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During the past couple of days at the Canton Fair, I’ve been running around interviewing visitors about doing business in China.

I’ve been amazed at how succinct and emotionally cool most of their analysis is. For instance Dragan Ivanov, a computer hardware agent from Macedonia, basically broke down the whole of China’s world beating competitiveness in a single sentence: “They have good facilities, low labor rate, they don’t have the same ecological limitations, the people work 18 hours a day.” Here’s the rest of what he had to say.

Quotables:
“They have one billion people; we have only two million – that’s the difference.”

“If you buy one kilo of metal, they sell you a refrigerator for the same price.”

“Even the big companies like iPods have factories here.”

“The cheaper countries, like India or Africa, can only benefit. They can buy good quality stuff for low money. Like now, you can buy a DVD [player] for $18. You cannot buy a hamburger in United States for $18.”

“In China they’ll make the software in our own language. If you go to Panasonic and tell them to make a Macedonian menu, they’ll never make it. They make anything here.”

DI: This is the fifth time I’ve been to the Fair.

BM: What’s your impression of it?

DI: Good, good.

BM: How is it to do business here in China?

DI: If you are experienced, it’s ok.

BM: What have you learned though your experiences here?

DI: Well, it’s a different culture, so, for example the standards. They have very low standards, so in terms of quality, you must be careful.

BM: In what ways is that different from Macedonia?

DI: They have one billion people; we have only two million – that’s the difference. But in terms of doing business here, it’s very cheap, extremely cheap. Whatever you buy is cheap, then you can earn money and you can do anything. Whatever you imagine, you can do the business. And now they even have quality, good technology and everything.

BM: And that’s recent?

DI: In terms of my business, consumer electronics, yes.

BM: So, you buy here and then you sell in Macedonia?

DI: Yes, I have my own brand, so I put my own brand on it and sell. People here mainly come to find new opportunities, but it can be difficult to work with Chinese.

BM: Because of communication?

DI: I don’t know, they come to the Fair, they’re not prepared, they don’t have quality goods… They have a big factory, but they’re not prepared. They bring the piece, you touch it and it is broken, you know? They have different products? for quality, for entertainment. I don’t really understand them, but I like the prices.

BM: So how do you ensure that the pieces you buy will be good enough quality to sell?

DI: I’ve been doing business here for five years, and I have companies that do the checking, they’re certified companies and they handle quality control. It’s a company from Singapore, and they check the quality when the goods are loaded. But generally if you work with one supplier, it is ok. If you chase the low price, then it can be difficult. Because, in my country, I have my own service and I fix all the goods by myself. But for other businesses, I’m not very sure. But usually people are satisfied, because the prices are very very cheap. In our country, the factories are closing. I have discussed with people from Iran, Brazil, everybody’s buying from here, and the local industries are having problems with the Chinese.

BM: Because they can’t match the price.

DI: Nobody can match. If you buy one kilo of metal, they sell you a refrigerator for the same price. For example, I used to import CDR cases. I had an idea to make them myself in my country. But when I made the price calculations of the plastic from Germany, it was much more expensive to buy the raw material than the ready product from China. They have good facilities, low labor rate, they don’t have the same ecological limitations, the people work 18 hours a day. Even the big companies like iPods have factories here. And those are produced under the same conditions.

BM: So, are people frustrated with China in Macedonia, because of this?

DI: No, we have very small country, only two million people. We are nobody and nothing. But I think the world economy should think about it. They are changing the balance of the world. And the Western companies have so much information.

BM: Has the situation changed a lot in the five years that you’ve been coming?

DI: Yes, very much. This new complex, two years before there was no complex. And it’s huge, like an airport. I don’t know. They are crazy. And also, now in Hong Kong they’ve opened one more exhibition, near the airport. They will be the producer of the world, you know? Nobody can produce nothing. All the big companies – Sony, Nokia… – everybody has their factories in Shenzhen.

BM: What do you think the other countries can do?

DI: I don’t know. Because, there are 1.2 billion [Chinese], I think, the last count was five years ago. But I cannot complain, because I make money from China, you understand? I’m based in my country, and I make good living, so I cannot complain. But generally for the world economy, it’s not very good. The Western world should be aware of this. The cheaper countries, like India or Africa, can only benefit. They can buy good quality stuff for low money. Like now, you can buy a DVD [player] for $18. You cannot buy a hamburger in United States for $18.

BM: Do you produce anything in Macedonia.

DI: No, I don’t. I only service them. I put my brand on them. I have an advertisement agency, and I’m product manager. We are a small country, we are nobody.

BM: How much do you up the price by adding your brand?

DI: It depends on the competition. But, it’s a good living, for me. I used to work with computers, and buy branded stuff, but anybody can buy from Sony or Panasonic or Fujitsu, hard drives from the United States, Intel processors… Nobody can give you sole agency. You buy on the free market and anybody can buy. Now I can have my own brand for low money. This was my dream.

BM: So it’s not worth it to use Japanese or American hardware in your computers?

DI: There are strong companies that have representatives in our country that are doing big business. Intel is giving them the goods on a delayed payment, and so what can I do?

BM: So you aim your products a little lower than those.

DI: Much lower. And I must say that [in China] they’ll make the software in our own language. If you go to Panasonic and tell them to make a Macedonian menu, they’ll never make it. They make anything here. I have my own engineer, I make the software, they put it inside, what else would I want? They only take 5 or 10 percent. Business [in China] is a little bit different than in the Western world. No one factory is producing everything. For example, for TV sets, there is one company that makes plastic; they have public molds, you can choose from twenty, and everyone has access to these molds. There is one company has S&T, the electronics. There is company that makes the carton? So this company is in China, he hires 100 workers, he buys the electronics from one company, the plastic from another, and the pays the workers, pays for the parts and he makes so much money. But all the expensive parts in the goods are made somewhere else. For example, the chips are all made in either Taiwan or Japan. For an LCD panels for TVs, the screens are made in Korea. Still the good money in electronics is going to Japan or Taiwan, but now even the Chinese companies are starting to produce their own components, like panels and chips, etc. but they’re not very strong yet.

BM: But you think it’s just a matter of time.

DI: It’s a matter of time. But anyway the Taiwanese companies, for example for DVD players, there is one Taiwanese company NTK and Sanplus?, they are both Taiwanese, even Panasonic and other big players are using their chips. Now NTK has opened a new factory in Shenzhen. It’s a Taiwanese company, but anyway, it’s here in Shenzhen. And soon Sony and Samsung will be opening their biggest factories, again in China. So, they don’t produce nothing, only the brand.

BM: But when they do that they give away the process…

DI: Yes. So, you can see they are stupid, you know, they see an Italian bike and copy it, they don’t pay patent or royalties or nothing, it’s crazy. But in our country we can’t afford to pay such expensive prices for royalties and stuff like that. I think for the Western world, it is a big threat. And the balance will be different.

BM: But for a small country like Macedonia, it’s good.

DI: For me it’s good. We have a very bad economy, so China doesn’t matter to us. It’s very far away, and there are very few companies like me who can import such things. Because there are usually minimum quantities – they ask for 4000 DVD players. In the US, this is a funny quantity, but for my market, it’s quite good. But there’s only a place for one or two companies like this.

Interview conducted at the Canton Fair, Guangzhou China, 17 October 2006

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