The New Yorker's recent article, "The Gift of Doubt, Albert O. Hirschman and the power of failure," by Malcolm Gladwell, inspires thoughts on the current business challenges in China. The article delves into the economic philosophy of the late economist Albert Hirschman, whose work examined whether ignorance impedes or is a precondition to progress. Hirschman's study of a thirty-two year odyssey in railroad construction led to his belief that creativity is borne of necessity rather than desire.
The article describes that during the mid-nineteenth century, a five-mile mass called the Hoosac Mountain blocked passage between the Deerfield Valley and a tributary of the Hudson, posing a significant challenge to railroad builders. Beset by miscalculations, political roadblocks and inefficient drilling methods, construction of the Hoosac Tunnel would eventually exceed its budget tenfold. Had they fully grasped the situation at the outset, the funders would never have undertaken this Herculean task. However, once engaged, the imperative of success spawned creative thinking and ingenuity that led to completion of the longest U.S. railroad at the time, contributing to the overall rapid industrial growth of the country.
According to Hirschman, "the only way in which we can bring our creative resources fully into play is by misjudging the nature of the task, by presenting it to ourselves as more routine, simple, undemanding of genuine creativity than it will turn out to be."
In the case of the China credit crunch, such ignorance has led to an economic system that is broken. The situation of unregulated shadow banking, combined with higher borrowing rates and the inability for many companies to obtain funding, has created a macroeconomic crisis condition where new thinking is required. It is the equivalent of being mid-way through the mountain before realizing the tools at-hand will not complete the task. It is an opportunity for the C2FO Market to provide a transformative solution.
The credit crisis in China has created an imperative for SMB and global Fortune 1000 companies to think more creatively about achieving cash flow efficiency, without resorting to shadow banking, factoring, and supply chain financing. Constant static and "less-than dynamic" discounting methods are not economic tools of the modern age.
Instead of borrowing the same money at increasingly higher rates, or being restricted to limited accounts receivable advance rates and excessive fees, C2FO provides an open market system that gives all businesses the opportunity to access their cash from their customers in a more efficient manner. This means lower cost, less friction and more flexibility. C2FO is the economic trans-continental railroad of our time and a tipping point for China's businesses to transform their financial system. C2FO is working capital made easy.
How the verification of a Chinese company should look like? What kind of information can be obtained through this process? Is it really an essential step, or can the whole process be skipped? We will answer these and similar questions below.
Usually, the whole process begins when we’ve finally find a suitable Chinese company. Many depend on when we made the first successful contact: if we simply received an e-mail offer, risk factor is higher than in the case in which we met our supplier during trade shows.
The most important thing that we will find out through verification process, is the type of a company and its scope of activities. Chinese companies, which are dealing in international trade, usually fall into two categories: these are either trade companies or manufacturing companies. Sometimes the former impersonates the latter, but a proper verification process will help to reveal the real identity of the company.
In many cases, the person who claims to represent the Chinese company has no legal title to do so. Therefore it is always necessary to find out, who is the legal representative of the company. As we say:chinese company credit.
Verification is helpful in revealing the physical address of the factory. It is important, if we want to proceed further and send someone to check our shipment. On the other hand, ISO 9001 certificate is awarded to a particular facility, not to the company as a whole. Companies which possess factories cannot be simply shut down overnight – it may happen though to some of the trading companies, especially after receiving our payment.
Through verification process, the authenticity of provided documents and certificates will be also checked. The rule is simple: the Chinese are able to forge everything, but the truth can usually be easily revealed.
If you want to know more about the most popular methods of fraud, documents necessary in the import process and during the custom clearance, please refer to our other guides.
