China taxes are weird

I got a call from the agent who is helping me incorporate both the Chinese and the Hong Kong company.  The HK company has to be set up as a shell company to own the Chinese company because trying to make any changes to the Chinese company equity ownership is apparently a pain in the ass.  Also, there are some tax benefits.  In any case, I'm shelling out an extra $1700 to set up the HK company and an extra $1300 in fees every year for accounting and business license.  Not real happy about it, but it will leave me the option and I won't kick myself down the road if I need to get investors.

Anyhow the agent tells me that the business district she was going to register me in has arbitrarily changed its preferential tax policies.  Despite the tax law change in 2008 that unified taxes between Chinese and foreign companies, each local govt still has the ability to do little dope deals.  So, since their main objective is to attract investment, the govt of Fengxian had a sweetheart deal with my registration agent to refund 30% of my revenue tax (5% of revenues) and 15% of my business profit tax (25%) back to me.  Quite a good deal and I wasn't expecting it at all.

Unfortunately, Fengxian decided to reduce this by half.  So, now I'm asking the agent to go searching for greener pastures.  The agent obviously doesn't want to do it because they have a special deal with that district, but they should be shopping around for their customers.  It's really surprising that the agents don't bring this up as a selling point, because that could be VERY substantial over the long run depending on the size of the company.

But I guess it also makes sense because it's probably not something they want the central government to know is going on...

 

Pound of sweat

I've just sent off draft one of content to my web page designer.  I tell you what...I think anyone in marketing should have to go through the process of creating a website -- from layout to content.  The content has taken me the most time -- probably close to 40 pages in content, complete with graphics, photos and source references (of which I am guessing I'll probably want to delete about half for skimmability)  But, the layout has been the hardest.  

Maybe I'm just totally left-brained, but doing the home page mockup kind of left me feeling really drained.  I'm just not creative.

Back to the point -- this whole exercise forces you to think about who your customers are, why they give a rat's ass about your website, products, and services, and forces you to prioritize.  It was actually a really useful process.

Let's see what the designer thinks though...

In other news, got intern #1 working, who although he's an undergrad senior, seems to be pretty sharp.  Nice not to be a one-man band anymore.  Two other master's candidates, both at Jiaotong's Environmental Studies dept, to call up tomorrow.  I like how some Chinese students put their photos on their resumes.  In some cases that works to their benefit.  Other times.... heh

All work and no play makes me a dull boy

A few days ago, I decided to take a day off and finally check out what the World Expo was all about.  The Shanghai government gave every legal resident household a free ticket and 200rmb to thank them for putting up with the construction and preparation but the ticket expires in Aug, so I had to go by today.  I didn't do too much homework - just went online to check out the buzz on some of the best pavilions and then printed put the schedule of events, which seemed to be pretty repetitive and small-time.

Took a cab to West Yanan Lu and wanted to catch Line 4 to Luban Lu, one of the Expo entrances on  the Puxi side, but I forgot that two lines both run off the same track and lost about half an hour . Doh! At least this happened on a day when I wasn't in a rush. Might as well get used to waiting.

10 min walk from subway stop and I was there. Lots of space for queues but no lines, through security in 5 min (don't bring liquids or lighters).

Went to check the event calendar and found there was a Gracie Brazilian jiujitsu (what I train) demo at night!
Then I started wandering in a general direction in that area. 

World Expo Museum - skip, just some audiovisual screens on past exhibitions, not even a narrative

Pavilion of urban footprint - not bad. Supposed to be the evolution of cities, but there are just a lot of static displays and no narrative our explanation of significance.  Actually there are a few videos that had some text, but no one was reading.  Kind of like drive-bys.  Looking at how many cameras are going off around me though, I guess this is what the chinese market wants. Photo opps and cheesy disneyland-like displays.  Been there, done that.  It's a little depressing to see especially around the displays that atte explaining concepts like sustainability that more chinese could be exposed to.

Japan Commercial Pavilion - only had to wait 17 min for this one, even less than the 30 min posted. It was a series of about 7 short marketing pieces by japanese companies.  Some were gee whiz (3D), others emotional, what's funny is that you had no options on what to see. Just had to watch all.  The highlight was that a few (about 10%) of the visitors won an invite in their gift bags to visit the"worlds most expensive bathroom". My luck held out and I had one.  Other than a solid gold toilet, however, this was no different than any nice Japanese office bathroom.

Next, I decided to go check out a different area. I went to Area B, Oceania and Asia, taking the free subway one stop.

Australia - impressive red block building very much in character with the Outback. I have been to Australia a few times and spent a fair amount of time there, but the line was short. the 360 theater was technologically nifty but lacking in content.

NZ - Virtually no wait.  I was drawn by the polynesian/mauri dancing performance, but they actually had a decent pavilion.  I thought it didn't do a good job capturing the amazing scenery and overemphasized the cities, but I guess that was intentional. to offset that though, they had this sort of landscape on top that even had a live wall of plants.  air seemed cleaner.

Philippines - No wait either.  given the recent killings of HK tourists due in part to police incompetence, I would have expected some backlash and one of the workers said that that there had been some response, but mostly not nasty. this pavilion was very accurate to how I know the philippines. Focused on music and disorganized.  But one thing made this a favorite for me: free massage.  Yep, masseuses from the Shangrila Hotel gave 10 min massages. was very nice.

Given how the lines were so light and after some food court workers told me that this was the fewest people they'd seen in awhile, I decided to go spend my remaining time this trip on the more crowded things.

Made my way to China. That building is imposing. Holy cow. Best place to take good photos is from the neighboring sky bridge that connects to all the retail and restaurants.  Unfortunately I couldn't get in because I hadn't pre-registered.  They give those out every morning at 9am at all of the gates.  I asked one of the info booth volunteers which gate had the fewest people and she said gate# 2, on Puxi side.  I also checked out Macau's pavilion from the outside but couldn't get a good photo. It is in the shape of a rabbit.  As one China blogger put it, didn't a single person on the Macau committee stop and say, "Wait a second, it's a fucking bunny??"

Turkey - 10am min wait, nifty architecture, and almost like a museum inside. They are also the first I'd seen to use bluetooth to send details as you walked through the pavilion.  Good idea.

Ireland - the "look how many famous Irish there are!" pavilion. I waited 15 min  which was about 10 min longer than this exhibit was worth. nice grass on the outside.

England - I mainly went just to see the building architecture. There are fiber optic cables all on the outside, supposedly each with a seed inside.  The net effect is that the pavilion looks like a fluffy koosh ball or maybe a dandelion. This is one design concept that must new seen to be believed.  It really does look shiny and round from a distance and then hazy up close. My camera even had a tough time focusing! There was still a big line and I've seen enough of the UK, so have it a skip.

France - this was the last pavilion I had time for and it was worth it because I can definitely say that without a doubt it was the most impressive pavilion I saw all day. First, it looked nice outside. Sophisticated, classy, cubist.  Wait was less than 20 min. Inside the courtyard, out looked a little like a French estate garden.  The theme was the "sensual life" so obviously there was a lot of emphasis on indulging the senses. The thought that came to me as I was walking through was a science and technology museum (which I ve always loved). Lots of overactive exhibits, lots of pizzazz for a reason. There were booths that had smells, lots of surround sound, and one cool thing was that they had the kitchen of the attached french restaurant integrated into the exhibits. 

After this, I had to get to the BJJ demo, so I got back over to E District. It was a pretty good show put on by another local school with attendance from fighters from Brazil and Abu Dhabi.  They did have random dancers, doing everything from traditional Chinese dress to Brazilian Carnevale costumes to cheerleader outfits which was weird.  Mixed in with bloody scenes of mixed martial arts, ultimate fighting championships and hard hitting demos, they also had some wushu and soft flowing taichi performances that really looked more like a dance performance.  Weird.

So 9 exhibits in about 10 hrs plus watching two shows was a pretty good day.

Week 11 of Project Startup: Two steps backwards, one step forward

I've just returned from a couple of chaotic weeks in Taiwan, Singapore, Indonesia, and then Taiwan again.

I was first in Taiwan for my grandpa's funeral. It was a short (20 hr) bittersweet trip. Although sad to see him like that and sadder to see how broken up everyone was, it was amazing to hear some of the stories about him and how he touched so many people's lives. I also got to meet relatives I never knew before.

Went on to Indonesia to spend a week with my cousin. She's just recently gotten certified as a scuba diver and I was excited to try to help introduce her to the underwater world. We spent 5 days doing the beach thing in Central Sulawesi at a German-run place called Prince John Resort in Tanjung Karung, and then decided to "rough it" a bit by going out to a remote national park. It was definitely an adventure and merits its own blog entry. I'll post it later :)

Then back to Taiwan for my high school best friend's wedding. I was the best man, but I think I actually took the duty more seriously than my friend! Typical exchange -- Me: "Hey K, what's going on with the rehearsal?" K: "Um, rehearsal?" It was in a gorgeous location, Taiwan's northeast coast, at a resort called the Leo. Other than some thunderstorms that interrupted the reception dinner at inopportune times, things went well. The afterparty went on pretty late and I didn't go the distance because we had an early morning flight the next morning and Sarah decided to call it a night early.

I came back to Shanghai ready to get a jump on the business again, and checked in with my assistant/intern as soon as I got back. She had two pieces of unwelcome news. First, the two local Chinese companies that I had met with before leaving and had counted on to be my subcontractors had both backed out. We had good meetings and I thought that they were both onboard to do the environmental testing for us. So it was a bit of a shock to find out how they had responded to the letter I asked my assistant to write to them. One company contact seemed impatient, like he couldn't be bothered to provide us the information we were asking for. The other guy, a young manager that I got along well with (we were both former military), inexplicably said that he had heard we had contacted many companies and didn't want to do business with us. Very disappointing news.

Then to pile on to this, my intern, H, who has been invaluable in every aspect, but mainly in dealing with translations and business development with Chinese partners, informed me that her Ph D advisor was putting her on a full-time project in Wuhan in a week and she'd be unavailable to continue with the project. Not good news.

So, that was the two steps back. Within the first couple of days after I returned, though, I did make some progress. I met with the website designing company and we hashed out a plan. Since the website is such a big part of marketing and customer education (and demand creation), I was happy to have a plan in place. For $1500, I'll be pretty happy if we can pull this off without too many complications. Second, I was able to get some more information on incorporation. Registering my company is actually a pain in the ass. In the US, you can easily incorporate for a couple hundred dollars. In China, it costs about $2000-10000, depending on what agent you use and where you incorporate. Also, many WOFEs (wholly owned foreign entities) first incorporate in Hong Kong and then make that holding company the parent company registered for the China WOFE. This is to givev more flexibility around changing equity ownership and in moving money around. However, this is an additional ~$2000 to setup and an additional ~$500/yr to do the accounting/tax filing, even if you don't even run money through the HK entity. So, I had to figure out whether the pros outweighed the cons. Usually, the best way to get answers is to ask potential consultants or agents who are hungry for your business, so I talked to about 5 of them, plus an accountant. I was left more confused than when I started. What complicates things is that since I'm a US citizen, the IRS taxes me on my global income. So, for most people, it makes sense to move profits to HK in order to lower their tax bill. However, as far as I can tell, it really doesn't matter if you're a US citizen because you have to report global income from dividends no matter where they're distributed. There's probably some way to game the system, but my tax guy in the US is a pretty straight shooter and won't tell me.

Anyhow, still a work in progress -- hope to have our first customers in about 3 weeks.