms hereof unless such waiver or variation is in writing and is specifically authorized or ratified in writing by an officer or director of the Carrier having 18. RUST. It is agreed that superficial rust, oxidation or any like condition due to moisture is not a condition of damage but is inherent to actual authority to bind the Carrier to such waiver or variation. the nature of the Goods. Acknowledgement of receipt of the Goods in apparent good order and condition is not a representation that such conditions of rust, oxidation or the like did not exist on receipt. 7. MERCHANT’S RESPONSIBILITIES/DESCRIPTION OF GOODS a) The description and particulars of the Goods set out on the face hereof and any description, particular or other representation appearing on 19. GENERAL AVERAGE the Goods, Container or other packages or documents relating thereto are furnished by the Merchant, and the Merchant warrants to the Carrier a) If General Average is declared, it shall be adjusted according to the York/Antwerp Rules of 1994 and all subsequent that the description, particulars and any representation made including, but not limited to, weight, content, measure, quantity, quality, condition, amendments thereto from time to time made, at any place at the option of any person entitled to declare General Average, and the Amended marks, numbers and value are correct. Jason Clause as approved by BIMCO is to be considered as incorporated herein, and the Merchant shall provide such security as may be b) The Merchant warrants that it has complied with all applicable laws, regulations and requirements of Customs, Port and other Authorities required in this connection. and shall bear and pay all duties, taxes, fines, imposts, expenses and losses incurred or suffered by reason thereof or by reason of any illegal, b) Notwithstanding a) above, the Merchant shall defend, indemnify and hold harmless the Carrier and any Participating incorrect or insufficient marking, numbering, addressing or any other particular relative to the Goods. carrier, their agents and servants, in respect of any claim (and any expense arising therefrom) of a General Average nature which may be c) The Merchant further warrants that the Goods are packed in a manner adequate to withstand the ordinary risks of Carriage having regard to made against the Carrier and/or any Participating carrier and shall provide such security as may be required by the Carrier in this their nature and in compliance with all laws, regulations and requirements which may be applicable. connection. d) No Goods which are or may become dangerous, inflammable or damaging or which are or may become liable to damage any property or c) Neither the Carrier nor any Participating carrier shall be under any obligation to take any steps whatsoever to post person whatsoever shall be tendered to the Carrier for Carriage without the Carrier's prior express consent in writing and without the Container or security for General Average or to collect security for General Average contributions due to the Merchant. other covering in which the Goods are to be transported being distinctly marked on the outside thereof so as to indicate the nature and character of any such articles and so as to comply with all applicable laws, regulations and requirements. If any such articles are delivered to the Carrier 20. LIMITATION OF LIABILITY. Except as otherwise provided in this Clause or elsewhere in this Bill of Lading, in case of any loss or without such written consent and marking or if in the opinion of the Carrier the articles are or are liable to become of a dangerous, inflammable or damage to or in connection with cargo exceeding in actual value the equivalent of $500 lawful money of the United States, per package, or damaging nature, the same may at any time be destroyed, disposed of, abandoned or rendered harmless without compensation to the Merchant in case of cargo not shipped in packages, per shipping unit, the value of the cargo shall be deemed to be $500 per package or per shipping and without prejudice to the Carrier's right to Charges. unit. The Carrier's liability, if any, shall be determined on the basis of a value of $500 per package or per shipping unit or pro rata in case of e) The Merchant shall be liable for all loss or damage of any kind whatsoever including, but not limited to, contamination, soiling, detention and partial loss or damage, unless the nature of the cargo and valuation higher than $500 per package or per shipping unit shall have been demurrage before, during and after the Carriage of property (including but not limited to Containers) of the Carrier or any person or vessel (other declared by the Merchant before shipment and inserted in this Bill of Lading, and extra freight paid if required. In such case, if the actual than the Merchant) caused by the Merchant or any person acting on its behalf or for which the Merchant is otherwise responsible. value of the cargo per package or per shipping unit shall exceed such declared value, the value shall nevertheless be deemed to be f) The Merchant and the Goods themselves shall be liable for and shall indemnify the Carrier, and the Carrier shall have a lien on the Goods for declared value and the Carrier's liability, if any, shall not exceed the declared value. all expenses of mending, repairing, fumigating, repacking, recoopering, baling, reconditioning of the Goods and gathering of loose contents, also The words "shipping unit" shall mean each physical unit (e.g., container, bundle, pallet, etc.) or piece of cargo not shipped for expenses for repairing Containers damaged while in the possession of the Merchant, for demurrage on Containers and any payment, expense, in a package, including articles or things of any description whatsoever, except cargo shipped in bulk, and irrespective of the weight or fine, dues, duty, tax, impost, loss, damage or detention sustained or incurred by or levied upon the Carrier, Vessel, Goods, Containers or other measurement unit employed in calculating freight and related charges. packages and for any action or requirement of any government or governmental authority or person purporting to act under the authority thereof, As to cargo shipped in bulk, the limitation applicable thereto shall be the limitation provided in Section 1304(5) of COGSA, seizure under legal process or attempted seizure, incorrect or insufficient marking, numbering or addressing of Containers or other packages or or such other legislation, convention or law as may be compulsorily applicable, and in no event shall anything herein be construed as a description of the contents, failure of the Merchant to procure consular, Board of Health or other certificates to accompany the Goods or to waiver of limitation as to cargo shipped in bulk. comply with laws or regulations or any kind imposed with respect to the Goods by the authorities at any port of place or any act or omission of the Where a Container is not stuffed by or on behalf of the Carrier or the parties characterize the Container as a package or a Merchant. The Carrier’s lien shall survive delivery and may be enforced by private or public sale and without notice. lump sum freight is assessed, in any of these events, each individual such Container, including in each instance its contents, shall be g) The Merchant shall defend, indemnify and hold harmless the Carrier, any Participating carrier, independent contractor, their agents and deemed a single package and Carrier's liability limited to $500 with respect to each such package, except as otherwise provided in this servants, against any loss, damage, claim, liability or expense whatsoever arising from any breach of the provisions of this Clause 7. or from any Clause or elsewhere in this Bill of Lading with respect to each such package. In the event this provision should be held invalid during that other cause for which the Carrier is not ultimately responsible. period in which compulsory legislation shall apply of its own force and effect, such as during the tackle-to-tackle period, it shall nevertheless apply during all non-compulsory periods such as, but not limited to, all periods prior to loading and subsequent to discharge 8. CONTAINERS. from the Vessel and during the entire time for which the Carrier remains responsible for the Goods. a) Goods may be stowed by the Carrier in or on Containers, and may be stowed with other goods. Containers, whether stowed by the Carrier or Where compulsorily applicable legislation provides a limitation less than $500 per package or shipping unit, such lesser received fully stowed, may be carried on or under deck without notice, and the Merchant expressly agrees that cargo stowed in a Container and limitation shall apply and nothing herein contained shall be construed as a waiver of a limitation less than $500. carried on deck is considered for all legal purposes to be cargo stowed under deck. Goods stowed in Containers on deck shall be subject to the Further, where a lesser monetary limitation is applicable, such as during handling by a Participating carrier or legislation referred to in Clause 4. hereof and will contribute in General Average and receive compensation in General Average, as the case may independent contractor and damage occurs during its or their period of care, custody, control and/or responsibility, the Carrier shall be be. entitled to avail itself of such lesser limitation b) The Terms and Conditions of this Bill of Lading shall govern the responsibility of the Carrier with respect to the supply of a Container to the Merchant. 21. NOTICE OF CLAIM: TIME FOR SUIT. As to any loss or damage presumed to have occurred during the Carrier's period of responsibility, c) If a Container has been stuffed by or on behalf of the Merchant, the Carrier, any Participating Carrier, all independent contractors and all the Carrier must be notified in writing of any such loss or damage or claim before or at the time of discharge/removal of the Goods by the persons rendering any service whatsoever hereunder shall not be liable for any loss or damage to the Goods, Containers or other packages or to Merchant or, if the loss or damage is not then apparent, within 3 consecutive days after discharge/delivery or the date when the Goods any other goods caused (1) by the manner in which the Container has been stuffed and its contents secured, (2) by the unsuitability of the Goods should have been discharged/delivered. If not so notified, discharge, removal or delivery, depending upon the law applicable, shall be for carriage in Containers or for the type of Container requested by and furnished to the Merchant, or (3) condition of the Container furnished, prima facie evidence of discharge/delivery in good order by the Carrier of such Goods. which the Merchant acknowledges has been inspected by it or on its behalf before stuffing and sealing. In any event, the Carrier shall be discharged from all liability of whatsoever nature unless suit is brought within 1 year d) The Merchant shall defend, indemnify and hold harmless the Carrier against any loss, damage, claim, liability or expense whatsoever arising after delivery of the Goods or the date when the Goods should have been delivered, provided however, that if any claim should arise during from one or more of the matters covered by a), b) and c) above. a part of the transport which is subject by applicable law and/or tariff and/or contract to a shorter period for notice of claim or commencement of suit, any liability whatsoever of the Carrier shall cease unless proper claim is made in writing and suit is brought within 9. CONTAINERS WITH HEATING OR REEFER APPARATUS. Containers with temperature or atmosphere control apparatus for heating, such shorter period. refrigeration, ventilation or otherwise will not be furnished unless contracted for expressly in writing at time of booking and, when furnished, may Suit shall not be deemed "brought" unless jurisdiction shall have been obtained over the Carrier by service of process or entail increased Charges. In the absence of an express request, it shall be conclusively presumed that the use of a dry container is appropriate for by an agreement to appear. In the event this provision should be held invalid during that period in which compulsory legislation shall apply the Goods. of its own force and effect, such as during the tackle-to-tackle period, it shall nevertheless apply during all non-compulsory periods during Merchant must provide Carrier with desired temperature range in writing at time of booking and insert same on the face side of the Bill of which the Carrier remains responsible for the Goods. Lading, and where so provided, Carrier is to exercise due diligence to maintain the temperature within a reasonable range while the Containers are in its care, custody and/or control or that of any Participating carrier or independent contractor. The Carrier does not accept any responsibility for 22. JURISDICTION the functioning of temperature or atmosphere-controlled Containers not owned or leased by Carrier or for latent defects not discoverable by the All disputes of whatsoever nature under or in connection with this Bill of Lading shall be determined by the [insert exercise of due diligence. specific court and location] to the exclusion of any other court PROVIDED ALWAYS that the Carrier may in its absolute and sole discretion Where the Container is stuffed or partially stuffed by or on behalf of the Merchant, the Merchant warrants that it has properly pre-cooled the invoke or voluntarily submit to the jurisdiction of any other court which, but for the terms of this Bill of Lading, could properly assume Container, that the Goods have been properly stuffed and secured within the Container and that the temperature controls have been properly set jurisdiction to hear and determine such disputes, but such shall not constitute a waiver of the terms of this provision in any other instance. prior to delivery of the Container to the Carrier, its agents, servants, or any Participating carrier or independent contractor. The Merchant accepts responsibility for all loss or damage of whatsoever nature resulting from a breach of any of these warranties, including but not limited to other 23. NON-WAIVER AND SEPARABILITY. Nothing in this Bill of Lading shall operate to deprive the Carrier of any statutory protection or any cargo consolidated in the Container with the Merchant's Goods or to any other cargo, property or person damaged or injured as a result thereof, defense, immunity, exemption, limitation of or exoneration from liability contained in the laws of the United States, or of any other country and the Merchant agrees to defend, indemnify and hold the Carrier, Participating carriers and independent contractors, their agents and servants, whose laws may be compulsorily applicable. The Terms and Conditions of this Bill of Lading (including all the terms and conditions of the harmless from and against all claims, suits, proceedings and all other consequences thereof regardless of their nature and merit. carrier's applicable tariff or tariffs, incorporated herein by virtue of Clause 2. above) shall be separable, and if any part or term hereof shall be held invalid, such holding shall not affect the validity or enforceability of any other part or term hereof. Recommended wording from TT Club

133

ORIGINAL

OPEN POLICY NO.

CERTIFICATE NO.

A2310

2952305

FOREMAN’S FUND INSURANCE COMPANY SAN FRANCISCO, CALIFORNIA ATLANTIC DIVISION, 110 WILLIAM STREET NEW YORK, NEW YORK 10038

$ 125,000.000 The company named above in consideration of premium in the amount of and at rates as arranged and subject to the Conditions and Warranties specified and/or attached hereto, does by this policy insure

ASSURED

Metalworking Machines, Inc.

as well in their own name as in that of those to whomsoever the subject matter of this Policy does, may, or shall appertain. IN THE SUM OF UPON

One hundred twenty-five thousand and 00/100--------------------------------steel grinders with accessories

CONTAINER-HOUSE/HOUSE CONTAINER-PORT/PORT CONTAINER-OTHER NON-CONTAINER

VALUED AT SUM OR SUMS INSURED LADEN (UNDER DECK) ON BOARD THE VESSEL/AIRLINE:

S/L Adventurer

(LOST OR NOT LOST) AT AND FROM (INITIAL POINT/PORT):

Interior USA via Baltimore

LOSS IF ANY PAYABLE TO THE ORDER OF THE ASSURED AT:

destination

B/L OR SAILING DATE: 9-30-2006 TO (FINAL POINT/PORT):

Taipei Taiwan via Kaoshiung

Insured against all risks of physical loss or damage from any external cause irrespective of percentage, but excluding the risks excluded by the “F.C.&S.” and/or “S.R.&C.C.” warranties on the reverse side of this policy except to the extent that such risks may be specifically covered by endorsement also warranted free from any claim arising out of the inherent price of the goods insured or consequent upon loss of time or market. This insurance attaches from the time the goods leave the warehouse at the place named in the policy for the commencement of the transit and continues during the ordinary course of transit until the goods are delivered to the final warehouse at the destination named in the policy. It is a condition of this insurance that there shall be no interruption or suspension of transit unless due to circumstances beyond the control of the Assured. The risks covered by this policy include loss, damage, or expense resulting from explosion howsoever or wheresoever occurring, irrespective of percentage, but it is especially understood and agreed that this wording is not intended to cover any of the risks excluded by the F.C.&S. and/or S.R.&C.C. Warranties set forth elsewhere in the policy. In the event of the vessel, wharf, warehouse, conveyance, or other cargo being fumigated by order of property constituted authority and damage arises therefrom to the goods insured hereunder, this Company agrees to indemnify the Assured for such damage irrespective of percentage. General Average and Salvage Charges payable according to United States laws and usage and/or as per Foreign Statement and/or as per York-Antwerp Rules (as prescribed in whole or in part) in accordance with the Contract of Affreightment. In cases of any loss or misfortune, it shall be lawful and necessary for the Assured, his or their factors, servants and assigns, to sue, labor, and travel for, in, and about the defense, safeguard, and recovery of the interest insured, or any part thereof, without prejudice to this insurance; to the charges whereof this Company shall contribute according to the rate and quantity of the sum hereby insured; nor shall the acts of the Assured or the Company in recovering, saving, or preserving the property insured, in case of disaster, be considered as a waiver or acceptance of abandonment. In case of any agreement, act, or omission of the Assured, prior or subsequent to loss, whereby any right of recovery of the Assured for loss or damage to any property insured hereunder against any Carrier or Bailee, is released, impaired, or lost, which would on acceptance of abandonment or payment of loss by this Company have inured to its benefit, but for such agreement, act, or omission, this Company shall pay for the loss only to the extent its right of recovery was not released, impaired, or lost.

This insurance is subject to the American Institute Marine Extension Clauses (1943) and the following American Institute Clauses as if the current form of each were endorsed hereon: South America 60-Day Clause S.R.&C.C. Endorsement War Risk Insurance

It is hereby understood and agreed that in case of loss and damage to the property insured under this policy, same shall be immediately reported as soon as the goods are landed, or the loss is known or expected, to the nearest agent of this Company as designated on the reverse side hereof.

(See reverse side for further terms and conditions which are hereby made a part of this Policy.) NOTE—It is necessary for the assured to give prompt notice to underwriters when he becomes aware of an event for which he is “held covered” under this policy and the right to such cover is dependent on compliance with this obligation. In witness whereof the company named above has caused this policy to be signed by its duty authorized officers, but this policy shall not be valid unless countersigned by an authorized representative of this Company or the Assured.

Secretary

Endorsement –

134

President

Counteragreed at

Baltimore MD

9-30-2006 Date

ARRIVAL NOTICE & RELEASE ORDER Cargo International Logistics Phone Toll Free: 1-888-253-3458 Fax Toll Free: 1-888-253-9155 Shipper:

Booking Number: Forwarder: Cargo International Logistics Suite 906, 20 Hughson Street South, Hamilton, ON L8N2A1 Canada Phone: 1-905-524-2112 Fax: 1-905-524-0099

Consignee:

Rate Reference Number

Notify Party

Precarriage By:

Port of Receipt:

Import Ref:

Vessel:

Port of Loading:

Type of Movement (traffic routing)

Port of Discharge:

Place of Delivery:

On Carriage By:

PARTICULARS FURNISHED BY SHIPPER Container & Seal Number(s) Marks/Numbers

Number of Packages

Gross Weight in Kilos

Description of Packages and Goods

Measurement in CBM

Special Instructions/Remarks

Isssued by:

Date:

135

Driver Please Note

SHIPPERS Please Note

IF SINGLE SHIPMENT LESS THAN 500 LBS -CHECK BOX IN LOWER RIGHT CORNER

FREIGHT CHARGES ARE PREPAID ON THIS BILL OF LADING UNLESS MARKED COLLECT SHIPPER NO.: PURCHASE ORDER NO.

1570 Cota Avenue Long Beach, CA 90813 P.O. Box 1524 Long Beach, CA 90801 TO: (CONSIGNEE)

PLACE PRO LABEL HERE

FROM: (SHIPPER)

STREET

CITY, STATE

ZIP CODE

BILL TO: NAME

NO. PIECES SHIPPED

DATE:

Phone #: (562)437-3553 Fax #: (562)437-3580 http://www.atlasmarine- inc.com

KING OF PACKAGING

CITY, STATE

STREET OR BOX #

ZIP CODE CITY

MARK “X” IN “HM” COLUMN FOR HAZARDOUS MATERIALS DESCRIPTION OF ARTICLES, SPECIAL MARKS AND EXCEPTIONS

STATE

NMFC ITEM NO.

CLASS

ZIP CODE

WEIGHT/LBS

RATE

CHARGES (CARRIER USE ONLY)

In case of emergency please call chemtrec 1-800-424-9300

COD

REMIT C.O.D. TO

$_____________________ AMOUNT

C.O.D. FEE

CONSIGNEE CHECK

PREPAID

ACCEPTABLE

NOTE – Where the rate is dependent on value, shppers are required to state specifically in writing the agreed or declared value of the property. The agreed or declared value of the property is hereby specifically stated by the shipper to be not exceeding.

ADDRESS: __________________________________ CITY / STATE: ________________________________

COLLECT

TOTAL CHARGES

NAME: _____________________________________

Subject to Section 7 of the conditions, if this shipment is to be delivered to the consignee without recourse on the shipper, the shipper shall sign the following statement. The carrier shall not make delivery of this shipment without payment of freight and all other lawful charges

FREIGHT CHARGES ARE PREPAID UNLESS MARKED COLLECT. _______________________________________ CHECK BOX IF FREIGHT CHARGES ARE

COLLECT _____________________________________________ (Signature of Shipper) RECEIVED, subject to the classifications and lawfully filed tariffs in effect on the date of the issue of this Bill of Lading, the property described above in apparent good order, except as noted (contents and condition of contents or packages unknown), marked consigned, and destined as indicated above which said carrier agrees to carry to its usual place of delivery at said destination, if on its routs, otherwise to deliver to another carrier on the route to said destination. It is mutually agreed as to each carrier of all or any of said property over all or any portion of said route to destination and as to each party at any time interested in all or any of said property, that every service to be performed hereunder shall be subject of all the bill of lading terms and conditions in the governing classification on the date of shipment. Shipper hereby certifies that he is familiar with all the bill of lading terms and conditions in the governing classification and the said terms and conditions are hereby agreed to by the shipper and accepted for himself and his assigns. This is to certify that the above named materials are properly classified, described, CARRIER packaged, marked, and labeled and are in proper condition for transportation, according to the applicable regulations of the Department of Transportation. SHIPPER PER SINGLE SHIPMENT $_______________________ per _________________

PER

EQUAL OPPORTUNITY CONDITION: This contract contains the provisions of Sec. 202 of Executive Order 11246, Paragraphs 1 through 7.

136

DATE

TIME

PICK UP PIECES

All damage must be reported within 24 hours or claim will be denied

Manufacturerâ&#x20AC;&#x2122;s Documents Commercial Invoice Date

Invoice #

Shipper Name

Consignee Name

Street Address

Contact (Shipper)

Email Address

Contact (Consignee)

Telephone/Fax Number Tax ID Number (EIN)

PO #

Email Address

Telephone/Fax Number Exporting Carrier

Tax ID Number (i.e. EIN, VAT) Incoterms

Other Information (i.e. ITN #) Complete Commodity Description

AWB # HM

Schedule B

Country of Manufacture

Quantity UOM

Unit Price USD $

Total Price USD $ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Subtotal (USD $) Total Freight Charge Total Insurance Cost Total Invoice Value (USD $)

I/we hereby certify that the information on this invoice is true and correct and that the contents of this shipment are as stated above.

Signature and Title of Authorized Person

Date

0.00

These commodities, technology, or software were exported from the United States of America for ultimate destination ______________________________ in accordance with export administration regulations. Diversion contrary to U.S. law is prohibited. 10/12/07

137

138

19 Place and Date of Shipment

To Gentlemen: Under your Order No. ___________________________________________________________ the material listed below was shipped

via

Shipment consists of:

Marks

Cases

Packages

Crates

Cartons

Bbls.

Drums

Reels * LEGAL WEIGHT IS WEIGHT OF ARTICLE PLUS PAPER, BOX, BOTTLE, ETC., CONTAINING THE ARTICLE AS USUALLY CARRIED IN STOCK.

WEIGHTS IN LBS. or KILOS PACKAGE NUMBER

GROSS WEIGHT EACH

*LEGAL WEIGHT EACH

Form No. 30-036 Printed and Sold by

NET WEIGHT EACH

DIMENSIONS HEIGHT

WIDTH

LENGTH

201 Circle Drive N, Suite 104, Piscataway, NJ 08854

QUANTITY

CLEARLY STATE CONTENTS OF EACH PACKAGE

(800) 631-3098 www.unzco.com

139

Bank’s Documents

Export Letter of Credit Accompanying Letter For documents submitted by customer Customer Information Name

Account No.

AIZK

Letter of Credit Information Letter of credit No. Claimed amount, currency Information on submitted documents The following documents are submitted to ABLV Bank, AS, for execution of above mentioned letter of credit (specify number of originals and copies): bill of exchange for amount

certificate of origin

invoice

insurance policy / certificate

bill of lading

packing list

road waybill CMR

certificate of weight

air waybill

certificate of quality / analysis

railway bill

other (name of the document)

Declaration I have read ABLV Bank, AS, General Terms of Business and rates and charges consent thereto, and agree to be bound thereby.

Date day

month

year

customer’s signature, print full name, seal

month

year

signature, position and print full name of the Bank’s representative

Place of signature city, country

Date day

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Exporting From China

Who can export from China? State foreign trade companies (FTCs) carry out most of the exportation

partied and acquire goods from the domestic market (Ramasamy). Further, a FTC can act as an agent for a domestic manufacturer by signing an export agreement with a foreign purchase(Ramasamy). Foreign Invested Enterprises, including contractual joint ventures, and foreign owned businesses,

well

some

Chinese

manufacturers

are

authorized

to export. However, these entities can only export goods that they manufacture themselves (Ramasamy). They are prohibited from exporting goods manufactured by third parties. Other types of businesses and individuals are required to apply for authorization from the MOFTEC before they can export goods from China(Ramasamy). In practice, these parties often approach FTCs to export goods as their agents, because this method is quicker than applying for MOFTECâ&#x20AC;&#x2122;s approval(Ramasamy).

What types of exporting license exist? There are general licenses and special license. Under a general license, a FTC is deemed to have a valid export license for any transaction within its authorized scope of businesses once it has obtained a single license; hence there is no need to apply for every transaction (Ramasamy). Special license are required where any enterprise or individual including an FTC wishes to export a good that is restricted under the MOFTEC(Ramasamy). The MOFTEC may restrict the exportation of a good for the following

Country Exporting Requirements

of goods from China. They can export products manufactured by third

reasons:

141

-a quota has been established by the country to which the good id being exported -the MOFTEC has established a limit on the quantity of goods to be imported to a country so that the amount of good exported will not surpass th capacity of that market -the MOFTEC wished to limit exportation of a good in order to effect foreign policy or macroeconomic objectives.

How to Apply? Exporter must submit an application to the MOFTEC. The application must contain the following information: the name of the good to be exported, specifications,per unit price, total value, method of payment, destination, and delivery date. If the MOFTEC approves the application, and export license will be issued.

How long is an export license valid? The term of validity on an export license varies to the date of the delivery contract. Normally, the term of the export license expires approximately six months after its issuance. An exporter can apply for an extension of 2 months if the goods arenâ&#x20AC;&#x2122;t shipped during its term of validity.

142

China Export Procedures In Chinaâ&#x20AC;&#x2DC;s export business, BOF terms apply only in a small number of countries and regions which have signed agreements with China on the same delivery terms (Ramasamy). The majority of countries do business on CIF or CFR terms and get paid in letter of credits (Ramasamy). These kinds of export contracts involve many links with complicated procedures and are associated with many aspects and departments(Ramasamy). Export procedures usually include: the establishment of an export contract, preparing export commodities, push for documents, checking and changing documents,

booking

space,

customs

declaration,

commodity

inspection,

insurance, loading, writing documents and settlement of exchange. Among them, the four procedures such as goods (preparing for export goods), documents (push

for

documents,

checking

and

changing

documents),

ships

(booking

space), payment (writing a document and settlement of exchange) are the most important(Ramasamy).

143

Conclusion Though thorough research and upon evaluating all the variables of sourcing from China, it is clear that both risks and benefits are present. To make the decision of whether or not the potential risks outweigh the benefits, many factors must be considered. In the past few years, China’s economy, which was once seeing steady growth, has been sluggish. This has caused the government to opt for reform. Though this reform wouldn’t effect the viability of China

source of manufacturing.

Because of China’s constant economic growth, China would be a great country to manufacture products in. China has a relatively low unemployment rate and as a country are working to keep it that way. The Chinese people are willing to work. The Chinese people as a whole have a high work ethic. Studies show that the native Chinese population have a high rate of job satisfaction. A risk with manufacturing in China is child labor. China has been known to have children working in factories. This could be an issue for Comfort Act due to the fact that our sourcing guidelines clearly state that we will not source our products from a company that utilizes child labor. This isn’t a high risk for Comfort Act because our sourcing guidelines also state that we will utilize internal and external monitors to evaluate the our manufacturers to ensure they are in compliance. China’s ruling Communist Party is pushing for pay increases to retain public support and to accelerate the nation’s shift away from polluting and capitalintensive manufacturing to a more services-driven economy. In minimum-wage increases so far announced for 2014, workers in Shenzhen in Guangdong province get a 13 percent boost and the gain for those in Yangzhou, Jiangsu province, is 15.6 percent. This increase has driven many low cost manufacturers, such as Nike away from China and into countries that have lower wages.

144

Though there are many risks associated with manufacturing in China,in the end the benefits out weigh the risks.China would be an excellent country to source and manufacture our product from due to its booming manufacturing and textile industry. Both the textile and apparel manufacturing industries are expected to see exponential growth within the next few years. Manufacturing in China opens a world of possibility to create a wide range of products and innovations. Many active wear companies such as Nike, Adidas,Lululemon and Reebok currently source their product here. The companies listed have similar sourcing guidelines to the ones of Comfort Act.

145

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“China Luxury Trends for 2014.” Red Luxury. N.p., 6 Jan. 2014. Web. 20 Oct. 2014. “China Profile.” BBC News. BBC News, 22 May 2014. Web. 25 Sept. 2014. “China Rules out Open Elections in Hong Kong.” The Gaurdian. Associated Press Hong Kong, 31 Aug. 2014. Web. 30 Sept. 2014. “China: Share of Global Gross Domestic Product 2019 | Statistic.” Statista. Statista, n.d. Web. 01 Oct. 2014. China Staff Employment Law Guide. Singapore: CCH Asia Pte Limited, 2003. Baker McKenzie. Baker McKenzie, 2014. Web. 15 Oct. 2014. “China: Total Population 2009-2019.” Statista. N.p., 2014. Web. 26 Sept. 2014. China. United Nations. Department of Economic and Social Affairs, Popula tion Division. N.p.: n.p., n.d. Web. “Chinese Arts and Crafts: Artworks, Handicraft, Souvenirs.” Chinese Arts and Crafts: Artworks, Handicraft, Souvenirs. N.p., n.d. Web. 20 Oct. 2014. “Chinese Consumers In 2020: A Look Into The Future.” Market Research World. N.p., 2014. Web. 4 Oct. 2014. “Chinese Food: Features, Eight Cuisines, Culture, Recipes with Photos.” Chinese Food: Features, Eight Cuisines, Culture, Recipes with Photos. China Travel Guide, n.d. Web. 19 Oct. 2014. Collins, Stuart. “Political Stability in China Comes with Little Transpar ency.” Political Stability in China. Business Insurance, 10 Oct. 2014. Web. 20 Oct. 2014. Conerly, Bill. “China Economic Forecast 2014 - 2015.” Forbes. Forbes Maga zine, 10 Mar. 2014. Web. 30 Sept. 2014. “Economic System.” Economic System. N.p., n.d. Web. 30 Sept. 2014. Fisher, Max. “Hong Kong’s Unprecedented Protests and Police Crackdown, Explained.” Vox. Vox Media, 28 Sept. 2014. Web. 20 Oct. 2014.

147

“Freight Calculator.” World Freight Rates -. N.p., n.d. Web. 20 Oct. 2014. “Foreign Travel Advice China.” China Travel Advice. GOV.UK, 2014. Web. 02 Oct. 2014. Forsythe, Michael. “Chinese Government Tightens Constraints on Press Free dom.” The New York Times. The New York Times, 19 June 2014. Web. 20 Oct. 2014. “Government.” Central Intelligence Agency. Central Intelligence Agency, n.d. Web. 29 Sept. 2014. Harjani, Ansuya. “This Is How Fast China’s Workforce Is Shrinking.” CNBC. N.p., 20 Jan. 2014. Web. 20 Oct. 2014.“Hong Kong Occupy Central Pro est Live Stream 2014: At Least 41 People Injured, 78 Arrested.” In ternational Business Times. Associated Press Hong Kong, 31 Aug. 2014. Web. 30 Sept. 2014. Huang, Nancy, Joie Ma, and Kyle Sullivan. “Economic Development Policies for Central and Western China.” China Business Review. N.p., n.d. Web. 01 Oct. 2014. “In This Section: Business Culture in China.” Business Communication Styles in China and Successful Communication with Chinese Businesses and Col leagues. World Business Culture, n.d. Web. 19 Oct. 2014. “Key Facts and Geographic Location. China Country Profile. June 2014:13-13. Business Source Premire. 4 Oct. 2014. Lambert, Robert. “Religious Statistics in China.” China Source. N.p., 7 Jan. 2014. Web. 25 Sept. 2014. Lininger, Mike. “Utensil Etiquette.” And Chopsticks. Etiquette Scholar, n.d. Web. 17 Oct. 2014. “Manufacturing in China.” OneSource.ReferenceUSA,Jul2014.Web.15 Sept. Neidel, Betsey. “Negotiations, Chinese Style.” China Business Review. China Business Review, 2010. Web. 16 Oct. 2014. Lieberthal, Kenneth G. “China.” Britannica Encyclopedia. N.p., 17 June 2014. Web. 26 Sept. 2014.

148

Perkowsi, Jack. “Negotiating In China: 10 Rules for Success.” Forbes. Forbes Magazine, 2014. Web. 16 Oct. 2014. Pettis, Michael. “China’s Rapidly Aging Population.” Carnegie Europe. N.p., 5 July 2014. Web. 20 Oct. 2014. Rakoczy, Christy. “Business Attire in China.” LoveToKnow. N.p., 2014. Web. 16 Oct. 2014. Ramasamy, Bala. AN ANALYSIS OF IMPORT-EXPORT PROCEDURES AND PROCESSES IN CHINA By Bala Ramasamy* * Professor, China Europe International Busi ness School (CEIBS), Shanghai, China. This Work Was Carried out (n.d.): n. pag. 2013. Web. 19 Oct. 2014. “Religion in China.” Religion in China. China News, 2014. Web. 26 Sept. 2014. Roberts, Dexter. “400 Million Chinese Can’t Speak Mandarin and Beijing Is Worried.” Bloomberg Businessweek. N.p., 23 Sept. 2014. Web. 25 Sept. 2014. Silk, Richard, Liyan Qui, and Mark Magnier. “China Exports Accelerate.” The Wall Street Journal. Dow Jones & Company, 8 Aug. 2014. Web. 04 Oct. 2014. Shao, Xiaoyi, and Jonathon Standing. “China Unemployment Rate 4.05 Pct at End Q4 2013 -labor Min.” Reuters. Thomson Reuters, 23 Jan. 2014. Web. 04 Oct. 2014 “Successful Networking Etiquette - The Etiquette School.” The Etiquette School RSS. N.p., 2014. Web. 16 Oct. 2014. “Textile Industry.” Textile Industry. N.p., 2014. Web. 04 Oct. 2014. “Textile Mills in China.” OneSource.ReferenceUSA,Jul2014.Web.15 Sept. Tiezzi, Shannon. “Chinese President Xi Won’t Back Down on Hong Kong Elec tions.” The Diplomat. The Diplomat, 23 Sept. 2014. Web. 04 Oct. 2014. Wang, Aileen, and Kevin Yao. “China to Keep Policy and Growth Steady in 2014, Push Reform.” Reuters. Thomson Reuters, 13 Dec. 2013. Web. 01 Oct. 2014.

149

Wang, Xiaohui. “Analyzing Work Attitudes of Chinese Employees.” Analyzing Work Attitudes of Chinese Employees (n.d.): n. pag. Web. 20 Oct. 2014. Wilbur, C. Martin. “Government and Society.” Britannica Encyclopedia. N.p., 17 June 2014. Web. 26 Sept. 2014. Zhang, Yajun, and Liyan Qi. “China Expects Larger Budget Deficit.” The Wall Street Journal. Dow Jones & Company, 5 Mar. 2014. Web. 01 Oct. 2014. Zhou, Ruru. “Eight Distinct Regional Cuisine.” ChinaHighlights. N.p., 8 Apr. 2014. Web. 20 Oct. 2014.

150

Source: China Focus

Appendix

151

152

U.S. Representation

The diplomatic representation of China in the United States consists of, Ambassador Max Sieben Baucus who has held the position of Chief of Mission since 21 February 2014. His information can be found below: Embassy: 55 An Jia Lou Lu, 100600 Beijing Mailing address: PSC 461, Box 50, FPO AP 96521-0002 Telephone: [86] (10) 8531-3000 Fax: [86] (10) 8531-3300

153

Economic Incentives Western Development Strategy Passed in March 1999, the Western Development Strategy was the first central government-directed development program for China’s western region. The strategy calls for the central government to invest in infrastructure development and natural resource exploitation, and set market liberalization policies to create regional economic development centers. With the first 10-year phase of the Western Development Strategy coming to a close—along with concerns about the damaging effects of the global recession—the central government began to call for a new round of regional development in 2008. The purpose was not only to support ongoing efforts to build basic infrastructure, but also to call attention to the broad industries the central government wanted to prioritize for development. The government added new energy, equipment manufacturing, new materials, biotechnology, pharmaceuticals, aerospace and defense, and information technology (IT) to the list of encouraged industries. These additions joined traditional sectors that had previously dominated economic activity in the western region, such as petrochemicals, energy, mining, and minerals processing. In addition to revising the catalogue, the PRC government has also designated three economic clusters in western China to spur regional development: the Chengdu-Chongqing Economic Zone, Guangxi-Beibu Gulf Economic Zone, and Guanzhong-Tianshui Economic Zone. Regional plans have been released for two zones—Guangxi-Beibu (2008) and Guanzhong-Tianshui (2009)—and media reports indicate the plan for the Chengdu-Chongqing Economic Zone will be released in late 2010, though no official confirmation has been made. The clusters will encourage economic development in surrounding areas and, over time, will connect to create widespread growth across the western region.

154

Policymakers intend to allocate certain industries to core areas to match industries with local capabilities and resources. For example, under the Guanzhong-Tianshui plan, Xi’an, Shaanxi, aims to become a national center for science and technology research and development (R&D), as well as a base for high- and new-tech industries and advanced manufacturing. Baoji, Shaanxi, is slated for development as a base for new-materials R&D and production, and as a center for machine-tool manufacturing, heavy-auto manufacturing, non-ferrous metal processing, and retail industries. Shaanxi’s resource-rich cities of Tongchuan and Weinan encourage investment in the energy, coal-to-chemical, and agricultural processing industries. For the province’s remaining areas that are largely rural, government efforts will still focus on basic infrastructure construction to foster urbanization. From 2000 to 2008, the western region’s GDP grew by an average of 11.7 percent annually. But these robust numbers mask the shortcomings of the Western Development Strategy. From 1999 to 2009, high-volume growth in western China was limited to just three major cities: Chengdu, Sichuan; Chongqing; and Xi’an. Average annual incomes in the western region remain below the national average. The Rise of Central China Plan In 2009, the State Council released the Rise of Central China Plan with the clear goal of transforming central China into a production base for four major industrial areas: grain production, energy and raw materials, equipment manufacturing, and high technology. The plan also aims to develop the region into a major transport hub. To support the 2009 plan, the PRC Ministry of Commerce (MOFCOM) in May 2010 issued the Central China Foreign Investment Promotion Plan (2009-14) and six related provincial sub-plans that cover Anhui, Henan, Hubei, Hunan, Jiangxi, and Shanxi. Each provincial plan contains a foreign-investment promotion strategy that focuses on specific industries. For example, the

155

Henan Promotion Plan encourages foreign investment in chemicals, electronic equipment, equipment manufacturing, high technologyâ&#x20AC;&#x201D;especially ITâ&#x20AC;&#x201D;and mining. Industries encouraged in the Central China Foreign Investment Promotion Plan include a mix of traditional and emerging industries, including -Agricultural products and food production; -Clothing, food, light industry, electronics, and other labor-intensive industries; -Electronic information, biotechnology, new energy, new materials, and other high-tech industries; -Energy and raw materials; -Farm machinery, vehicles, and shipbuilding; -Logistics, transportation, and other modern services; and -Mining, metallurgical, and petrochemical equipment. The Rise of Central China Plan has a few characteristics that set it apart from the Western Development Strategy. Notably, central China development policies seek to exploit the regionâ&#x20AC;&#x2122;s agricultural advantages and develop industries such as agriculture machinery, food processing, logistics, and petrochemicals. The Rise of Central China Plan has already shown some positive results. In 2009, the average GDP growth rate of the six central provinces reached 11.6 percent, exceeding the 11.1 percent growth rate of coastal provinces. Industrial value-added and fixed-asset investment in the region also demonstrated robust growth in 2009. Indeed, impressive economic growth in the central region appears to be generating domestic demand and driving policymaking toward the region.

156

Yet companies have expressed doubts about the business-operating environment in central China. Many complain about the regionâ&#x20AC;&#x2122;s poor infrastructure and fragmented logistics networks relative to the coast. Higher transport costs and relative isolation from supply chains may outweigh the benefits of tax breaks and other financial incentives available to foreign-invested enterprises (FIEs) that relocate to central China. Signs indicate that the PRC government is pushing for further development in the countryâ&#x20AC;&#x2122;s central and western regions. Chinaâ&#x20AC;&#x2122;s 12th Five-Year Plan (2011-15), will devote significant attention to developing central and western China. Though details of specific policy initiatives are not yet public, the policies will likely emphasize balanced regional economic growth instead of focusing on generating rapid economic development.

157

Founded in 1949 by the Communist Party, the People’s Republic of China (PRC) is a unified multi-ethnic country. Fifty-six nationalities are now

living

thirty-four

direct

administrative

regions

including

twenty-three provinces, five autonomous regions, four directly-governed city regions–Beijing, Shanghai, Tianjin and Chongqing and two special administrative regions (SAR)–Hong Kong and Macau. The fifty-six ethnic minorities mainly live in Chongqing, Gansu, Guangxi, Guizhou, Hainan, Heilongjiang, Hubei, Hunan, Inner Mongolia, Jilin, Liaoning, Ningxia, Qinghai, Sichuan, Tibet, Xinjiang and Yunnan. China is also the most

Political

populous country in the world.

Many of the elements that make up the foundation of the modern world originated

China,

including

paper,

gunpowder,

credit

banking,

the compass and paper money (“China Profile”). According to British Broadcasting Corporation, China stagnated for more than two decades under the rigid authoritarianism of early communist rule and its late leader, Chairman Mao (“China Profile”). But China now has the world’s fastest-growing economy and is undergoing what has been described as a second industrial revolution. It has also launched an ambitious space exploration program involving plans to set up a space station by 2020 (China Profile”). The People’s Republic of China (PRC) was founded in 1949 after the Communist Party defeated the previously dominant nationalist Kuomintang in a civil war (“China Profile”). The Kuomintang retreated to Taiwan, creating two rival Chinese states - the PRC on the mainland and the Republic of China based on Taiwan (“China Profile”).

158

The Chinese government is system is single-party socialist republic; this socialistic republic is led by its Head of State Xi Jinping (“Government”). Xi Jinping is the General Secretary of the Communist Party of China, the President of the People’s Republic of China, and the Chairman of the Central Military Commission. As Xi holds the top offices of the party, state, and military, he is sometimes informally referred to as China’s “paramount leader”. As General Secretary, Xi is also an ex officio member of the CPC Politburo Standing Committee, China’s de facto top decision-making body (“Government”). Prime Minister Li Keqiang is currently the Head of State of the People’s Republic of China (“Government”). The Communist Party of China elected these officials. According to the Central Intelligence Agency, Communist Party of China (CPC): The founding and ruling political party of the People’s Republic of China, whose paramount position as the supreme political authority is guaranteed by China’s constitution and realized through control of all state apparatus (“Government”). The CPC was founded in 1921 and came to rule all of mainland China after defeating its rival, the Kuomintang (KMT), in the Chinese Civil War (“Government”).

*Information on United States representative can be found in the Appendix

159

Being over 1.36 billion (in 2013), the country’s population is about 22 percent of the world population.

According to Travel China, the most

populous part is the eastern coastal areas (Travel). Almost 94 percent of Chinese people live in the Southeast part of the country which covers 43 percent of its land area; while the other six percent people live in the northwestern areas which cover 57 percent of the territory (Travel). China’s population is not expected to grow as quickly as it has in previous years. Due to several mechanisms put into place by the Chinese government as well as changing

Population

circumstances in the working and social environment of the Chinese people population growth has virtually subsided over the past decade (“Population”). Displaying a 0.49 percent annual growth rate in 2012, population growth in China ranks among the lowest worldwide. Nevertheless, compared to the world population in total, China held a share of about 19 percent of the overall global population in 2010.

Figure 11

160

Source: Statista Database

Apart from the quasi-stagnation in population growth, a clear growth trend in Chinese cities can be seen.

According to Statista, by 2012, more than

52 percent of Chinese people lived in urban areas, compared to less than 40 percent a decade before (“Population”). Also, the median age of the population has risen substantially over the past 50 years and is forecast to reach approximately 46 years by 2050, indicating a strong imbalance in the age distribution of China (“Population”).

161

Looking at the graphs on the page to the right, the age pyramid in

Age Structure

China has been gradually shifting towards the older demographic within

162

the past decade. This shift can be attributed to

the low birth rates

in China. According to Statista, the age group containing 0 to 14 year-olds has declined by approximately six percent since 2002, whereas the age groups 15 to 64 years and 65 years and over have seen growth of about four and two percent, respectively (“Age”). Thus, the median age of the Chinese population has been constantly rising since 1970 and is forecast to reach 47 years by 2050 (“Age”). Accompanied by a relatively steady mortality rate of about 7 per thousand, China is showing strong signs of an aging population.

Age Structure 2010

Figure 12

Projected Age Structure 2020

Figure 13

163

China’s aging population could cause a decrease in the number of young people who are able to work due to the fact that they must care for their parents and or grandparents who may not be able to work or care for themselves. China’s aging population also directly impacts fiscal policies and economic performance(Pettis). Political legitimacy in China over the past three decades has been built around rapid economic growth, which in turn has relied on a cheap and willing,young labor force(Pettis). An aging labor force will compel changes in this economic model and may make political rule more difficult (Pettis). An aging population will force national reallocations of resources

and priorities, as more funds

flow to health care and pensions(Pettis). Increased spending obligations created by the aging population will not only shift resources away from investment and production; they will also test the government’s ability to meet rising demands for benefits and services (Pettis). In combination, a declining labor supply and increased public and private spending obligations will result in an economic growth model and a society that have not been seen in China before (Pettis). Japan’s economic stagnation, closely related to the aging of its population, serves as a ready reference(Pettis). China’s demographic changes will also have far-reaching implications for the world economy, which has relied on China as a global factory for the past two decades and more (Pettis). The changes may also affect international peace and security (Pettis). An aging population is likely to lead to a more peaceful society(Pettis).

164

165

Ethnic Groups 166

Source: Vincent Ross

As a large united multi-national state, China is composed of fiftysix ethnic groups. The Han (Chinese), the largest group, outnumber the minority groups or minority nationalities in every province or autonomous region except Tibet and Xinjiang (Lieberthal). The Han, therefore, are the majority of the Chinese people, sharing the same culture, the same traditions, and the same written language. For this reason, the general basis for classifying the country’s population is largely linguistic rather than ethnic. The minority groups are spread over approximately three-fifths of the country’s total area. Where these minority groups are found in large numbers, they have been given some semblance of autonomy and self-government; autonomous regions of several types have been established on the basis of the geographic distribution of nationalities (“Ethnic Minorities”).

167

Religion 168

Source: Vincent Ross

In the past, the Chinese government resisted many religious activities, but the government has opened up to religion recently. Especially traditional religions such as Mahayana Buddhism, Taoism and Shenism because the Government also continued to emphasize the role of religion in building a “Harmonious Society,” which was a positive development with regard to the Government’s respect for religious freedom (Lambert). China is a country with a great diversity of religious beliefs. Citizens of China may freely choose and express their religious beliefs, and make clear their religious affiliations. According Marketline Reports the following are the percentages

of each religion in relation to the

population of China today: Buddhist (18.2%), Christian (5.1%), Muslim (1.8%), folk religion (21.9%), other (0.7%) [Includes Daoist (Taoist)], unaffiliated (52.2%), Hindu and Jewish (0.1%) (“Key Facts”). China has the following national religious organizations: Buddhist Association of China, Taoist Association of China, Islamic Association of China, Chinese Patriotic Catholic Association, Chinese Catholic Bishops’ College, Three-Self Patriotic Movement Committee of the Protestant Churches of China, and China Christian Council. Religious leaders and leading organs of the various religious bodies are selected and ordained in accordance with their own regulations (“Religion”).

169

Language 170

Source: PRC

As one of the six official languages used by the United Nations, Chinese now has earned itself greater status in the World. The official language of China is Mandarin, which is also referred to as Putonghua. Putonghua is used mostly in the mainland of China. It is the common language of all modern Han nationality people. In Taiwan Province and Hong Kong, it is called ‘Guoyu’ while in Singapore and Malaysia; it is often called ‘Huayu’ (“Language”). According to an article published by Bloomberg BusinessWeek, China has seven major dialects which include Cantonese, Hokkien, Xiang, and Wu, as well as thousands of smaller ones. The Chinese Communist Party named Putonghua, also known as Mandarin—what China’s Constitution refers to as “common speech based on Beijing pronunciation”–the official dialect back in 1955 as a way to promote national unity (Roberts). Though Mandarin is the official dialect of China, approximately 70% of their population can speak Mandarin. Of that 70%, only 10% speak Mandarin fluently. This can be attributed to the fact that though Mandarin has become the official language of instruction in schools and among government officials, many families prefer to speak one of the dialects when home. And in recent years, local dialects have gained popularity in music, movies, and television programs (Roberts). English is a required course in education in China. Nowadays many Chinese people can speak basic English, though it is more common among the youth, students, and staff of service trades like hotels, restaurants, airlines, banks and post offices (“Language”).

171

Arts It is common knowledge that China has a long history and glorious history in both arts and traditional crafts. These are just two of the many jewels in China’s over five thousand-year culture. The arts and crafts are not only the embodiment of the people’s longing for aesthetic beauty for themselves and as gifts for others, but also great treasures for China and the rest of the world (“Chinese Art”). Many of the master artisans have had their skills handed down via one generation to the next so that only the offspring of such an artisan could learn the necessary skills required (“Chinese Art”). The result being that they are the most valuable treasures both for a family and

Culture

for the nation. Of all the Chinese arts and crafts, the most representative are Bronze Vessels, Folk Toys, Embroidery, Calligraphy, Music, Opera, Painting, Cloisonne,

Jade,

Kites,

Lacquer

Ware,

Paper-Cuttings,

Porcelain,

Pottery, Seals, and Silk(“Chinese Art”). They are not only a vivid reflection of the culture of China but also the embodiment of both the local people, and of the nation itself.

Chinese Opera

Chinese Calligraphy

Source:Zoharby(Chinese Opera);Canada-China Friendship Society (Chinese

172

Calligraphy) Sour

Monuments Oriental Pearl Tower in Shanghai

Source: Xinhua The Oriental Pearl Tower, also known as the Oriental Pearl TV Tower, is the worldâ&#x20AC;&#x2122;s sixth highest tower with 467.9 meters. It combines travel, shopping, conferences and exhibitions. Visitors can enjoy a 360-degree view of Shanghai in the Space Module at 350 meters. Besides, it has the highest revolving restaurant in Asia at 267 meters. In addition, it is home to Shanghai Urban History and Development Museum, which provides a history of Shanghai since it became a commercial port, linking up China and the world. As one of the most popular touristic attractions in Shanghai, it receives nearly 3 million visitors every year.

173

Lama Temple in Beijing

Source:Xinhua Lama Temple, or the Yonghegong Lamasery, also known as the Harmony and Peace Palace Lamasery, is a renowned lama temple of the Yellow Hat Sect of Lamaism. The lamasery, built in 1694, was originally the residence of the Qing (16441911) Emperor Yongzheng before he ascended the throne. Lama Temple features five large halls and three exquisite memorial archways. It houses treasuries of Buddhist art, including sculptured images of gods, demons and Buddha, as well as Tibetan-style murals.

174

Potala Palace in Lhasa

Source: Xinhua Perched on top of Hongshan Mountain in the center of Lhasa, the capital of Tibet Autonomous Region, 3,650 meters above sea level, Potala Palace was first built in 641 by the Tibetan King Songtsen Gampo to greet his bride Princess Wencheng of the Tang Dynasty (618-907). It is a 13 story palatial architecture that is a 110-meter-tall. The palace also collected a large number of sculptures, murals, scripture and other valuable cultural relics. Besides, it is a famous Buddhist holy attraction and countless Tibetan Buddhist followers will gather in Potala Palace during festivals.

175

Great Wall at Mutianyu in Beijing

Source: Xinhua Located 73 kilometers from downtown Beijing, it is the essence section of the Great Wall. This well-preserved section was built about 1,400 years ago and reconstructed later under the Ming Dynasty. It joins the Juyong Pass in the west and Gubeikou in the east. The strategic importance of Mutianyu was obvious, as many battles took place there. The famous Jiankou Great Wall is located in the west of it. Besides, it features a splendid view because of a plant cover that reaches 90%. In addition, it is equipped with a world-class cable car and provides entertainments, offering more fun to visitors.

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Cuisine The development and diversity of the delights of Chinese cuisine are also representative of China’s long history. With each dynasty new recipes were created until the art of food preparation reach its peak during the Qing Dynasty (1644 - 1911) (“Chinese Food”). The dinner called Man Han Quan Xi that incorporates all the very best of Man and Han Cuisine is held in high esteem involving as it does countless dishes, each with its own distinctive flavor and appeal(“Chinese Food”). This veritable banquet in its preparation and presentation typifies all of

is a comprehensive amalgam of taste, instruments, and manners (“Chinese Food”). The diversity of geography, climate, costumes and products have led to the evolution of what are called the ‘Four Flavors’ and ‘Eight Cuisines’ but as catering is a living art sub-classifications continue to increase (“Chinese Food”). For example in each field of cuisine, adept chefs can utilize something as simple as a melon to create dozens of dishes with dozens of flavors. Meanwhile, local specialties and snacks with their origins steeped in the mists of time are also an important progeny and indicate a profound philosophy and taste(“Chinese Food”). As well as the cuisine of the majority Han people, the many minorities have their own

Dining & Cuisine

the culture and culinary arts that have been perfected over centuries and

fantastic traditions and appeal(“Chinese Food”). Cuisine in China is a harmonious integration of color, redolence, taste, shape and the fineness of the instruments (“Chinese Food”).

For the

cooking process, chefs pick choice and various ingredients and seasonings while employing unparalleled complicated skills handed down from their fathers, ever aspiring to their ideal of perfection for all the senses (“Chinese Food”). Among the many cooking methods they use a

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are boiling, stewing, braising, frying, steaming, crisping, baking, and simmering (“Chinese Food”). When they finish their masterpieces they are arranged on a variety of plates and dishes so that they are a real pleasure to view, to smell and ultimately to savor (“Chinese Food”). Cuisine can rise to many different occasions from luxury court feasts, fetes, holy sacrificial rites, joyous wedding ceremonies to simple daily meals and snacks(“Chinese Food”). The art of a good cook is to provide a wholesome and satisfying dish to suit the occasion(“Chinese Food”).

What follows is a summary of China’s eight recognized culinary styles, including their shortened names (which correspond to the single character abbreviation for their provinces)(Zhou). The two styles most famous in the West are Cantonese and Sichuan (Zhou). -Guangdong Cuisine (Cantonese Food/Yue Cuisine): sweeter, favoring braising and stewing, adding various sauces(Zhou). -Sichuan Cuisine (Chuan Cuisine): spicy and bold, using lots of chili, garlic, ginger and peanuts (Zhou). -Shandong Cuisine (Lu Cuisine): salty and crispy, favoring braising and seafood (Zhou). -Fujian Cuisine (Min Cuisine): lighter, with a sweet and sour taste, using ingredients from the sea and the mountains(Zhou). -Jiangsu Cuisine (Su Cuisine): fresh, salty and sweet, favoring soups and precise cooking techniques (Zhou). -Hunan Cuisine (Xiang Cuisine): quite spicy, favors sautéing, stir-frying, steaming and smoking (Zhou). -Anhui Cuisine (Hui Cuisine): uses many wild plants and animals as ingredients, favoring stewing and more oil(Zhou). -Zhejiang Cuisine (Zhe Cuisine): mellow, uses freshwater fish, seafood and bamboo shoots, and a wide variety of cooking methods(Zhou).

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Source: Local Color Blog

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Economy 180 Source: AP

Type According to China’s official website, a socialist market economic system has now taken shape, and the basic role played by the market has been improved in the sphere of resource allocation. At the same time, the macro-control system continues to be perfected. The pattern has basically been formed in which the public sector plays the main role alongside non-public sectors such as individual and private companies to achieve common development. According to the plan, China is forecast to have a relatively complete socialist market economy in place by 2010 and this will become comparatively mature by 2020 (“Economy”).

History China’s official website states that, “For the first 30 years of the PRC, the government practiced a planned economic system, in which industrial production, agricultural production, and the stocking and selling of goods in commercial departments were all controlled by state plan. State planners fixed the variety of products, quantity and prices in every sphere of the economy” (“Economy”). While this contributed to the focused and steady development of China’s economy, it also sapped its vitality and limited its growth. Economic reforms began with the rural areas in 1978, and were extended to the cities in 1984. In 1992, after some 10 years of reform in the clear direction of the establishment of a socialist market economy, the government set out the main principles of economic restructuring which were as follows: -Encouraging the development of diversified economic elements whilst retaining the dominance of the public sector

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-Creation of a modern enterprise system to meet the requirements of the market economy -A

unified

and

international

open

market

markets,

and

system

across

promoting

the

China,

linking

optimization

domestic of

and

resources;

transformation of government economic management in order to establish a complete macro-control system; -Encouraging certain lead groups and areas to become rich first, enabling them to help others towards prosperity too; -The formulation of a China-appropriate social security system for both urban and rural residents, so as to promote overall economic development and ensure social stability.

Economy Today Following a forecasted 7.3% performance in 2014, it is expected that real GDP growth in China to slow further in 2015 (â&#x20AC;&#x153;Chinaâ&#x20AC;?). Chinaâ&#x20AC;&#x2122;s long-term growth outlook is solid, but there will be rocky times along the way. Figuring out when those rocky times will hit is the difficult part. Businesses involved in China for the long term can be confident of economic growth, but the company that needs strong sales in one particular year is much less certain (Conerly).

Current Exchange Rate As of September 30, 2014, the current exchange rate for the Chinese Yuan is 1 Yuan to 0.16 US dollars.

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The inflation rate in China was recorded at 2.0% in August of 2014 (“China Inflation”). In China, the inflation rate averaged 5.72% from 1986 until 2014, reaching an all time high of 28.40% in February of 1989 and a record low of -2.20% in April of 1999(“China Inflation”). According to Trade Economics, the inflation rate is expected to drop down to 1.89% in 2015 but by 2020 it is expected to make a jump to 3.89% (“Economy”). According to an article written in China Business review, China has launched two strategies to develop its central and western regions within the last decade. The article goes on to explain the plans, “China’s State Council launched

the

Western

Development

Strategy,

China’s

first

comprehensive

regional development plan to boost the economies of western provinces, in 2000. Premier Wen Jiabao announced the Rise of Central China Plan, a development strategy to coordinate regional growth in six central provinces, in 2004. To achieve the broad goals outlined in the plans, the government has implemented strategic programs, developed industry-specific plans, created industry-specific catalogs of preferred technologies, and announced new incentives to attract investment to the central and western regions” (Huang). Though both plans have limitations, they provide important guidance—and specific incentives—for foreign companies looking to expand in China and gain access to potential customers in untapped regions.

*Details on these strategies can be found in the Appendix

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China currently has a prudent monetary policy and pro-active fiscal policy and they plan on sticking with this policy for years to come (Wang). In March, China unveiled plans for a larger budget deficit in 2014 as it tries to meet rising expectations for improved social services, grapple with mounting environmental problems and step up military spending (Zhang). A Wall Street Journal article states, “The budget deficit, which will rise 12.5% to 1.35 trillion Yuan ($221

Fiscal Policies

billion), will also reflect efforts to overhaul the economy and deal with the effect of slower growth. While the deficit total is up, the finance ministry said the shortfall would still be about the same percentage of the nation’s inflation-adjusted gross domestic product at around 2.1% (Zhang). Spending is set to rise 9.5% this year to 15.3 trillion Yuan, while revenue will increase 8% to 13.95 trillion Yuan, according to the budget plan. The article also states that, “The budget called for a 9.8% rise in social-welfare and employment spending amid slightly slower economic growth, which is targeted at about 7.5% this year. That target is unchanged from the 2013 objective but down from an actual 7.7% last year and considerably below the 10.4% growth recorded in 2010” (Zhang). China is trying to shift the economy’s reliance on exports and investment for growth and allow a bigger role for consumption (Zhang). That means that consumers will need a better social safety net to encourage them to spend. Reforms According to an article from Reuters, top leaders in China have unveiled a bold reform agenda for the next decade as they try to steer the world’s second-largest economy towards more sustainable growth after three decades of breakneck expansion (Wang).

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The following are reforms that China is putting into place: -The government would control local government debt and take steps to resolve over-capacity problems, it said without elaborating. -China’s leaders have pledged to steer the economy away from its dependence on investment and exports to one driven more by consumption, services and innovation, which they consider more sustainable. -New standards have been already issued for local officials. Their performance will no longer be based simply on their region’s growth rate, but will include resource and environmental costs, debt levels and work safety. -The government aims to set specific reform plans for next year after the Communist Party last month unveiled sweeping economic and social changes, including relaxing the country’s one-child policy and liberalizing financial markets. -The leadership has decided to set up a high-level central leading group on reforms. State radio said on Friday all local governments would establish similar bodies to steer change. Reforms with “clear directions” would be implemented next year or even more quickly, while reforms that tended to have wider impacts or those “without deep understanding” would be subject to experiment, it said without elaborating (Wang). As of September 19, 2014, the Gross Domestic Product (GDP) in China is worth 9.24 trillion US dollars. The GDP value of China represents 15.40% of the world economy.

According to Statista, China’s real GDP growth is expected

at 7.29 percent in 2015. China’s per capita GDP is also expected to continue to grow into the 2020s, reaching 10,034 U.S. dollars in 2018. Comparatively, Luxembourg and Norway have some of the world’s largest GDP per capita with 112,404 U.S. dollars and 106,134 U.S. dollars, respectively, as of 2014 (“Share of GDP”).

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Industries in China

The most dominant sector of China’s economy remains its manufacturing and industries. Despite seeing a 3.3 % drop in its composition of the nation’s GDP, industries still accounted for 45.3% of China’s GDP in 2012 – sealing China’s position as the world leader in gross value of industrial output. Nevertheless, despite the dominance of Industries in the composition of China’s GDP, services is catching up quickly – and may overtake industries by the end of the year. In 2012, services accounted for 44.6% of China’s GDP, just 0.7% behind Industries. Comparatively just three years ago, that gap was 8.1 percentage points wide. Finally, agriculture accounted for 10.1%of China’s GDP in 2012. The economic reforms introduced in 1978 saw China de-collectivize agriculture, yielding tremendous gains in production as a result.

Today, China is the world’s largest producer of agricultural products ranking first in the world for rice, wheat, potatoes, sorghum, peanuts, tea, millet, barley, cotton, oilseed, pork, and fish. About 300 million Chinese are employed in the agriculture sector – making up 34.8 percent of the labor force. China’s economy is growing into multiple new sectors. For example, the ecommerce sectors has been growing, both with large sites such as Alibaba, and with multiple small retailers, such as this site, offering clothes shopping on-line.

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Imports & Exports 188

Source: JP Morgan Asia Pacific Equity Research

According to an article in Wall Street journal, China’s exports surged in July on the back of strong demand from the U.S., Europe and Southeast Asia, while imports fell, surprising markets on both counts and resulting in a record monthly trade surplus (Silk). The news was largely welcome in Beijing, as the world’s second-largest economy struggles to regain growth- and foreigntrade momentum after this year’s weak start, although negative import growth underscores continued weak domestic demand. According to figures released by the General Administration of Customs on Friday, exports expanded 14.5% year-over-year, nearly double the 8% growth forecast by 15 economists in a Wall Street Journal survey and a sharp increase from the 7.2% year-over-year increase recorded in June (Silk). Imports, meanwhile, fell 1.6% during the same period, following a 5.5% on-year expansion in June. The survey predicted a 3% rise. China’s politically sensitive trade surplus widened to $47.3 billion in July from $31.6 billion in June, well above the $27.7 billion economists projected. The country’s previous monthly trade surplus record was $40.09 billion in November 2008 (Silk). Analysts said the large surplus could intensify calls by U.S. export groups to let the Chinese currency appreciate. China’s controlled currency gives the country’s exporters an unfair trade advantage by keeping the value of their products artificially low in U.S. dollar terms, some foreign companies maintain (Silk). Strong exports—fueled by double-digit growth to the U.S., the EU, Southeast Asia and Hong Kong—dovetailed with similar strong export growth for Taiwan and South Korea, as those economies order more Chinese components for use in their own export industries, analysts said, exports also have been bolstered by a yuan that has depreciated 1.7% against the U.S. dollar this year. After the data were announced Friday, the yuan rose to 6.1579 against the dollar from 6.1619 at Thursday’s close, while the Shanghai Composite Index rose 0.3% to 2193.15.

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China’s gradually improving economic picture should lead to further upward pressure on the currency, analysts said. Macquarie Group economist Larry Hu said the yuan could reach between 6.05 and 6.10 by year-end. “In fact, China’s trade surplus has been fairly high in most months of the year, and the yuan has started to rebound since June” (Silk). Weak imports reflected slower domestic growth, tepid investment and a troubled real-estate market, which has reduced imports of building materials and commodities, economists said. A recent crackdown on commodity-financing irregularities is also a factor, they added. Trade figures are often volatile, however, and analysts said they expect imports to grow by around 5% in coming months given that many export products depend on imported materials (Silk). The strong export numbers should bolster economic growth, which expanded at its slowest pace in 18 months during the first quarter. Helped by improving exports and targeted domestic spending on public housing, transport and energy, economic growth edged up to 7.5% yearover-year in the second quarter, matching Beijing’s annual growth target. China aims to re balance its economy away from a traditional reliance on exports and investment in favor of consumption, high technology and services. But short-term pressure to shore up employment, boost growth and stem social unrest this year has forced it back to old patterns, at least temporarily. While exports grew more than expected, analysts said they didn’t expect this to affect Beijing’s monetary policy stance. “We’ll still see targeted easing,” predicted CIMB economist Fan Zhang. In general, the central bank is likely to remain supportive of growth without resorting to larger, more general stimulus measures that could expand China’s bad debt burden, economists added (Silk).

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As economic momentum has slipped this year, Beijing has taken steps to support exporters. In May, China’s cabinet announced measures to speed up exporttax rebates and expand credit to importers and exporters. A month later, the central bank encouraged banks to innovate and lend more to exporters to boost shipments (Silk). According to Trading Economics, China’s main imports are electromechanical products (43 percent of total imports). The country is also one of the biggest consumers of commodities in the world. Among commodities the biggest demand is for crude oil (12 percent of total imports), iron ore (5 percent), copper, aluminum and soybeans. China’s main import partners are: European Union, ASEAN, Japan, South Korea and Taiwan. Others include: Australia, South Africa and Brazil. This page provides - China Imports - actual values, historical data, forecast, chart, statistics, economic calendar and news (“China Imports”).

Figure 14

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Trade Economics also states that, export growth has been a major component supporting China’s rapid economic expansion. Exports of goods and services constitute 30% of GDP. China major exports are: electromechanical products (57 percent of total exports) and labor-intensive products like clothing, textiles, footwear, furniture, plastic products, bags and toys (20 percent). In recent years, the exports of high tech products have been also growing and in 2012 accounted for 29 percent of total exports. China’s main export partners are the United States (17 percent), European Union (16 percent), ASEAN (10 percent), Japan (7 percent) and South Korea (“China Exports”).

Figure 15

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Geography

China is located in Eastern Asia, bordering the East China Sea, Korea Bay, the Yellow Sea, and the South China Sea. It shares borders with Russia, Kazakhstan, Mongolia, North Korea, and Vietnam, among other countries. Covering a land area of 3,706,581 square miles, The People’s Republic of China is the third largest of the world, inferior to Russia and Canada. It is 3,231 miles long from east to west and 3,417.5 miles long from north to south. Though it isn’t the hub for apparel manufacturing, the capital of China is Beijing. According to China’s Nation Garment Association, China's garment industry is mainly located in Pearl River Delta, Yangtze River Delta, Bohai Sea region and southeast coastal areas (“An Overview”). The total output of the five provinces in the east coastal area, namely Shandong, Jiangsu, Zhejiang, Fujian and Guangdong, takes over 70% of the total output of the whole country (“An Overview”). The garment industry is the most prominent industry among all sectors in China. Through optimal allocation of resources, industry clusters help to achieve a low-cost-and-high-efficient regional scale effect.

Climate For a country of China’s size and varied topography, diverse weather patterns are expected, but due to it being located entirely in the northern hemisphere means its seasonal timings are broadly comparable to those in Europe and the United States. There are, for the most part, four seasons: Winter, Spring, Summer, and Autumn. China has a subtropical climate and during Summer and Winter months, temperatures can be extreme. Spring and Autumn are known to be the most pleasant periods throughout all regions.

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Weather in north China: The Northern Winters are especially unforgiving since temperatures drop as a result of the cold and dry winds. Northern areas, such as Inner Mongolia and Urumqui face intensely harsh winters from January-March. During the winter months, Beijing has an average temperature of 32 degrees Fahrenheit and below. In the summer months (May-August), the weather is hot and humid. There is heavy rainfall in July and August. Weather in south China: Due to the typhoons that usually affect the coastal regions, the weather here remains humid from April-September. There is a short winter period from January-March, and places like Guangzhou are pleasantly cool. However, the humidity factor persists and there can be occasional drizzles. Weather in central China: The summers in central China are very warm and humid. In places like Shanghai, summers last from April-October. The winter months are very cold with freezing temperatures.

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Source:Xinhua

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Natural Hazards Earthquakes China is located in an active seismic zone and can experience major earthquakes. An earthquake of magnitude 6.8 struck parts of Xinjiang on 12 February 2014. Take care and follow the advice of the local authorities. To learn more about what to do before, during and after an earthquake, see the US Federal Emergency Management Agency website. Latest tsunami warnings can be found on the Pacific Tsunami Warning Centre website. Flooding Flooding is common during the wet season (May to November). Large areas of central, southern and western China, particularly those bordering the Yangtze River (Chang Jiang) experienced severe flooding in June 2011. Gansu Province experienced major flooding in May 2012. Heavy rains also triggered landslides in Zhejiang and Hubei provinces. In July 2012, Guizhou Province and Beijing were similarly affected. Monitor local weather reports and follow any evacuation orders. Typhoons The typhoon season in China normally runs from May to November, affecting in particular the southern and eastern coastal regions of China. You should monitor the progress of approaching storms on the Japan Meteorological Agency and the China Meteorological Administration websites (â&#x20AC;&#x153;Foreign Travelâ&#x20AC;?). Avoid visiting isolated or rural areas if a typhoon system is forecast. There are sometimes large-scale evacuations, particularly in the coastal regions of southern China. You should follow the advice of the local authorities. Air travel and other forms of transport can be affected. Check with your airline or travel operator for further details and try to keep in touch with family and friends.

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Labor Laws Special Categories of Protected Employees An employer is prohibited from dismissing employees in any of the following situations, unless the termination is during the probationary period or for cause(“China Staff”): -if the employee suffers from an occupational disease or has sustained an industrial injury, and is confirmed to have lost or partially lost the ability to work; -during the stipulated period of medical treatment for a non-work related illness contracted or injury suffered by the worker -during the pregnancy,confinement and the nursing period Collective Dismissals There are also grounds for collective dismissals of employees (defined as 20 or more employees, or 10% or more of the workforce): -the employer has serious difficulties in terms of production or operation; -the employer is undergoing restructuring under the Enterprise Bankruptcy Law; -the employer switches production, introduces a major technological innovation or revises its business method, and, after amendment of employment contracts, still needs to reduce its workforce; -other major changes in the objective economic circumstances relied upon at the time of conclusion of the employment contracts, rendering them unable to be performed. Termination on these grounds requires 30 days’ notice to a labor union or all employees (if the employing company has no labor union) about the redundancy plan and then submission of the redundancy plan to the local labor bureau. In addition, employees with long fixed-term contracts, open-term contracts, or who are the sole breadwinners in the family should be retained with priority(“China Staff”).

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Wrongful Termination Unless an employer can prove that a unilateral termination is based on one of the above-mentioned statutory grounds, the termination will be deemed to be unlawful(“China Staff”). Under the Employment Contract Law, the employee can demand reinstatement in the event of unlawful termination(“China Staff”). If the employee does not wish to continue working for the employer or if reinstatement is not possible, then the employer must pay the employee double the amount of severance that would need to be paid if the employee had been lawfully terminated(“China Staff”).

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Pestel Analysis

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202

China has been under the leadership of the Communist Party of China (CPC) for more than 60 years, and the leadership has been able to impose its decisions on the country without going through deliberations and negotiations. With growing economic might, China has also been able to forge ties with most countries, and its sphere of influence is evident in Africa. However, China’s relationship with Vietnam, Japan and the Philippines remains a matter of concern owing to tensions in the East China Sea and South China Sea. Internally, the province of Xinjiang, which is home to the Turkic-speaking Muslim Uighur ethnic group, remains vulnerable to the outbreak of ethnic violence due to the Islamic separatist movement. Media censorship and intolerance by the government against criticism are areas of concern;

in the country through judicial reforms.

The CPC has governed China for over 60 years and remains secure in its position as the country’s sole political party. The party has been able to impose its decisions without going through the grind of democratic deliberations and negotiations. The CPC has a formidable

Political

however, the government is making efforts to strengthen the rule of law

influence over the entire process, from policy framework right through to implementation—this is because of the party’s presence in every part of the government and its large grassroots penetration. With over 70 million members in the country, the CPC is the largest political party in the world.

Strong geopolitical influence China continues to forge ties with most countries, and its sphere of influence is evident in Africa. In 2009, Africa became China’s largest trading partner, surpassing the US. The value of China’s trade with Africa rose from $40 billion

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in 2005 to $210 billion in 2013. The increasing influence of China in Africa has not just been limited to trade, as it has also given the country access to oil reserves. Moreover, China invested around 20% of its total upward investment between 2005 and 2010 in Africa, and its investment rose to around $50 billion in 2010 up from around $8 billion in 2005. This has led to an enormous increase in the influence of China in Africa. There are reports that many developing nations such as Nigeria keep the Chinese yuan as a reserve currency, highlighting the importance of China in the global economy. China is also spreading its geopolitical influence in South and Southeast Asia. Chinaâ&#x20AC;&#x2122;s increasing interest in Afghanistan, Myanmar, Kyrgyzstan and Mongolia is testimony to this. In Myanmar, China is building ports, pipelines and roads to gain access to natural resources. In addition, it has also established naval bases and seaports in Pakistan, Sri Lanka and Bangladesh, enhancing its dominance over South Asia. Being a permanent member of the United Nations Security Council, it has immense power over UN decisions and its global policymaking bodies. Roiled relationship with neighbors China has strained relationships with a number of its neighbors due to maritime and territorial disputes in South China Sea and East China Sea. Neighbors including Japan, Vietnam and the Philippines have all accused China of creating instability in the region due to its quest for territorial expansion. While disputes over Senkaku islands (known as Diayou Islands in China) in the East China Sea, administered by Japan but claimed by China, have fueled diplomatic tensions with Japan, tensions with Vietnam, the Philippines, Taiwan, Malaysia and Brunei stem from Chinese claims on almost the entire resource-rich South China Sea, while rejecting rival claims to parts of it. Chinese tensions with Japan were aggravated in November 2013, when China expanded its Air Defense Identification Zone (ADIZ).

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Chinese ADIZ also covers the airspace above the Senkaku/Diayou islands, which have been a source of dispute for the last four decades. Japanese Prime Minister Shinzo Abe’s visit to the Yasukuni shrine in Tokyo in December 2013 brought in strong condemnation from China and added to worsening of bilateral ties; the shrine honors the spirits of 14 high-ranking war criminals among the 2.5 million Japanese war dead. Similarly, Philippines act of filing a case with the International Tribunal on the Law of the Sea in March 2014 over competing claims in the South China Sea strained bilateral ties, which could also affect economic ties between the two nations. Tensions with Vietnam escalated in May 2014 after China Offshore Oil Corporation placed an oil rig in waters claimed by both countries. This incident promoted anti-China rioting and also induced acts of violence in many foreign enterprises in Vietnam, which left six Chinese employees dead and several injured. Strained relationships with neighbors could hurt China’s political and economic interests in the region.

Terrorism by Xinjiang extremists The province of Xinjiang, which is home to the Turkic-speaking Muslim Uighur ethnic group, remains vulnerable to the outbreak of ethnic violence due to the Islamic separatist movement. In 2009, violence in Xinjiang killed 200 people, while an April 2013 clash claimed around 21 lives. Since then, a series of attacks have claimed more than 130 lives in the ethnically troubled region, as of June 2014. The latest of them occurred in a market in the province of Urumqi, in May 2014, which left 31 people dead and 94 injured. The volatility of these areas poses a high political risk to the country even though the chances of a full-blown national political crisis are slim. Moreover, it represents a major challenge for the country’s internal security forces to bolster their intelligence and counter-terrorism capabilities.

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Current Protests Currently, citizens are protesting in China and Hong Kong due to recent discoveries about the 2017 election of the new leader of Hong Kong. The Chinese government is preselecting the candidates for the election which takes away the power from the people of Hong Kong to have total authority over who they will elect into office.

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Analysis

In the political area, there isnâ&#x20AC;&#x2122;t much that would effect doing business in China. Though protesters are in Hong Kong, they have been allowing workers to pass through and get to work so that wouldnâ&#x20AC;&#x2122;t inhibit the production process and the time it takes to get the product to market.

The terrorism by Xinjiang extremist could form a problem for manufacturers. One of their attacks could be on or near one of our manufacturing plants causing the plant to shut down. This would also inhibit product lead times if workers are injured or if a member of their family were injured or even killed in an attack.

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Manufacturing hub China is the world’s largest exporter and the second largest economy. The economy’s strength lies in manufacturing competitiveness driven by its large pool of relatively cheap labor and economies of scale. China has earned the reputation of a global manufacturing hub as it produces a major chunk of the world’s manufacturing output.

Disposable Income Currently, the disposable income per capita of China is 26955.00 yuan which equals $4,390.78 US dollars. It is projected that by year 2020, China will have a population of more than 1.4 billion people that will

Economic

make up a significant portion in the world’s consumer market. The annual disposable income of Chinese consumers combined is forecasted to increase to 65.4 billion yuan (US$9.57 billion) by 2020 compared with 15 billion yuan (US$2.19) in 2008 (“Chinese Consumers”).

The National Bureau of Statistics of China announced that the country would be considered a moderately affluent society by 2020, if development trends since the year 2000 continue (“Chinese Consumers”). The estimate was made taking into account progress in the fields of the economy, social harmony, quality of life, democracy and law enforcement, culture and education, as well as resources and the environment. Zheng Xinli, Vice-Minister of the Communist Party’s central policy research office, said that taking price changes into account, 55% of the population will be middle class by 2020, with 78% of city dwellers and 30% of those in rural areas reaching that status (“Chinese Consumers”). Middle class is currently defined as having an annual household income of between RMB60,000 (US$8,700) and RMB200,000 (US$29,215). In 2008 prices, the annual disposable income per household will be RMB98,956

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(US$14,900) in 2020. Unemployment China’s urban unemployment rate is up to 4.10 percent as of May 2014, which is no change from when it was assessed previously. Li Zhong, spokesman of the Human Resources and Social Security Ministry, told a media conference that China’s jobless rate was around 4 percent for the whole of 2013 (Shao). China aims to keep its registered urban unemployment rate below 4.6 percent in 2014, unchanged from its target for 2013. Interest Rates China’s interest rate is currently set at 6% though rates do fluctuate; the rate had been the same for over a year. The Peoples’ Bank of China Monetary Policy Committee makes interest rates decisions. The PBC administers two different benchmark interest rates: one-year lending and one-year deposit rate. Trade Tariffs In line with its WTO accession requirements, China has lowered its import tariffs. In 2006, the general tariff level on imports was 9.9%, a decline of more than 40% on the early 1990s level. The commitment to lower tariffs has been borne out by thriving import levels, which have surged faster than China’s exports in recent years. China is now the world’s third-biggest importer. The government has pursued multilateral agreements as a priority, with a series of regional and bilateral free trade negotiations under way as part of its wider commitments under the Doha Development Round. China’s formal accession to the WTO in December 2001 cemented its integration into the global economy. The two key bilateral deals were the EU-China agreement signed in May 2000 and the US-China agreement signed in November 1999. Beijing is actively pursuing regional trade deals, with recent progress towards a free trade agreement (FTA) between China and the 10-member

209

Association of South East Asian Nations (ASEAN). It has also initiated FTA talks with the Southern African Customs Union and the Gulf Co-operation Council. Non-tariff barriers remain in force. China has agreed to drop all agriculture export subsidies as part of the WTO agreement. There has been criticism over its lack of adherence to trade agreements, particularly when discretionary elements are involved â&#x20AC;&#x201C; specifically the absence of implementation on IPR protection. Foreign Exchange Rates Top 10 Chinese Yuan Renminbi Euro US Dollar British Pound Indian Rupee Australian Dollar Canadian Dollar Emirati Dirham Swiss Franc New Zealand Dollar Malaysian Ringgit

Oct. 4, 2014 1.00 CNY 0.13 0.16 0.10 10.03 0.19 0.18 0.60 0.16 0.21 0.53

US officials have also accused Beijing of intervening to keep the yuan artificially low, thereby boosting its exports to the US and creating a debilitating trade surplus. But the Chinese government appears likely to resist pressure to adjust its currency regime solely to suit the US. Concerns also remain over inconsistencies in the legal system, as well as over government attempts to control trade flows through the deployment of import and export licenses. The government retains regulatory controls through commodity inspections and a plethora of registration requirements.

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Inflation rate The inflation rate in China was recorded at 2.0 percent in August of 2014. Inflation Rate in China averaged 5.72 Percent from 1986 until 2014, reaching an all-time high of 28.40 Percent in February of 1989 and a record low of -2.20 Percent in April of 1999. The National Bureau of Statistics of China reports inflation Rate in China.

Rebalancing of the economy Compared to other major economies, Chinaâ&#x20AC;&#x2122;s share of fixed investment as a proportion of GDP is much higher, while its share of private consumption is much lower. In 2013, gross fixed capital formation was 46.6% of GDP, almost three times that of the US (15.9%). In contrast, private consumption was extraordinarily low at around 33.7%, less than half the rate observed in the US (70.6%) and almost half the rate observed in other major economies such as Japan, Brazil, Germany, Mexico, Canada and India (where private consumption accounts for around 60% of GDP). Furthermore, the level of private consumption spending has declined and that of gross fixed capital formation has increased sharply during the past decade. Private consumption and gross fixed capital formation accounted for 46.7% and 34.1% of Chinaâ&#x20AC;&#x2122;s GDP, respectively, in 2000.

211

Analysis

China is the world’s second largest economy, having overtaken Japan in February 2011, and has consistently maintained its growth and development. The market reforms implemented by China over the past two decades have greatly impacted the country and the world as a whole. China’s entry into the World Trade Organization (WTO) and the subsequent inflow of foreign direct investment (FDI) has helped to strengthen the economy.

The country has maintained strong economic growth in recent years, with average GDP growth of 10.2% during 2004-13. The financial crisis of 2008-09 led to a global economic downturn, and China’s growth rate dipped to 9.2% in 2009 from 14.2% in 2007, before recovering marginally to 10.4% in 2010. Growth dropped to 9.3% in 2011 and 7.7% in 2012, partly due to the lingering effects of the Eurozone debt crisis, which hampered exports. The economy matched its 2012 GDP growth rate of 7.7% in 2013 as Chinese officials looked for more sustainable way for achieving economic growth. For instance, the government is taking measures to boost domestic consumption to make growth less dependent on exports and investment.

Because of China’s constant economic growth, China would be a great country to manufacture products in. China has a relatively low unemployment rate and they hope to keep it that way. The Chinese people are willing to work.

212

Generally, China has seen a decline in poverty and a drop in inequality. The 12th five-year plan seeks to extend this trend by increasing social welfare payments, raising wages and improving healthcare. However, one of China’s longstanding problems has been its rising population. While China’s adoption of the one-child policy resulted in a drop in population growth, it made China a country with an increasingly aging population. This is due in part to the improvements in life expectancy over the years. Other major problem faced by the Chinese society is its highly skewed gender ratio in favor of males, which could lead to an increase in sexual violence, human trafficking and crime. Increase in life expectancy and decrease in infant mortality China’s average life expectancy rose from 32 years during the 1950s to

deaths per 1,000 births to 14.8 deaths per 1,000 births over the same period, according to MarketLine. Economic reforms initiated in the late 1970s fundamentally altered the methods of healthcare used and the collective medical care system has been gradually replaced by a more

Social

75.2 years in 2014, while the infant mortality rate dropped from 32

individual-oriented approach.

Decline in poverty Since economic reforms began in 1978, China has seen long-term growth, which has reduced poverty levels in the country by increasing per capita income. According to the World Bank, China reduced its population living under the international poverty line of $1.25 from 43% of the global poor population in 1981 to 13% in 2010. This indicates that around 680 million people were lifted out of poverty in just two decades. China’s per capita income adjusted by PPP was $9,935 as of 2013, one of the highest levels in Asia. The shift to

213

the household responsibility system, which allowed production to be contracted out to families, propelled a large increase in agricultural output, and poverty was cut in half from 1981 to 1987. This policy was continued until 2001, after which China joined the World Trade Organization (WTO), accelerating the process of poverty reduction through increased exports. As growth endures, the advantages of development are increasingly trickling down and poverty is set to decline further.

Gender imbalance Gender imbalance is a serious problem affecting the Chinese society. According to census data by the National Bureau of Statistics, there are 117.7 boys born in the country for every 100 girls in 2012. Although this represents a decrease from the 2008 level of 120.56, it is still highly skewed by international standards, where a ratio of 103-107 is considered normal. In provinces such as Anhui, Jiangxi and Shaanxi, the gap is wider, with a male: female ratio close to 130:100.The 12th five-year plan (2011-15) has embarked on an ambitious plan to reduce gender imbalance to around 112 by 2016. There are fears that gender imbalance could lead to an increase in sexual violence, human trafficking and crime, which will destabilize the society. This has forced the government to ban sex selective abortions and prescribe harsh penalties for violations. It is estimated that by 2020, the number of men aged 20 to 45 will exceed the number of women of the same age by 30 million, which could have serious repercussions. In spite of the governmentâ&#x20AC;&#x2122;s efforts to remove gender bias through campaigns like Care for Girls (begun in 2000), the provision of cash incentives to girl-only families and the clamping down on illegal sex determination, there are still no major improvements in sight. The gender imbalance will have a negative impact on Chinaâ&#x20AC;&#x2122;s future demographics and social environment if it is not brought under control in the medium term.

214

Aging population Despite its successes, the one-child policy adopted in China is also creating an increasing number of problems. Due to the strict population control policy, not only has a gender imbalance emerged, but China is also experiencing growth in its elderly population without a corresponding increase in the birth rate. The one-child policy has had a negative impact;China took just 20 years to reach the demographic profile that Britain and France evolved into over a period of 60 years. The aging population will put strain on social security and healthcare. According to UN World Population Prospects: The 2008 Revision, Chinaâ&#x20AC;&#x2122;s old-age dependency ratio (65 and over/15-64 years old) will increase from 11.4% in 2010 to 38.0% by 2050â&#x20AC;&#x201D;a sharp increase of 28.0% during the period. This would be higher than the Asian average of 26.7% by 2050. This increase in the aging population will lead to a reduction in productive output in the future, which would be a serious problem given that the Chinese economy relies heavily on a large pool of young workers with relatively low wages. China may lose its cost competitiveness and its growth story may come to a grinding halt if the rapid demographic change is not arrested in time.

215

Analysis

Chinaâ&#x20AC;&#x2122;s aging population could possibly pose an issue to companies wanting to manufacture and do business in China. A large number of Chinese people are getting above the age of 65, this could take a great amount of workers out of the workforce. This removal of workers could be caused by two things; the children of parents over 65 must leave the workforce to care for the parent(s) or the older person is no longer able to work anymore due to illnesses caused by their old age.

The gender imbalance could impose an issue as well. Companies who have their product being manufactured in China must pay close attention to the way the factories are run. Companies must insure there isnâ&#x20AC;&#x2122;t anything occurring that could be considered sexually inappropriate.

216

China has international co-operation pacts for scientific research & development with more than 150 countries across the world. It has also signed intergovernmental science and technology pacts with around100 countries. China is a member of more than 1,000 international scientific organizations with a number of scientists from the China Academy of Science holding key positions in these organizations. Chinese researchers also hold close to 300 executive or director-level posts in various international

scientific

and

technological

organizations.

This

has

increased China’s international influence in the field of science and technology.

3,400 research institutions affiliated with universities, and about 13,750 institutions affiliated with medium and large industrial enterprises. Both China’s research & development expenditure and its human resources in research & development sector have increased at a rapid pace over the last decade. According to the National Bureau of Statistics, China spent CNY1.19 trillion ($193.4 billion) on research & development in 2013, an increase of 15.6% over 2012. China’s R&D intensity stood at 2.09% of GDP. According to the World Bank, there were only 576.7 researchers per million people in 2001, but by 2011, this figure had surged to 963.2.

Technological

China has about 5,500 state-owned research & development institutions,

Due to the enthusiastic support from the government, the number of research institutions is set to increase substantially, which is sure to boost R&D further in the country. With China producing the second largest number of science and engineering graduates after India, the abundance of research & development institutions is a positive for the country’s technological future. There has been a consistent rise in the number of patents acquired by China. According to the US Patent and Trademark Office, the number of

217

patents granted to Chinese filers rose from a paltry 119 in 2000 to over 5,928 in 2013, highlighting strong growth in innovation. China’s 2013 patent count was the highest among the BRICS nations. Moreover, according to the World Intellectual Property Organization (WIPO), China surpassed Germany to become the third biggest nation in terms of patent application filing. China filed 21,516 international patent applications in 2013, and lags only the US (57,239) and Japan (43,918). With the development of special economic zones and the establishment of There has been a consistent rise in the number of patents acquired by China. According to the US Patent and Trademark Office, the number of patents granted to Chinese filers rose from a paltry 119 in 2000 to over 5,928 in 2013, highlighting strong growth in innovation. China’s 2013 patent count was the highest among the BRICS nations. Moreover, according to the World Intellectual Property Organization (WIPO), China surpassed Germany to become the third biggest nation in terms of patent application filing. China filed 21,516 international patent applications in 2013, and lags only the US (57,239) and Japan (43,918). With the development of special economic zones and the establishment of research & development centers, the number of patents is expected to witness a sharp increase in the future. Technological development China could develop its own operating system by October to take on imported rivals such as Microsoft, Google and Apple, Xinhua, the government news agency, reported (“China Developing”).Computer technology became an area of tension between China and the United States after a number of run-ins over cyber security. China is now looking to help its domestic industry catch up with imported systems such as Windows from Microsoft and the mobile operating system Android from Google (“China Developing”). The operating system would first appear on desktop devices and later extend to smartphone and other mobile devices, Xinhua reported on Sunday, citing Ni

218

Guangnan

who

heads

official

operating

system

development

alliance

established in March (“China Developing”).

Intellectual property and its laws -Regulation of the People’s Republic of China on Protection of New Varieties of Plants (promulgated by Order No. 213 of the State Council on March 20, 1997, and revised by the Decision of January 31, 2013, of the State Council Amending the Regulation of the People’s Republic of China on Protection of New Varieties of Plants) (2013) -Trademark Law of the People’s Republic of China (as amended up to decision of August 30, 2013, of the Standing Committee of National People’s Congress on Amendments to the Trademark Law of the People’s Republic of China) (2013) -Copyright Law of the People’s Republic of China (as amended up to the Decision of February 26, 2010, of the Standing Committee of the National People’s Congress on Amending the Copyright Law of the People’s Republic of China) (2010) -Patent Law of the People’s Republic of China (as amended up to the Decision of December 27, 2008, regarding the Revision of the Patent Law of the People’s Republic of China) (2008)

219

Analysis

Technology is growing very quickly in China. China having a great number of research and development centers could lead to developing new and better technologies for the textile and apparel manufacturing industries. Companies manufacturing in China could gain early exposure to these technologies which could possibly speed up the production process.

220

China’s New Environmental Law It marks groundbreaking progress and has the potential to become a cornerstone for China’s “war on pollution”, recently declared by Premier Li Keqiang. Several years in the making, the Standing Committee of the National People’s Congress adopted the revised law on April 24. It will enter into force in 2015. The law will equip environmental authorities with several powerful and much needed instruments to solve China’s daunting environmental challenges. Now, it has to prove its worth in practice. The most forceful instrument it entails is a day-based punishment system. The law of 1989 allows environmental authorities only to impose one-time penalties on polluting enterprises. The maximum amount is very low, so the penalty does not represent a serious threat to enterprises if they refuse to comply. The revision now enables the Environmental

long as they fail to bring their operations in line with environmental regulations. As there is no maximum limit for the fine, environmental authorities can

Legal

Protection Bureaus to fine polluting enterprises on a daily basis as

now pose an existential threat to non-compliant enterprises. If this provision holds up in implementation, it can become a game changer for the power dynamic between environmental agencies and polluters. Another noteworthy feature is the introduction of Environmental Impact Assessments (EIA) for plans and policies into the law. Until now, the EPL made only stipulations about project level impact assessments. Although China’s environmental regulation already contains provisions on EIAs for plans and policies, the EPL remained silent about these instruments. In consequence, the few existing examples of plan or policy level EIAs are rather the exception than the rule. As policy decisions frequently have far-reaching implications for the environment, the lack of systematic

221

policy EIAs has been one of the big blind spots of environmental regulation in China. The new law now instructs central and provincial level governments to carry out EIAs for their economic and technological policies, closing an important gap.

Finally, the law formalizes the possibility of public-interest environmental litigation. Experiments in the past with settling disputes through environmental courts faced difficulties due to the lack of a legal basis. The revised law will now provide such a basis. Throughout the law-drafting process, this aspect has undergone significant strengthening. Initial drafts attributed the right for litigation only to one NGO, the All-China Environment Federation, a de facto government-owned organization subjugated to the MEP.

Product market regulation Product market regulation in China is still way above other BRICS nations. Liberalization has not made much headway in the country and deregulation has been slow in other areas. In the banking sector, the top four state owned banks still account for around half of the banking assets. In addition, the government has significant control over lending institutions and second tier banks in China. Foreign ownership in domestic banks is also restricted. In the 2013 FDI Regulatory Restrictiveness Index, the country was seen as the most restrictive among its BRICS counterparts. The tertiary sector was the most restrictive as per the index, followed by primary and the secondary sectors.

222

The reform of the Hukou

Analysis

The plan from the state council will remove the distinction between urban and rural residents, a decision welcomed for its symbolic value at least. It should help migrant workers to access services and social welfare.

But experts warned that the changes to the hukou, or household registration system, fell short of hopes for more comprehensive reform and would have limited impact.

The reforms include exemptions for major cities, and analysts say key measures are not enforceable by the center. Even if 100 million gain new rights, there are more than that already living in cities without official status. This could cause issues with migrant workers looking for jobs in the garment industry. Due to the fact that there are so many people in China willing to work, I donâ&#x20AC;&#x2122;t think it will impose a major issue with our company sourcing in China

Product market regulation The product market regulations could be an issue for other companies looking to source products other than garments but at this time, this doesnâ&#x20AC;&#x2122;t effect the garment industry.

223

Rich biodiversity According to Marketline Report, China has a vast land area with rich biodiversity. The country has over 30,000 species of plants, which include over 25,000 species of seed plants. In addition, there are more than 3,700 species of vertebrates, including 1,500 species of animals and birds. In January 2003, the Chinese Academy of Sciences initiated a project to save endangered plants, aimed at increasing the plant diversity of its 12 affiliated botanical gardens from 13,000 to

Environmental

21,000 species within 15 years. The academy also plans to build the world's largest botanical garden, covering a total area of 458 sq. km. These efforts might prove crucial in the nation's quest to maintain its ecological balance alongside its economic growth.

Evolving environmental policies To address environmental issues, the Chinese government set up the State Environmental Protection Administration in 1998 as a ministry-level agency, highlighting its growing concern about environmental issues. The government ratified the Kyoto Protocol for the second time in Durban in 2011, in an attempt to demonstrate its positive stance towards international environmental co-operation and sustainable development. Under the 12th national plan, environmental protection became part of the national economic strategy. Under the scheme, supervision and inspection of industrial enterprises is to be carried out on a regular basis. The reduction of pollution and protection of the environment are also criteria for gauging an enterprise's performance in fulfilling its production obligations. Environmental protection laws are slowly becoming more stringent in China. The final form of these laws will ultimately determine the course China takes with regard to its environmental landscape.

224

Extensive usage of coal for energy production Chinaâ&#x20AC;&#x2122;s primary energy source, coal, is the biggest cause of its high levels of environmental pollution. According to estimates from U.S. Energy Information Administration, the country depended on coal for a staggering 69% of its energy production in 2011, while clean sources of energy such as nuclear, renewable and hydroelectricity together accounted for a mere 8%. In fact, the coal consumption of China for production of electricity alone or for industrial use alone is higher than the total coal consumption of the second largest coal user in the world, the US. Although China surpassed the US as the largest emitter of CO2 only in 2006, by the end of 2011, its CO2 emissions were 59% higher than that of the US. The increase in the manufacturing capacity of the country without adequate ecological or pollution control norms has contributed a great deal to this worsening of the environmental situation. Moreover, usage of coal and other fossil fuels such as petroleum have resulted in acid rains, which has damaged forests and watersheds in parts of Asia, with its negative effects reaching places as far away as the US. This kind of environmental degradation can harm human health and the economy.

225

Figure 16 Marketline report also states that due to extensive usage of coal for energy generation, energy intensity in China is the second highest after Russia among major world economies, which is reflective of inefficient energy use. The government needs to promote efficient use of energy as it remains a major challenge (MarketLine). Water and soil contamination According to government reports, around 70% of rivers and lakes in China are polluted and roughly 50% of river and lake water is deemed unfit even for human consumption. Contamination from industrial chemicals, agricultural runoffs (particularly from fertilizers, pesticides and livestock waste) and urban wastewater have been major culprits for deterioration of China's water resources. In March 2013, around 16,000 pig carcasses were found floating in the Hangpu river which supplies water to Shanghai. Critics alleged that the lack of dead pig processing plants may have caused the dumping.

226

The quality of groundwater, which accounts for around one-third of the country's water resources, is also reported to be extremely poor. According to a 2014 report by China's land and resources ministry, around 43.9% of 4,778 tested spots across 203 cities had "relatively poor" groundwater quality, which could only be used for drinking after proper treatment. Around 15.7% of groundwater tested as "very poor" meaning it could not be used as source of drinking water even after treatment. Poor quality of drinking water came to the fore in April 2014 when carcinogen benzene was found in the water supply in the northwestern city of Lanzhou, which affected its two million residents, as they were unable to use tap water for 24 hours. The water contamination has also led to higher incidences of cancer along waterways and the riverside that are generally dotted with chemical plants. The government had identified 450 â&#x20AC;&#x153;cancer villagesâ&#x20AC;? in the late 1990s, which are classified as communities near pharmaceutical, power and chemical plants with abnormally high death rates. Although the Chinese government has initiated steps to tackle these problems, these have been inadequate so far. There are also operational issues that restrict the positive impact of the major investments made in the environmental front. Major thrust on development of renewable energy Energy consumption in China is increasing at a staggering pace. As per IEA Figures, the country became the largest global consumer of energy in 2009. The Chinese government has set aggressive targets to reduce energy consumption, which relate more to its concerns about energy security than about climate change. In its 12th five-year plan the government stressed the importance of renewable energy and sustainable development. The government has targeted reducing CO2 emissions by 17% per unit of GDP along with 11.4% usage of non-fossil fuels by the end of the period. By 2015, wind and solar power generation is poised to reach 100 million kilowatts, while nuclear

227

energy is expected to increase its share to 8% of Chinaâ&#x20AC;&#x2122;s total power capacity by 2020, up from 1% in 2010. Moreover, the government has embarked on an ambitious plan to become the largest renewable energy car market in the world. China is expected to manufacture 5 million new vehicles that run on renewable energy by 2020 and the government has allocated $15 billion toward this cause. The country has also become the worldâ&#x20AC;&#x2122;s largest manufacturer of wind turbines and solar modules and overtaken the US in terms of installed renewable energy capacity. Additionally, the Chinese government has set a target of increasing the share of renewable energy to 15% of its energy mix by 2020. These measures are likely to have a positive impact on the countryâ&#x20AC;&#x2122;s greenhouse gas emissions.

228

-Suggested

topics

calligraphy,

and

conversation

inquiries

about

include the

sightseeing

health

the

China,

otherâ&#x20AC;&#x2122;s

arts,

families.

Generally, conversation during a meal focuses on the meal itself and is full of compliments to the cook as fervent toasts. -Exaggerated gestures or dramatic facial expressions are not the norm in China and should be avoided. The Chinese also do not gesticulate with their hands when speaking, and as such, visitors should temper their hand motions. Also, do not put your hand in your mouth; this is considered rude. -Touching is not acceptable among unfamiliar persons, and generally, public displays of affection should be avoided. -When giving or receiving a gift use both hands. The Chinese often decline a gift three times before accepting as easy acceptance is considered to be a sign of greed. One should continue to insist upon giving the gift and express profuse pleasure once the gift is accepted. -Wrap gifts in red, a lucky color; pink and yellow, happy, prosperous colors, are also good colors. Do not use white, which is the color for funerals. Clocks and handkerchiefs are not good gifts for symbolic reasons. Gifts of food, including the offer to host a banquet, electronic items, pens, quality liquors and imported items are generally considered to be good options.

229

Cultural Etiquette Cultural Dos and Taboos -When greeting another person in China, nodding or bowing slightly are the norms, although handshakes are becoming more common. One should ideally wait for one's Chinese counterpart to extend a hand first. Note that introductions tend to be formal and courteous rather than familiar and casual as in the US. -Titles and status are important in China, so be sure to use official titles unless invited to do otherwise. Unless one is a communist, however, one should avoid using the term "comrade." -Punctuality is important in China in both professional and personal cases, so be sure to adhere strictly to meeting times and deadlines. -Do not begin eating or drinking until your host commences. Also, be prepared for lengthy and filling meals since Chinese banquets may consist of twenty courses. In such cases, temper the amount of food consumed so you can manage the quantity of food. You may not, however, want to completely finish all your food since hosts will continue to fill an empty bowl, as it is a sign that the host has not provided a sufficient offering. Alternatively, a completely filled bowl is viewed unfavorably so some balance in between is preferable. -Rice is served in bowls and should be consumed close to the mouth. Chopsticks are generally used for most foods (other than rice and soup dishes). Your attempts to use these utensils will be well appreciated although dropping them on the floor when your attempts are unsuccessful is regarded unfavorably.

230

Business Etiquette - Chinese business people will expect you to be well prepared for the meeting. Make sure to have at least 20 copies of your proposal ready for handing out. **Presentation materials should be only in black and white, avoid colors. - Small talk is considered particularly important at the beginning of a meeting. - They prefer to establish a strong relationship before closing a deal, so you might have to meet up several times to achieve your objectives. -

vital

for

you

maintain

composure

during

meetings.

Causing

embarrassment or showing too much emotion could have a negative effect for a business negotiation. - Regarding decision-making, the Chinese tend to extend negotiations far beyond the agreed deadline to gain some advantage. Be prepared for that: accept their delays and do not mention deadlines. Your patience will be much appreciated! - People in China usually enter the meeting room in hierarchical order. So be careful â&#x20AC;&#x201C; they will assume that the first of you walking in the room is the head of the delegation! - Business hours are 8:00 am to 5:00 pm, Monday to Friday. - Many Chinese workers take a break between 12:00 and 2:00 pm, during which almost everything stops from working â&#x20AC;&#x201C; from lifts to phone services. - It is best to schedule an appointment during these periods: April to June and September to October.

231

Greetings - Handshakes are common, but wait for your Chinese counterpart to initiate the gesture. - Regarding titles of courtesy, most people should be addressed with a title followed by their last name. Do not to use ‘comrade’ – unless you are a convict communist of course. The Art of Conversation - Chinese people will appreciate it if you use a couple of words in Chinese, but make sure you are aware of the meaning and the appropriate occasions. - In Chinese culture, the questions ‘Have you eaten?’ or ‘Where have you been?’ are pleasantries equivalent to the traditional ‘How are you?’ in the English-speaking culture. Therefore, do not take it literally and start getting into details in your answer! Simply answer ‘yes’ if you have eaten – even if you haven’t – or simply smile and say ‘thank you!’. - Popular welcome topics are themes about China: art, scenery, landmarks, climate, and geography. You can mention your travelling experiences to other countries and include your positive impressions as a tourist in China! - Try to avoid political-related discussions, such as the Cultural Revolution system or Chairman Mao, the ‘Tibet’ and ‘Taiwan’ questions, human rights, animal treatment. - Chinese people are very careful about strong negative statements. For instance, negative answers are considered impolite, so find alternatives (‘I’ll think about it’/’maybe’/’we’ll see’) instead of a blunt ‘no’. - Similarly, if your Chinese counterparts say ‘Not a big issue’ or ‘The problem is not serious’, they usually mean that there still are problems or that the problems are serious.

232

Labor Force The size of China’s workforce declined for the second year in a row in 2013. This trend is projected to continue and have widespread implications for emerging markets, according to experts(Harjani). According to the National Bureau of Statistics ,China’s working age population fell by 2.44 million to 919.54 million in 2013, marking the second consecutive year of decline (Harjani). The working age population - defined as those from 15 to 59 - accounted for 67.6% of the country’s overall population – down 1.6 percentage points from the previous year (Harjani).

Labor

Source: Getty Images “From the perspective of the world economy, the turn in the dynamics of the Chinese workforce, still the world’s largest, will be the most important shift,” Sanjeev Sanyal, global strategist at Deustche Bank wrote in a reported dated September 2013 (Harjani). China’s shrinking workforce will spur the transformation of the country from “factory to the world” into the “investor to the world,” Sanyal said. This will create opportunities for other emerging markets such as Indonesia, Philippines and India to enter market

233

segments

being

vacated

China,

said,

including

export-oriented

manufacturing (Harjani). In December 2013, Chinaâ&#x20AC;&#x2122;s top legislature approved a loosening of the countryâ&#x20AC;&#x2122;s controversial one-child policy that was introduced in the 1970s in an effort to address demographic challenges including a shrinking labor force, rising elderly population and male-female imbalances(Harjani).

234

Source:Central Intelligence Agency

235

China in Relation to the United States

Source: Aridd

236

Tech PAcK

237

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ADDRESS: Beaverton, OR 97005

GROUP NAME: Women’s Athletic Tops CLASSIFICATION: SEASON: Women’s Knit Tops Spring 2015 FABRIC CONTENT: 84% Polyester, 16% Elastane COLORWAY: Mixer Yellow **SAMPLE SIZE:MEDIUM**

PHONE: 1-800-266-3678 EMAIL: Comfortact@gmail.com

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Designer Initials TJ

FABRIC INFO Eclat Textile Co., LTD. Lot 1. Road 5A, Nohn Trach 2 Industrial Zone Dong Nai, Vietnam

Date Created: 9/27/14

STYLE#/THICKNESS Double Knit with Spandex yarn. 80-380 GSM(weight), 180 CM WIDTH Style # 5342

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MATERIAL SHEET COMPANY NAME: Comfort Act

STYLE#: CAA104

ADDRESS: Beaverton, OR 97005

GROUP NAME: Women’s Athletic Tops CLASSIFICATION: SEASON: Women’s Knit Tops Spring 2015 FABRIC CONTENT: 84% Polyester, 16% Elastane COLORWAY: Lightening Grey **SAMPLE SIZE:MEDIUM**

PHONE: 1-800-266-3678 EMAIL: Comfortact@gmail.com

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Designer Initials TJ

FABRIC INFO Eclat Textile Co., LTD. Lot 1. Road 5A, Nohn Trach 2 Industrial Zone Dong Nai, Vietnam

Date Created: 9/27/14

STYLE#/THICKNESS Double Knit with Spandex yarn. 80-380 GSM(weight), 180 CM WIDTH Style # 5342

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SIZE RANGES S-XXL

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MATERIAL SHEET COMPANY NAME: Comfort Act

STYLE#: CAA104

ADDRESS: Beaverton, OR 97005

GROUP NAME: Women’s Athletic Tops CLASSIFICATION: SEASON: Women’s Knit Tops Spring 2015 FABRIC CONTENT: 84% Polyester, 16% Elastane COLORWAY: Rapid **SAMPLE SIZE:MEDIUM**

PHONE: 1-800-266-3678 EMAIL: Comfortact@gmail.com

SWATCH:

SKETCH:

FRONT:

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Designer Initials TJ

FABRIC INFO Eclat Textile Co., LTD. Lot 1. Road 5A, Nohn Trach 2 Industrial Zone Dong Nai, Vietnam

Date Created: 9/27/14

STYLE#/THICKNESS Double Knit with Spandex yarn. 80-380 GSM(weight), 180 CM WIDTH Style # 5342

Date Modified:

SIZE RANGES S-XXL

Date Released:

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MATERIAL SHEET COMPANY NAME: Comfort Act

STYLE#: CAA104

ADDRESS: Beaverton, OR 97005

GROUP NAME: Women’s Athletic Tops CLASSIFICATION: SEASON: Women’s Knit Tops Spring 2015 FABRIC CONTENT: 84% Polyester, 16% Elastane COLORWAY: Illuminating **SAMPLE SIZE:MEDIUM**

PHONE: 1-800-266-3678 EMAIL: Comfortact@gmail.com

SWATCH:

SKETCH:

FRONT:

BACK:

Designer Initials TJ

FABRIC INFO Eclat Textile Co., LTD. Lot 1. Road 5A, Nohn Trach 2 Industrial Zone Dong Nai, Vietnam

Date Created: 9/27/14

STYLE#/THICKNESS Double Knit with Spandex yarn. 80-380 GSM(weight), 180 CM WIDTH Style # 5342

Date Modified: Page 9 of 14

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SIZE RANGES S-XXL

Date Released:

MATERIAL SHEET COMPANY NAME: Comfort Act

STYLE#: CAA104

ADDRESS: Beaverton, OR 97005

GROUP NAME: Women’s Athletic Tops CLASSIFICATION: SEASON: Women’s Knit Tops Spring 2015 FABRIC CONTENT: 84% Polyester, 16% Elastane COLORWAY: Rapid/Electric Lines **SAMPLE SIZE:MEDIUM**

PHONE: 1-800-266-3678 EMAIL: Comfortact@gmail.com

SWATCH:

SKETCH:

FRONT:

BACK:

Designer Initials TJ

FABRIC INFO Eclat Textile Co., LTD. Lot 1. Road 5A, Nohn Trach 2 Industrial Zone Dong Nai, Vietnam

Date Created: 9/27/14

STYLE#/THICKNESS Double Knit with Spandex yarn. 80-380 GSM(weight), 180 CM WIDTH Style # 5342

Date Modified:

SIZE RANGES S-XXL

Date Released:

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ILLUSTRATION SHEET COMPANY NAME: Comfort Act

STYLE#: CAA104

ADDRESS: Beaverton, OR 97005

GROUP NAME: Women’s Athletic Tops CLASSIFICATION: SEASON: Women’s Knit Tops Spring 2015 FABRIC CONTENT: 84% Polyester, 16% Elastane COLORWAY: Mixer Yellow,Lightning Grey, Rapid,Illuminating, Electric Lines, Rapid/Electric Lines

PHONE: 1-800-266-3678 EMAIL: Comfortact@gmail.com SKETCH:

BACK:

FRONT:

Designer Initials

FABRIC INFO Eclat Textile Co., LTD. Lot 1. Road 5A, Nohn Trach 2 Industrial Zone Dong Nai, Vietnam

Date Created: 9/27/14

STYLE#/THICKNESS Double Knit with Spandex yarn. 80-380 GSM(weight), 60 INCH WIDTH Style # 5342

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LABEL/PACKAGING SHEET COMPANY NAME: Comfort Act

STYLE#: CAA104

ADDRESS: Beaverton, OR 97005

GROUP NAME: Women’s Athletic Tops CLASSIFICATION: SEASON: Spring 2015 Women’s Knit Tops FABRIC CONTENT: 84% Polyester,

PHONE: 1-800-266-3678

16% Elastane

**SAMPLE SIZE:MEDIUM**

EMAIL: Comfortact@gmail.com Item-VendorCode-Origin

Designer Label(Label-free Iron-On Heat Transfer Sticker)-ITHTAG_ LA33Image-Trans Technics INC. Taiwan, ROC

Size-QuantityUnit or Measure

Content High grade woven 100% polyester

1 Per Top Size: See Label Placement sheet

Garment Paper Hang Tag White Card Stock, Dongguan AM Packaging Glossy, 110lb. weight Company Limited-Guangdong, Care Label(Label-free Iron-On Heat Transfer Sticker)-ITHTAG_ LA33Image-Trans Technics INC. Taiwan, ROC Poly Bags - Uline 1 mil. Poly Bags* - (S-3643) Grand Rapids, MI

1 Per Top

High grade woven 100% polyester

1 Per Top Size: See Label Placement Sheet

Plastic

1 Per Top 1000/roll 24 x 24 x 24 inches, 1 Per Top

Corrugated Box (S-19078)- Uline- 100% Cardboard Pleasant Prairie, WI

Date Created: 9/27/14 Date Modified:

Location

Colors

*see label placement sheet*

130645TCX 110601TCX 190303TCX

*see tag placement sheet*

130645TCX 110601TCX 190303TCX

110601TCX (ALL OTHER COLOR TOPS) *see label placement *190303TXC (ONLY sheet* FOR ILLUMINATING TOP) See Garment Folding sheet for placement Placed around top

1 Color 1 Color

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GARMENT FOLDING DIRECTIONS COMPANY NAME: Comfort Act

STYLE#: CAA104

ADDRESS: Beaverton, OR 97005

GROUP NAME: Women’s Athletic Tops SEASON: Spring CLASSIFICATION: 2015 Women’s Knit Tops FABRIC CONTENT: 84% Polyester, 16% Elastane **SAMPLE SIZE:MEDIUM**

PHONE: 1-800-266-3678 EMAIL: Comfortact@gmail.com

1)Place garment face down. Fold garment along the dotted lines. Ensure that sleeves are folded and tucked securely.

2)Fold in half horizontally. (Fold hem of garment to the neck line)

**Note: Garment should measure approximately 12 inches across once folding is completed. Place into poly bag.

Date Created: 9/27/14

Date Modified: Page 13 of 14

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COMPONENT SHEET COMPANY NAME: Comfort Act

STYLE#: CAA104

ADDRESS: Beaverton, OR 97005

GROUP NAME: Women’s Athletic Tops SEASON: CLASSIFICATION: Spring 2015 Women’s Knit Tops FABRIC CONTENT: 84% Polyester, 16% Elastane **SAMPLE SIZE:MEDIUM**

PHONE: 1-800-266-3678 EMAIL: Comfortact@gmail.com Item-VendorCode-Origin Thread - A&E - Anecord PBT - Mt. Holly, NC

Size-QuantityUnit of Measure

Content Polybutylene Terephthalate (PBT) *Twisted Multifilament

Tag gun fasteners -(Regular 2” Tag gun fasteners) STD2”/5000Standard-Japan

Date Created: 9/27/14

Plastic

Location

Colors

1,000 mt - 1 Spool as needed per top, Tex: 120

All Seams and hems

Pantone: 130645TCX

2 inches -1 per top

*see tag placement sheet*

Black

Date Modified:

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