China, one tough market to crack

I had a tough day yesterday. A potential China client which I have attended to since April asked me to revise my revised revised quote.  I will call this potential client “the client” just for the sake of convenience, though  it is unlikely that I am going to get it. There were a lot of toings and froings with this client since April. I can’t remember how many times I have revised the quotes.  Finally the  client gave me the impression that the deal were to be closed imminently.

I spent the last couple of days liaising with my principals in the US and a freight forwarder in Hong Kong trying to give the client the best deal. Due to the time difference, I had to stay up late just to talk to my US office. There are so many rules and regulations for doing business in China.  Sometimes one has to be creative in structuring deals for making shipments into China. Finally, I thought I had come up with an excellent deal for the client and e-mailed the final quote to the client. Within 10 minutes I got a reply from the client claiming that my quote was not competitive and it decided to stay with the company which it had been dealing with for 10 years. Essentially he was asking me to substantially cut my prices which made us not making any money at all. Needless to say, my US company refused to budge. There goes the deal and the efforts my company and I had put into were “wasted”.

I think the Chinese buyers are really spoiled nowadays. There are so many overseas suppliers and manufacturers knocking on their doors.  It is a survival game out there.  For me to survive I just have to hang in there. It is two o’clock in the morning.  I will hit the sack and wake up tomorrow and go on with another deal.

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A must for canmakers doing business with China: know the best selling drink in China, Wanglaoji 王老吉(Part 2)

It is a continuation of my preceding blog of the same title.

About WLJ the company

The history of WJL dated back to 170 years ago or the Qing dynasty. History has it that the legendary, Wang Lao Ji, a Chinese medicine practitioner, developed a formula for certain herbal tea, which was said to be effective for curing an epidemic in Guangzhou at that time. The tea was so popular that people from afar came to Wang’s  medicine shop to seek his medical advice and consumed the tea.  The formula was passed from generations to generations. The production of the tea became a business. It is said that several branches of the Wang’s family claimed to have the original formula.  When Communists took control of China in 1949, one branch of the Wong family moved to Hong Kong and continued the business under a Hong Kong company, while the business of the  Mainland WLJ was taken over by the China government.

The Hong Kong WLJ has been selling the tea in Hong Kong and overseas under the brand, Wong Lo Kut, which is the transliteration of its phonetic Cantonese name. WLJ was sold in Tetra paks until recently. The tea was only massively produced in cans in 2004. Prior to that it was thought that the tea would cause certain chemical reactions with metals, and therefore not compatible with cans. As a matter of fact the China WLJ thought it had little use for the related patent that it granted the use of license thereof to the Hong Kong WLJ for 20 years at a nominal fee.

After the Hong Kong company obtained the license, it undertook an aggressive marketing strategy in China by promoting the tea on national TV, buses, billboards and direct sales at supermarkets and restaurants. The tea soon became the number one drink in China. That woke up the China WLJ as it had apparently let go a money generating machine on the cheap. It is said that the China WLJ has been selling the tea parallelly in China. It is further said that there is an going legal battle between the two companies over the rights to sell the tea in China. One may have to look at the printing on the can to find out which is the producer, the Hong Kong or the China WLJ.

About WLJ the drink

A more appropriate description for the kind of tea that WLJ belongs to  is “cool tea” or liangcha 凉茶, a generic name for the kind of herbal tea in question. Liangcha used to be commonly found in family run liangcha shops in Hong Kong or could be home brewed each according to its own formula. Due to the change of demography in Hong Kong, less and less of those shops could be found, let alone the home brewed practice.

According to traditional Chinese medical theory, liangcha, is known for being able to remove the bodily heatness from one’s body and almost all symptoms of minor illnesses are due to excessive bodily or internal heatness (neiri 内热).  Such  symptoms can be dryness or cracks on lips, ulcers on gum or tongue, hot air in nasal cavity,  swelling of the throat, tiredness of the whole body, loss of appetite and etc..  If you mention any one of such symptoms to a Chinese, you don’t need expert medical advice, he or she, young or old, is likely to advise you to drink liangcha, to help reduce your bodily heatness,jianghuo 降火, hence the name cool tea. For this reason, one should not take “cool tea” literally as the tea does not necessarily have to be drunk cold. Quite the contrary, the proper way is to drink it while it is hot.  The coolness of the tea refers to one’s bodily heatness. If one has excess of the latter, he needs to be “cooled down” until a balance is restored.

Traditionally, it is not a cool thing (see the pun) to drink the cool tea in front of other people as it is bitter and is usually drunk from a rice bowl. However, WLJ added sugar to its tea and HKWLJ took it a step further by producing the drink in cans and undertook massive promotion efforts. Now WLJ can be consumed widely in restaurants and other public places. It is now a cool thing to do so after or with a meal, a hotpot dinner or a BBQ especially Chinese foods are known for their spiciness and greasiness, which are among the major causes for the excessive bodily heatness. Besides, some of the Chinese smokers and drinkers see WLJ as a soothing medicine, which has the effect of lessening the occurrence of illnesses or diseases brought on by such habits. No wonder WLJ literally sells like Cokes in China or should I say better than Cokes.

A must for canmakers doing business with China: know the best selling drink in China, Wanglaoji 王老吉(Part 1)

wangloji can2Guess which is the best selling drink in China? Coke? Pepsi? No, it is Wangloji 王老吉 (WLJ), which is little known to other peoples outside of China other than the Chinese communities. Look at the photo on the  left, one wonders what is inside this ordinarily looking can (I am being nice) and why it is so popular in China. WLJ is a kind of traditional Chinese herbal tea. According to a reliable source sales  of canned WLJ amounted to RMB2.5 billion or US$365 million in 2008, which surpassed sales of Coca Cola in the country.

What is relevant to the canmaking industry is that the canned WLJ emerged from its obscurity only in or about 2004, when the company first started to sell the drink in cans. At that time, WLJ was sold only in Tetra paks. The China WLJ, which holds the license, thought that WLJ in cans would have no market at all and  granted the use of the license to a Hong Kong company, which is related through history, at a low price for 20 years. Herbal teas in cans were then considered a revolutionary idea.

The type of cans currently used by WLJ belongs to the kind known as 3 piece steel can. The company is taking  another  innovative move this year by changing the cans to 2 piece aluminum. It is said  that the state owned corporation, COFCO, is building a huge plant in Wuhan for producing 2 piece cans mainly to cope with WLJ’s demands.

I am not an expert on canmaking technology. Nevertheless, I consider WLJ’s switching to 2 piece cans a bold move.  Some of the experts in the idnustry have doubts that herbal teas are chemically compatible with aluminum, the metal which most 2 piece cans are made of. Further, WLJ, being a non-carbonated drink, is said to be not suitable for a 2 piece can which relies on the gas of the liquid inside to support the soft aluminium wall and keep it in shape. I think WLJ will face a lot of challenges on the technical front for switching over to 2 piece cans. That said, I was told that WJL by doing so it could save about 15% of the costs for each can it produces and on the whole the company could save hundred millions of dollars in costs each year. It will save on materials costs as aluminium is cheaper than steel and also on operating costs as the former is a lighter material, hence, cheaper transportation and storing costs. I was told that WLJ’s competitor, Red Bull, which is in a similiar situtaion, is watching the related developments closely. If WLJ’s move is proven to be successful, Red Bull, will likely to follow suit.

That is enough on the tecnical aspect or I should say that is all I  know. As a matter of fact, the history of WLJ is quite intriguing and so is the drink. I will talk more on these two subjects in the subsequent blog.

My thoughts on Reminbi as a currency for settlement of international trades

I recently came across  a Chinese corporation which intended to purchase certain canmaking machines and parts from US  manufacturers for a sum of around US$300,000. The Chinese buyer made it a condition that the payment was to be made in Renminbi (RMB), the Chinese currency.

There is an increasing trend that the Chinese want to settle their foreign purchases by RMB. It seems there is a certain agenda, among the Chinese corporations, to do so in line with the country’s policy to become less relied on the US dollar.  It is a well known fact that China is the largest foreign holder of US government treasuries and bonds. The holdings are continuing to grow despite China from time to time voiced its concern over the safety of its US assets. The irony is that the Hong Kong dollars were and is pegged to the US dollar. Since 1983, the Hong Kong dollar exchange rate has been held to one US dollar to 7.8 Hong Kong dollar, with minimal fluctuations. The Hong Kong government holds that this linked exchange policy will not be changed whatsoever. It indicates that Hong Kong has great confidence in the US dollar. I think there is something that Hong Kong knows, which China does not, or vice versa.

It is not surprising that China wants its currency to play a bigger role in international trades as it is the largest exporter in the world and one of the largest importers in the world. The problem is that the there are a lot of rules and regulation governing the remittance of RMB into and out of the country.

In passing, I would like to mention one of my recent bad experiences in dealing with RMB. In the beginning of this year, one of my US clients intended to purchase certain steel pipes from China. The relevant contract was signed between the parties and the US buyer remitted a certain sum of deposit to the Chinese supplier in US dollar.  However, the Chinese local bank refused to convert the dollars into RMB as the local company did not have a US dollar account. In order for it to receive the RMB it had to attain the status of a foreign trading corporation, which required the approval of China Foreign Exchange Bureau. At the same time the US supplier could not arrange to remit RMB to China as RMB was not available at its US bank. At the end of the day, the deal was called off and the deposit was returned to the US supplier. As can be seen what appeared to be a simple transaction could be  made complicated or impossible due to the lack of understanding of the China currency situations.

Returning to the subject on RMB as a settlement currency, personally, I do not mind receiving payments in RMB as the currency  is one of the strongest in the world and with the country’s prevailing strong economy and as a primarily exporting country, RMB is likely to continue to be strong. Further, in Hong Kong,  there are a lot of channels to do the RMB exchanges. It is so only because Hong Kong has a strong pool of RMB and a close tie with China.  There is an available market, in Hong Kong,  for the buying and selling of RMB. As I said before there are many rules and regulations with regard to the exchanges of RMB into other currencies. It is difficult for foreign companies to understand or to take the risk

With a view to solving these issues, at end of June 2009, the monetary authorities of China and Hong Kong signed a pact, which came into force on 1st July 2009, to make Hong Kong officially (my comments added) the first RMB exchange centre outside China. Under the pact companies in Hong Kong are allowed to settle trades with their China counterparts in RMB in five major China cities, namely, Shenzhen, Guangzhou, Zhuhai, Dongguan and Shanghai. It should be mentioned only a number of authorised companies within those five cities are allowed to engage in such deals. It is clear only a handful of foreign companies will be benefited. Although it is meant to be a test scheme, there is no time schedule for extending the scheme to other cities.

In the meantime, I think foreign corporations will likely see their China counterparts to press for paying their purchases in RMB. Yet it would be a long time before RMB could turn into a freely convertible currencies. It is a lesser problem if a foreign corporation has  manufacturing facilities in China as it could use the RMB received to meet expenses of its local operations. As for a foreign company engaging in one way trade, it will have to find solutions as to how to repatriate their moneys back home.

Blogs for business in China, does it work?

As a trader actively involved in the dealings between China companies and their counterparts for the rest of the world (ROW), I need a cost effective platform to bring the two worlds together. Entirely for the sake of ease of reference and with no political agenda at all, when I mention China in the context of this blog I am referring to Mainland China. Technically, Hong Kong, Macau and Taiwan are part of China and they fall within the unofficial term,  Greater China. Again, when I refer to China and ROW or the two worlds, one should not interpret them literally that China belongs to another world. With respect to my mother country, when it comes to doing business, China is another world. The country is unique because of, among other things, its immense manufacturing and consuming powers, controlled currency, culture and political system.

Returning to my need of an effective platform, a specially designed website should be ideal. Think about those niceties, such as icons and photos whereby I could exhibit my wares and forums for my followers, if any, to discuss interesting topics . Moreover, I could put up a bunch of Google Adsense banners to make some extra incomes.  However, the problem is that for a start-up business, I am operating on a shoestring budget, I simply cannot afford to do that, yet.

The next best thing would be to do my marketing through social medias, or simply known as blogs. Many people know that blogs are free and efficient and it can work or look as good as a professionally designed website (look at my blog :). To show how cost effective “blogs for business” could be, I would like to  tell one of my recent experiences. In about the middle of July this year, I started twitting at Twitter. At the time, I loosely put up some of the CM products of a China supplier at my tweets for trial basis. Let’s call this supplier “my client”. Within 24 hours I was “followed” by an editor of an international CM web magazine. One thing led to another, the editor invited my client to do a profile at their magazine. After an interview and subsequent exchanges all through e-mails, an article about the client’s businesses, products and future plans was published in the magazine’s August issue. It took only about 10 days to do that. The client was impressed with the professionalism and efficiency that I showed in handling the matter, which I have to thank Twitter and the said editor.  Needless to say I have built a good rapport with the client and hopefully it would translate into dollars and cents in the near future..

Prior to that I asked my client to comment on my tweets at the Twitter. Unfortunately, the client could not do it as it had no access to Twitter.  The reason is that Twitter was and still is blocked in China. So is WordPress, Google and etc.. So if I want to reach my Chinese clients through these popular blogs sites, it would be hopeless. I don’t think there is a blog site which crosses both worlds. It is not a language problem. The English language level of some Mainland Chinese, at least for those I deal with in business, is unusually high. They like to talk with and write to foreigners in English. Further, The Chinese love to blog as much as their overseas counterparts. However,  they have their own blog systems, such as QQ, Sina. I think WordPress and Google blogspots were at one time available in China, but when they got too political they were barred from China.

I don’t think there is a quick solution to this conundrum. What I intend to do is to take a shot gun approach, which is to have  a couple of blogs in China and at the same time doing the same through WordPress and Google for my international clients and see how things pan out.

Dear readers, if you have any good ideas please let me know. I would be grateful.

Haba Chains

I know a dealer who is offering Haba Chains at very competitive prices.  The chains offered are built to European specifications. If you are using 879, 880, and 882 Table Top chains, this dealer has all common widths and materials available from stock. This dealer said it would give you unbelievably low prices.

Call me.


For sale 2 piece used CM machines

I know a used CM machines dealer offering the machines below for sale.  Contact me.

Standun B3 bodymaker

  • Serial Number 02-82-6
  • Tool 211
  • Speed 250 spm
  • Year 1982
  • Minimum Diameter 200
  • Maximum Diameter 300
  • Panel Yes-both
  • Electrical 415/50
  • Notes Rebuilt 2003, very good condition

ASC single arm uncoiler including coil arm

  • Model 25M60H
  • Application Uncoiler
  • Serial Number SAU-25M60H1517H80-M
  • Tool 25,000 Coils
  • Year 1997
  • Maximum Diameter 60″ Wide Coils
  • Panel YES
  • Electrical 480/60/3
  • Notes ASC Single Arm Uncoiler in excellent condition. Machine includes rotating coil car