Shanghai’s Booming Business Scene

Business & Technology — By Jessica Schwartz on June 22, 2011 8:17 am

By Jessica Schwartz
For ChinaInFocus

In the summer of 2010, Trevor Squier and Henry Hu traveled to Shanghai for an MBA program through Boston University. The two spent four months developing a mock business plan to bring customized T-shirts to China’s highly competitive market based on the popular design-to-order U.S. company Threadless.

One year later, attracted by the city’s high-energy environment and international culture, they returned with a long-term plan to make their assignment a reality.

For months, the two men met regularly in Boston to solidify plans for their company, Feng Feng (Sew Sew), which is now in the works. It aims to connect design professionals with consumers through an online community. Like Threadless, Feng Feng will allow its customers to vote on which T-shirt designs the company will produce.

The partners feel they have more potential to be successful in Shanghai than the U.S. because, “the personal connections you can make in Shanghai are endless,” said Hu, a native of Taiwan. “The city is the business center of China. Money is flowing out of everywhere and coming to Shanghai.”

The 2010-2011 American Chamber of Commerce China Business report found that 79 percent of U.S. companies said their operations in China were “profitable” or “very profitable.” Up from 65 percent in 2009, the report signals the market for foreign businesses in China may be on the rise.

“U.S. companies in China have come to expect challenges, have weighed them against the opportunities and have found a way to succeed in China despite them,” concluded the American Chamber of Commerce report.

Bill Powell, senior writer for Time Inc., explained that Shanghai is a good place for foreign businesses because, “China’s goal is to make Shanghai their business and financial capital. An economic crisis is the last thing the Chinese government wants to see, so the municipal government is very open to keeping Shanghai a very business-friendly city.”

For young entrepreneurs like Squier and Hu, this is good news. However, that’s not to say that they won’t encounter any difficulties in their business endeavors.

“We know we have to adjust to the market here,” Hu said. “That means we will be giving up some of our Western education that taught us about how to start a business in the States.” Squier added, “Our lack of knowledge about Chinese contract law will also be difficult. We have to learn for the Chinese market, it is very different.”

Trouble enforcing contracts, unclear regulations, lack of transparency and corruption ranked among the top 10 challenges for U.S. businesses in China—all issues that give Hu and Squier good reason to worry.

While they continue to work on their business plan, the pair hopes Shanghai continues to welcome U.S. businesses.

“We still don’t know what we don’t know,” Hu said. “The longer we are here the more we will realize what we still need to figure out. We need to lean on others, keep contacts and anticipate pitfalls, but Shanghai is a better place to be doing that than the states.”