I need two domains for my purposes: one for the app itself and another one for the CDN server. So I figured out how to set up two SSL vhosts on the same MAMP Apache server.

Using these instructions, you’ll be able to use https://anysubdomain.fake-domain-1.com/ and https://fake-domain-2.com:4043/ for testing locally. There must be a way to get around using the different port for the second vhost, but I couldn’t figure it out. But it works! If you want to add on more SSL vhosts, I’m sure you could just use different ports.

On the MBP, I run MAMP (the free version).

Setup Local Domains

I test my app locally using a fake domain names. First, you need to establish your fake domain name as a local domain. To do so, you need to add it to your hosts file.

To open up your hosts file in TextEdit while logged in with root permission, enter the following in Terminal:

sudo /Applications/TextEdit.app/Contents/MacOS/TextEdit /etc/hosts

Your hosts files might look something like this:

127.0.0.1    localhost
255.255.255.255    broadcasthost
::1             localhost
fe80::1%lo0    localhost
127.0.0.1 mamp fake-domain-1.com anysubdomain.fake-domain-1.com fake-domain-2.com

Just add the domains you want after 127.0.0.1 mamp. Once you update your hosts file, you’ll need to enter this in Terminal.

dscacheutil - flushcache

Create Self-Signed SSL Certificates

Create a directory to store your SSL certificates at:

/Applications/MAMP/conf/apache/ssl

Then create directories in his folder for your various local domains:

/Applications/MAMP/conf/apache/ssl/fake-domain-1.com
/Applications/MAMP/conf/apache/ssl/fake-domain-2.com

Log into Terminal. Sign in as root by using the su command. cd to one of the directories you just made and enter in these commands taken from Justin Samuel’s website. When you are prompted for a Common Name, enter “*.fake-domain.com” (where, of course, you substitute the domain you want to use). The * makes it a wildcard certificate for use with any subdomain on that domain. And don’t forget to enter a valid email address when asked for it. I just hit enter the first time I tried it and no files were generated.

(umask 077 && touch host.key host.cert host.info host.pem)
openssl genrsa 2048 > host.key
openssl req -new -x509 -nodes -sha1 -days 3650 -key host.key >  host.cert
openssl x509 -noout -fingerprint -text < host.cert > host.info
cat host.cert host.key > host.pem
chmod 400 host.key host.pem

Configure Apache

Edit the Apache config file at /Applications/MAMP/conf/apache/httpd.conf. Add this or uncomment relevant lines.

LoadModule ssl_module modules/mod_ssl.so
<IfModule mod_ssl.c>
SSLRandomSeed startup builtin
SSLRandomSeed connect builtin
Listen 443
AddType application/x-x509-ca-cert .crt
AddType application/x-pkcs7-crl    .crl
SSLPassPhraseDialog  builtin
SSLSessionCache         dbm:/Applications/MAMP/logs/ssl_scache
SSLSessionCacheTimeout  300
SSLMutex  file:/Applications/MAMP/logs/ssl_mutex
<VirtualHost *:443>
ServerName fake-domain-1.com:443
ServerAdmin you@fake-domain-1.com
ServerAlias *.fake-domain-1.com
VirtualDocumentRoot /Applications/MAMP/htdocs/fake-domain-1.com/%-3+
ErrorLog /Applications/MAMP/logs/ssl_error_log
TransferLog /Applications/MAMP/logs/ssl_access_log
AddDefaultCharset utf-8
SSLEngine on
SSLCipherSuite ALL:!ADH:!EXPORT56:RC4+RSA:+HIGH:+MEDIUM:+LOW:+SSLv2:+EXP:+eNULL
SSLCertificateFile /Applications/MAMP/conf/apache/ssl/fake-domain-1.com/host.cert
SSLCertificateKeyFile /Applications/MAMP/conf/apache/ssl/fake-domain-1.com/host.key
SetEnvIf User-Agent ".*MSIE*." nokeepalive ssl-unclean-shutdown downgrade-1.0 force-response-1.0
</VirtualHost>

Listen 4043

<VirtualHost *:4043>
 ServerName fake-domain-2.com
 ServerAdmin you@fake-domain-2.com
 DocumentRoot "/Applications/MAMP/htdocs/fake-domain-2.com"

 SSLEngine on
 SSLCipherSuite ALL:!ADH:!EXPORT56:RC4+RSA:+HIGH:+MEDIUM:+LOW:+SSLv2:+EXP:+eNULL
 SSLCertificateFile /Applications/MAMP/conf/apache/ssl/fake-domain-2.com/host.cert
 SSLCertificateKeyFile /Applications/MAMP/conf/apache/ssl/fake-domain-2.com/host.key
 SetEnvIf User-Agent ".*MSIE*." nokeepalive ssl-unclean-shutdown downgrade-1.0 force-response-1.0

</VirtualHost>
</IfModule>

Restart Apache

You can use the MAMP tool to restart servers.

Accept Self-Signed Certs in Firefox

Try out your your domain on https in your browser. It will throw an error, but if you add an exception to use the cert you won’t get anymore errors.

In order to accept the self-signed certificates in Firefox you’ll do the following. Go to the URLs at https://anysubdomain.fake-domain-1.com/ and https://fake-domain-2.com:4043/ using Firefox. Firefox will tell you that the connection is untrusted.

Click on “I Understand the Risks”.

Then click on “Add Exception”.

Wait a while for the cert to load up, then click on “Confirm Security Exception”.

Do this for all the domains you’ve setup.

A feasibility study is one of the first requirements when submitting an application to the Chinese government to set up a wholly foreign owned enterprise (WFOE) in China. This post is a feasibility study as to whether setting up a SaaS in Chengdu makes business sense.

Reality check requested. I’ve never set up a business before in China and have never even been to Chengdu. If you have information that could help me, please feel free to add a comment.

Table of Contents

Software As A Service (SaaS)

My company provides a website publishing (i.e., a content management system, or CMS) and member database (i.e., a customer relationship management, or CRM) software for organizations. The software is delivered to the customer via a web application, so no installation is needed on the customer’s computers. The software as a service (SAAS) business model provides predictable monthly revenues as customers pay for using the service via a monthly subscription. The software is basically complete and we have paying customers, although as with any software application, upgrades are always needed to stay current with competitors, keep up with technology and to become a market leader.

Benefits of Web-based SAAS

• access to global market via the Internet
  • customers can access the software from anywhere, anytime
  • developers can code and update server from anywhere
  • customer service agents can be located around the world for complete time-zone coverage
• quick release cycles of new software features/upgrades to pace with market and competition
• economies of scale derived from multi-tenant software architecture
• consumption-based expenditure for customers (pay as you go and scale up or down as needed)
• subscription model provides predictable monthly revenues

Requirements to a Successful SAAS in Chengdu

• reliable, high-speed Internet connections at affordable rates with quick connections to international servers
• stable electricity (infrequent brown outs)
• access to intelligent, problem-solving software developers
• available English-speaking employees to serve as customer service agents
• affordable office rental rates
• affordable employee salary rates

SaaS Market in China

In 2008, China’s software industry grew by 29.8% to RMB 757.3 billion. China’s SaaS market is targeted to reach US$171 million in 2010. Some SaaS players in China:

• 800app (八百客) – CRM provider
• Salesforce
• SAP
• Baihui (百会) – provider of ZOHO apps to China
• Kingdee – SME ERP
• YongYou/Ufida (用友伟库网) – ERP – Wei Library Network
• bFuture (富基标商)
• XToolsCRM
• MainOne (铭万) – SaaS product
• Jingoal (今目标)
• OlymTech (奥林科技)
• LiveUC (网动live UC)
• eAbax (金算盘)
• SaaSBB (神码在线)
• YouShang (友商网)
• Cinderella (灰姑娘)
• MarketingMap (昆山频道)
• SaaSChina – seeks to be a SaaS platform where budding SaaS companies can rapidly develop and deploy their SaaS offering on SaaSChina’s SaaSExpress platform.
• Dr. SaaS – China’s self-proclaimed No. 1 SaaS blogger
• Desai Network – SaaS industry portal

Chengdu Software Industry

One of China’s economic goals is to turn from manufacturing to focus on the service sector. Software development and outsourcing is an industry encouraged by the central government.

An excellent article from the ChinaSourcing magazine argues convincingly that Chengdu is an attractive location for software outsourcing.

The Chengdu Municipal Bureau of Commerce has set a goal to USD200 million worth of offshore outsourcing contracts.

Chengdu has one of China’s 11 National Software Parks

China has eleven national level software parks, one of which is in Chengdu. Being that a national level software park exists in Chengdu, it should stand to reason that there would be an ample pool of computer science graduates from which to hire. And once my company grows, a suitable office space might be available in the nearby software park. At first China started off with five national software parks in 2000 and by 2006 they added six more. These software parks can be officially called “National Software Industry Base” and/or “National Software Export Base”.

Links:

• China Maps out 10 Software Industry Bases
• China becomes Japan’s biggest software outsourcing base
• China Software Parks Show Growing Competitiveness

Chengdu High Tech Zone

Chengdu Hi-Tech Industrial Development Zone (CDHT) is one of China’s first nationally recognized high-tech zones and ranks fifth among China’s 53 high-tech zones. It has two sections: south and west. CDHT has 16,000 companies, of which 750 have foreign investment. Forty of those are Fortune 500 companies, including Intel (in the West Park) and Microsoft (in the South Park). Software companies that rent an office in the CDHT may qualify for a number of government policy incentives.

• Hiring a certain minimum number of employees may qualify for subsidized rent.
• 20-100% rebates on individual income tax for management and technical staff for the first five years.
• training subsidies
• exempt from corporate income tax for the first two years after it begins to make profit

TianFu Software Park

Chengdu’s software park is located in the south part of the South Park and is managed by Chengdu Tianfu Software Park Co., Ltd. (LinkedIn profile). Tianfu (天府) means “heavenly province” and is an epithet of Sichuan, especially the area around Chengdu.

Services

• office space at an average rate of 50 RMB/m²/month
• business registration
• HR recruitment and staff dispatching
• training association to provide custom courses
• incubation center for startups
• outsourcing solution center

Features

• employee dormitory
• apartments for singles
• business hotel
• shopping center
• 24 hour restaurant, high-end restaurant, cafeteria
• wifi throughout the park
• international school
• supermarket
• business center
• hospital and pharmacy
• fitness gym and outdoor sports area
• The municipal government is building Tianfu New City adjacent to the park, to be completed in 2014, and will have a population of about 600,000.

Location of the Software Park

It is located directly south of the center of Chengdu with 24 hour shuttle buses that go back and forth from the park to the center of metro Chengdu. The southernmost station of city’s new subway line #1, set to open in October 2010, will be at the New Exhibition Center, just a ten minute walk to the Tian Fu Software Park.

Check out photos of the park from Panoramia, PicasaWeb and Flickr.

Chengdu Universities that Produce Programmers

• Sichuan University (四川大学) – College of Computer Science (the English version of their website doesn’t work).
• Southwest Jiaotong University (西南交通大学) – School of Software Engineering
• University of Electronic Science and Technology of China (电子科技大学) – School of Software (their English website loads but I was unable to get to the actual computer science department page)
  • Ding Lei, China’s richest man in 2003 and founder of NetEase, operator of the popular website 163.com, is a graduate of UESTC.
  • Other prominent graduates include the CEO of China Unicom and the Chairman of Huawei.
• Sichuan Normal University (四川师范大学) – not much info available online
• Chengdu University of Technology (成都理工大学) – Dept. of Information and Computing Science
• Chengdu University of Information Technology (成都信息工程学院) – Software Engineering
  • Beijing Fastweb, a China CDN (i.e., content delivery network) established a strategic alliance with CUIT in 2009. I wonder how that’s going.
• Xihua University (西华大学) – School of Mathematics and Computer
  • Xihua students entered the China Imagine Cup Competition in 2007 submitting a multi-tenant SaaS application for creating and managing university portals. Very cool.
• Chengdu University (成都大学) – School of Information Science & Technology
  • ChengduU has the best English language website of all universities in Chengdu. And the school offers an Internet Engineering major and a course on computer graphics. I would like to know more.

Computer Companies in Chengdu

• Dawning Information Industry, Co., Ltd. (Wikipedia page) – supercomputer manufacturer entered a joint venture with the Chengdu municipal government and opened China’s first large scale cloud computing center to facilitate local government affairs and scientific calculation. (source, source and another source). It is apparently the  most advanced data center in China and will serve also as a telecommunications hub for the southwestern part of China.
• Ubisoft Chengdu (Facebook page) – a WFOE game development studio located in Tianfu Software Park. Sits on board of the Chengdu Game Alliance, an game industry alliance of 80+ game developers in Chengdu.
• Noah Education Holdings Limited – maker of electronic dictionaries and e-learning software relocated headquarters to Chengdu from Shenzhen.
• TianFuXinKong Web Technology Co., Ltd. – website design and hosting
• Sheer Digital Technology Co., Ltd – game, animation and art development outsourcing
• Chaofa – software outsourcing
• TechFirst – web and print design plus iPhone app development
• SYNNEX Corporation (都聚思力信息技术有限公司) – supply chain service center
• LanyoTech – software outsourcing and ERP SaaS product to emerge from beta in June 2010
• 30San Information System Co.,Ltd.
• Bug-Tracker Chengdu – Q/A and localization services
• MaesInfo – software outsourcing
• Ericsson – to move R&D to Tianfu Software Park, renting 5000 m²

Industry Conferences in Chengdu

• ChinaSoft – a 4 day conference with about 3000 attendees
• 5th Annual Asia Shared Services and Outsourcing Summit – Day 2 keynote on India’s outsourcing industry

Industry Websites

• PHP Training Center Chengdu
• Chengdu Computer Training Network – computer trade school
• Tianfu Software Forum

Internet

Reliable high speed internet connection speeds are vital to the success of a SaaS company both for quick download and upload access to its servers but also for use with VoIP services such as Skype for sales, inter-office and customer support related voice communications.

Residential

According to this Maxxelli blog post, broadband internet cable service can be obtained from China Telecom. Fees are:

• Installation: 300 RMB
• Plans:
  • 1 mbps: 98 RMB/month
  • 2 mbps: 120 RMB/month

Commercial

Are commercial connection speeds much better? The Invest Chengdu government website says that much fiber optic and ADSL connections are available on commercial lines. It cites the following network connections from Chengdu:

Chengdu’s internet bandwidth is 40G/S. China Net, Chengdu 163 net, Chengdu 169 net (Tianfu Hotline) of China public multimedia are main internet players. There are 4020 PSTN dialing ports, 600 ISDN dialing ports and 150 dedicated line ports in the network, which is connected by fast speed interfaces with the International Exit and the country’s eight regional centers. Chengdu is one of China Unicom’s seven key Uninet nodes. So far the bandwidth of the key node is 700M, that of international exit 418M, whereas the bandwidth of direct trunk connection with CHINANET in Beijing, Shanghai and Guangzhou is 2X155M, which is 6X155M of domestic network bandwidth.

ADSL fees are:

• Installation: 180 RMB
• Equipment rental: 100 RMB
• Plans:
  • 1 mbps: 500 RMB/month
  • 2 mbps: 1000 RMB/month
  • 4 mbps: 2000 RMB/month (about USD $293 per month!)
  • uncapped speed: 4000 RMB/month

A slow internet connection in Chengdu is ludicrously expensive when compared to a super fast 100 mbps residential fiber optic connection in Japan which you can get for only USD $11 per month. With Chengdu’s “fast” 4 mpbs commercial connection, you’d pay $73 per mbps. Japan’s fiber optic costs only 11 cents per mpbs! China’s internet is 666 times more expensive than Japan.

Woefully Slow Speed to Servers Outside of China

This might be a show-stopper right here, that is, if I were limited to a residential connection.

• A Chengdu resident said in 2007 that he could only get 70kbps from his local Chengdu telecom company connection.
• Another said that he could only get 35kbps from websites outside of China.

However, the city reportedly installed an “International Gateway Data Channel” on December 1, 2009 which Bai Gang, the deputy mayor, says should increase Chengdu’s international internet speed by 30-50 percent.

Providers

• China Telecom – according to one forum post they sell a residential Internet service plan of 1.5mbps for 120元/月, however China Telecom’s English website says nothing about Internet service.
• sad story: China Broadband – launched cable Internet service in October 2000 through it subsidiary Big Sky Network Canada. However China later outlawed foreign ownership of cable companies, so Big Sky’s Chinese joint venture partner got everything. Big Sky filed suit against Sichuan in Utah, but it was dismissed as it was out of jurisdiction.

Internet Cafes

• MoqiZone launches 802.16d WiMAX network in Chengdu
• Noah Information Industry

Telephone

Chengdu is apparently one of eight major telecom hubs in China and has 560 km worth of fiber optic cable laid. CDHT says Chengdu’s telecom infrastructure can fully guarantee international communications via its overseas nodes. Siemens China planned to open its first global call center in China, headquartered in Chengdu’s High Tech Zone, during the first half of 2010.

Tax and Incentives

Both domestic and FIEs pay 25% income tax. However, high-tech companies can qualify for a reduced 15% tax rate and qualified small and thin-profit enterprises can get a 20% tax rate.

Enterprise Income Tax (企业 所得税法) (EIT Law)

The EIT Law (PDF, 78 KB) went into effect in 2008 and replaced previous tax laws for FIEs. China taxes “resident enterprises” on their worldwide income at rate of 25 percent. “Non-resident enterprises” pay 20 percent income tax on their income earned in China.

• resident enterprise – set up under Chinese law OR a foreign company headquartered in China
• non-resident enterprise – a foreign company AND headquartered outside of China (may or may not have a China FIE) and earns income in China

If a company pays income taxes to foreign governments for income earned outside of China, those taxes paid overseas can be deducted from its enterprise tax in China (Article 23) unless otherwise superseded by a tax treaty the PRC has with a foreign government (Article 58). A tax treaty between the US and China (PDF, 111 KB) has been in effect since 1987.

Tax-exempt or partially tax-exempt income types:

• interest from treasury bonds
• dividends from qualified resident enterprises
• income of qualified nonprofit organizations
• income from agriculture, forestry, husbandry and fishery
• income from important state-sponsored infrastructure projects
• income environmental protection, energy efficiency and water saving projects
• income from transferring technology

The tax year in China is from January 1 to December 31. EIT is to be paid in RMB in advance by month or quarter and is due 15 days after the previous month or quarter ended. Annual returns are due by the end of May or 60 days after an enterprise is shut down and ceases business operations.

Preferential Income Tax for Hi-Tech Enterprises

Article 28 of the EIT Law stipulates a 15 percent income tax rate for important high-tech enterprises.

The second paragraph of Circular 39 (i.e., Circular on the Transitional Preferential EIT Rate or 国务院关于实施企业所得税过渡优惠政策 的通知 … read a machine translation in English) states that the preferential tax policies for Western Development will continue.

Serial number 30 of Circular 39 states that qualified high-tech companies operating in a high tech zone would be exempt from income tax for the first two years.

Circular 40 (i.e., Circular on the Transitional Preferential Tax Treatment for the Newly Established High-Tech Enterprises in the Special Economic Zones and Shanghai Pudong New District (国 务院关于经济特区和上海浦东新区新设立 高新技术企业实施过渡性税收优惠的通知… read a machine translation in English) states that in order to qualify for the 15 percent tax rate, a high-tech enterprise must own core intellectual property rather than simply licensing technology from a foreign parent corporation.

For further information, read the Preferential Income Tax for Hi-Tech Enterprises (PDF, 705 KB)

Read also the analyses of the tax incentives by KhattarWong, Ernst & Young, Deloitte and PriceWaterhouseCoopers.

Registered Capital

A WFOE is required to invest a certain amount of registered capital which is sent into China from a foreign company into the WFOE’s bank account. It doesn’t have to just sit there for the duration of the WFOE. You get to spend it on valid company expenses. According to the new Chinese Company Law (Article 59), a minimum of 100,000 RMB (about USD $14.7K) registered capital required for a single member LLC, depending on your industry. Read the China Law Blog post on this topic.

• The amount must be listed in your company’s Articles of Association and company register.
• The company register is a matter of public record and available to the public. Therefore it establishes a company’s “credit worthiness” and reputability.
• Small amounts of registered capital must be contributed immediately upon forming the company.
• Large amounts of registered capital can be contributed in installments (over a period, sometimes as long as two years) with the first installment being 20%, called “paid up” registered capital.
• It is a crime to fail to fully transfer the entire stated amount of registered capital into China.
• Regulators will evaluate whether the amount of registered capital is reasonably sufficient for operating your company in your chosen industry and location.
• Registered capital should be enough to cover rents and salaries in advance during the company’s start-up phase.
• Capital contribution can be in money, equipment or intellectual property. However any non-monetary contributions will be valued at the low-end by the authorities.
• Capital must be approved prior to transferring it to China otherwise it will not be recognized as part of your registered capital.
• All companies in China, both domestic and foreign, must have registered capital, although probably foreign companies have higher requirements.
• registered capital cannot be repatriated, unless perhaps if the WFOE is dissolved

100,000 RMB is the minimum amount of registered capital. But a commenter on this blog post noted that after a WFOE application stalled for 5-7 months, they resubmitted with two times the original amount of registered capital and got the WFOE approved in two weeks. It is important to make sure you have enough registered capital to pay operational expenses for the WFOE during the startup phase until such time as the WFOE can bring in income and positive cashflow. If the WFOE runs out of money (i.e., spends all of its registered capital), you would have to go through a 6-8 week process of applying for permission to increase the WFOE’s registered capital, re-issue business licenses, apply to the approve the transfer and then wire the money.

Human Resources

One of the prime motivating factors for establishing an office in China to do software development is to hire software developers at a much lower cost than in the U.S.

2008 Chengdu Annual Salary/Wages in RMB

Minimum wage in Chengdu

Minimum wage in Chengdu is based on two sets of geographic regions.

Chengdu Web Developers Salary: Market Study through Job Ads

Other current job listings for Javascript and PHP developers in Sichuan can be found on Zhaopin. 3000 RMB per month seems to be a valid estimate of salary costs for programmers in Chengdu.

2008 Chengdu Benefits

Source: CDHT The percentage rates for medical insurance payments are prescribed by the Chengdu Municipal Urban Employees Basic Medical Insurance Method.

Employment Agencies or Labor Agents

Representative Offices are not allowed to hire employees. They instead “hire” staff via a labor agent which will serve as the actual employer. This sounds just like outsourced human resources companies (i.e., temp agencies) like Adecco, Kelly Services, or ManPower. The company that requires staff will enter into a labor service contract with the labor agent. However, recent changes in the Chinese labor contract law make such contracts extremely unattractive. Two commonly used labor agents are:

• Foreign Enterprise Human Resource Service Co. (FESCO)
• China International Intellectech Corporation (CIIC) – a state-owned agency

Even though WFOEs or JVs can directly hire PRC citizens, some choose to use a labor agent instead to employ their staff. The labor agent can help you recruit employees or you can recruit your own and later arrange for their employment with the labor agent. Multi-national labor agents have a China presence with offices in multiple cities across China:

• ManPower
• Adecco
• Kelly Services

Labor Contract

According to China’s Labor Contract Law, the term of a labor contract (see Article 12) may be

• fixed term
• flexible term
• by project

A company may determine its own recruiting process. Once an employee is hired, a labor contract between the employer and employee must be signed within one month. A copy of the contract must be given to the employee (Article 16). Confidentiality and non-compete clauses can be added to the labor contract, but only for senior management or engineers.

Probation

Only one probationary period is allowed per employee.

Wages for employee under probation cannot be less than minimum wage, the lowest pay grade for that job (in the company) or 80 percent of the salary stipulated in the labor contract for that employee.

Termination (regarding full-time employees)

A labor contract may be terminated if mutually agreed upon but both employee and employer. An employer may terminate an employee if he/she :

• is found lacking during probation
• seriously violated written company policies (i.e., bylaws)
• causes serious loss to employer
• is under criminal investigation

Or the employer may terminate an employee upon providing 30 days written notice or one month’s severance pay if the:

• the employee is unable to perform duties due to medical reasons, even after treatment, and cannot perform other duties the employer may have need of
• the employee is unable to perform duties even after significant training
• situation has changed considerably so that the employee cannot do the work prescribed in the contract and no agreement can be reached in arbitration

During probation, an employee can quit by giving three days notice. After probation, the employee must give 30 days written notice. An employee is allowed to quit if the employer fails to

• provide work conditions that are safe and stipulated in the contract
• pay wages on-time
• pay social security premiums
• abide by the law

Whenever a labor contract is terminated, for almost ANY reason including when a fixed term contract is completed or an employee is found negligent, the employer must pay the employee severance pay. The only time an employer doesn’t need to pay severance is if the employee dies or starts to get retirement benefits. Severance pay is one month’s salary for every year the person was employed by the company. An employee who worked for less than six months would get half a month’s salary.

The turnover rate of Chengdu’s IT industry is 5-8%.

Part-Time Employees

Part-time workers are paid on an hourly basis, cannot work more than an average of four hours per day and not more than 24 hours per week. No written contract is required and no severance pay needs to be paid. Either employee or employer may terminate the relationship at any time. Hourly wages must not be less than the regional minimum wage.

Labor Law

• Labor Contract Law
• Trial of labor dispute cases
• income tax for non-residents

Expenses

Office Space

The average rental cost in the Tian Fu Software Park is 50 RMB per square meter per month. One company paid two months deposit plus one month rent in advance. Apparently it was possible in the past to set up your company using a residence as your company address. But this is not possible any longer. You must register your company with a commercial address. This requires that you sign a lease with the office landlord prior to submitting your FIE application. WFOE.org recommends adding a clause to your lease agreement that the lease is contingent upon the successful registration of the WFOE and that in the event that the registration does not go through that the landlord should fund the deposit and any rents paid. Moving your office to another location is a complicated process. Your accountant will need to submit a Tax Clearance Declaration Report, which is a difficult as an audit. Then you would need to change all licenses with your new office address.

Startup Costs

• Office Rental
  • one company paid two months deposit plus one month rent in advance
• Real Estate Agent Fees (RMB 5,000)
• Legal Fees (RMB 10,000)
• Employee Recruitment (i.e., job ad postings, RMB 5,000)
• Office furniture and equipment (???)

Monthly Expenses

• Accountant (RMB 400)
• Office Rental (???)
• Janitorial Services (RMB 500, service twice a week)
• Broadband Internet Service (RMB 400)
• Office Management Fees (RMB 400)
• Electricity (1.35 RMB/kwh)
• Sewer (1.5 RMB/m³)
• Water (3.10 RMB/m³)
• Gas (2.08 RMB/m³)

Yearly Costs

• Tax Preparation Fees
• Various Fees and Insurance charges

Business Entity Options

When starting a foreign invested enterprise (FIE) in China, you have four basic options:

1. Wholly Foreign Owned Enterprise (WFOE)
2. Representative Office (RO)
3. Joint Venture
4. establish no legal entity in China and just “do business” there

Obviously the first three options are legal while the last one is “risky business” and likely to get you booted out of China and your business given to your “employees”. However, establishing no China company at all might be the way to go for some.

Wholly Foreign Owned Enterprises (WFOE)

Read the excellent China Law Blog post on setting up an WFOE in China. Requirements

• company to engage in types of business activities approved by China as detailed in the Catalogue for the Guidance of Foreign Investment Industries
• foreign investor is an approved investor
  • investor is a valid, existing company in its home country
  • documents (along with Chinese translation) to authenticate person representing the company is authorized to sign documents on the investor’s behalf
    • articles of incorporation
    • business licenses
    • Certificate of Status
    • Bank Letter
    • description of investor’s business activities
• submit documents (in Chinese) for government approval
  • Articles of Association (sample AoA by wfoe.org)
  • Feasibility Study
  • Leases
  • Budget for Employee Salary and Benefits
  • Business plan

The World Bank Group provides an excellent 13 step registration process for starting a business in Chengdu, which includes times and costs to complete each step. They also provide valuable information which compares how easy it is to (1) start a business, (2) register property and (3) enforce contracts in Chengdu as opposed to other parts of East Asia & Pacific. Pros

• can directly hire Chinese citizens as employees
• no longer required to export 50% of product … can target the Chinese market
• freedom to control company without a Chinese partner
• can earn profits (as opposed to a representative office which is forbidden to do so)
• can convert RMB to USD for taking out of China

Cons:

• application process can be lengthy (2-5 months) and expensive (incorporation fees are about one percent of the initial capital)
• According to the new Chinese Company Law (Article 59), a minimum of 100,000 RMB (about USD $14.7K) registered capital required for a single member LLC, depending on your industry. Read the China Law Blog post on this topic.
  • The amount must be listed in your company’s Articles of Association and company register.
  • The company register is a matter of public record and available to the public. Therefore it establishes a company’s “credit worthiness” and reputability.
  • Small amounts of registered capital must be contributed immediately upon forming the company.
  • Large amounts of registered capital can be contributed in installments (over a period, sometimes as long as two years) with the first installment being 20%.
  • It is a crime to fail to fully transfer the entire stated amount of registered capital into China.
  • Regulators will evaluate whether the amount of registered capital is reasonably sufficient for operating your company in your chosen industry and location.
  • Registered capital should be enough to cover rents and salaries in advance during the company’s start-up phase.
  • Capital contribution can be in money, equipment or intellectual property. However any non-monetary contributions will be valued at the low-end by the authorities.
  • Capital must be approved prior to transferring it to China otherwise it will not be recognized as part of your registered capital.
  • All companies in China, both domestic and foreign, must have registered capital, although probably foreign companies have higher requirements.
• taxable under the Enterprise Income Tax Law

Types of WFOEs

• manufacturing
• consulting
• trading, wholesale, retail or franchise

Representative Office (RO)

A representative office in China is not itself a separate legal entity but represents the its headquarters (i.e., the foreign company in another country). An ROs purpose is to

• perform liaison activities
• conduct research and market studies
• promote the foreign company
• establishing and arranging contacts
• coordinate activities of the foreign company in China

Pros:

• faster (4-6 weeks, usually 30 days), simpler and cheaper setup than a WFOE
• can hire staff indirectly via a labor agent
• accounting and corporate services costs less than for an WFOE
• useful for building sales, brand and relationships in China
• no registered capital required!

Cons:

• cannot hire Chinese citizens as employees directly
• Must lease an approved office space for an entire year beyond the RO approval date. Some jurisdictions, such as Shanghai, consider only a few designated office buildings as approved to serve as office space for ROs.
• cannot bill customers, earn any money in China or take payments from a PRC business or individual
• cannot sign contracts
• must pay a 10% tax on the gross expenses of the RO
• the closing down of an RO will be under close scrutiny by tax authorities who will look for every opportunity to get money out of you.

The law firm Harris & Moure recommends not to setup an RO with the intent to convert it later to an WFOE. They say you will save time and money in the long run by just setting up a WFOE at the outset. Converting from an RO to and WFOE required the shutting down of the RO, which itself can take about two weeks and requires a bunch of paperwork, and then creating a brand new WFOE from scratch.

Joint Venture

There are two types of joint ventures:

• Equity Joint Venture
  • operates in the form of a limited liability company
  • profits are allocated based on the ratio of capital contributions made by partners
• Cooperative Joint Venture
  • can be organized as an LLC or as a “non-legal person”
  • profit allocation ratios are at partners’ discretion rather than by contribution amounts

Using an offshore holding company

LehmanBrown has some good advice about whether to create a company in another country (e.g, Hong Kong, Cayman Islands, etc.) owned by the parent company and where the offshore holding company owns the WFOE in China. Pros

• selling the China investment would involve selling the offshore entity rather than the WFOE, saving administrative hassle in China
• possible tax savings (this could be illegal tax evasion)
• if you create a Hong Kong holding company, you can get Hong Kong residency status and setup a HSBC account in RMB. Not sure why this is a benefit.

Cons

• practical difficulties for WFOE in China when opening bank account or verifying documents

Discussion

It seems that Chengdu’s Tianfu Software Park would make a fantastic location in which to set up an R&D office for my company. I would choose to set up an WFOE so that we could hire employees and control the direction of the company. I would prefer to keep our core intellectual property ownership outside of China. However, perhaps the Chengdu WFOE could create and own its own core technology which is different from our existing core technologies. In that case, then the WFOE would qualify as a high-tech company and receive two years tax exempt status, then 12.5 percent during the third, fourth and fifth years, and then 15 percent from then on.

Appendices

Business Registration consultants

• Conpak CPA
• Harris & Moure
• Path To China
• RHK Legal Corporate Advisors
• Sinovantage International
• Trident Trust
• Willsonn Partners
• Tianfu Software Park Customer Service Center

Other Links

• U.S. Commercial Service – Chengdu – mission to assist U.S. business successfully enter the Southwest China market and is art of the International Trade Administration within the U.S. Dept of Commerce.

Chinese Business Law

• Legal Documents
• The Company Law of the People’s Republic of China (revised in 2005) – China Law Blog post
• Enterprise Income Tax Law
• Preferential Income Tax for Hi-Tech Enterprises (PDF)
• Income Tax Law of the People’s Republic of China on Enterprises with Foreign Investment and Foreign Enterprises
• Determining the Newly-established Enterprises that May Enjoy the Preferential Policies for the Enterprise Income Tax
• Strengthening Administration of Enterprise  Income Tax on Non-Resident Enterprises’ Equity Transfer Income
• Accounting Standards for Enterprises No. 18 – Income Taxes (PDF)
• State Administration for Industry & Commerce (SAIC)

Acronym Glossary

• capability maturity model integration (CMMI)
• domestic enterprise (DE)
• foreign direct investment (FDI)
• foreign-invested commercial enterprise (FICE)
• software as a service (SaaS)
• State Administration of Taxation (SAT)

Chengdu Business News

• Chengdu High Tech Zone
• China Knowledge Online
• Invest Chengdu
• ChinaSourcing

Here is a playlist of 18 (new) Christian songs that I had never heard of until this morning.

Last night we were talking to some missionary friends who told us a wonderful story of thousands of people who had just gotten saved in a revival. How do you disciple thousands of people who get saved at once? House churches. But you’d need hundreds of leaders trained and ready to go. That’s a problem. Most churches don’t have enough small group leaders as it is where is no revival.

Immediately Internet video came to mind. Actually I’ve been thinking about it for some time. And, incidentally, I’m almost always thinking about the Internet. Ha. There are already a lot of great video websites which host video for free. They contain thousands of video of worship songs, many with lyrics. Many churches also provide their sermons by video online. The way to string them all together to create a cohesive service would be to create a playlist. A playlist allows you to watch each video in succession without having to click from one video to the next. It is like a slideshow of videos where the next video plays automatically once the previous video finishes.

Churches and missionary groups can setup any number of ready-to-go online “services” which anyone can use to host a small group in their home. No one needs to know how to play a guitar to lead worship. Instead you can have the very best and most talented worship leaders in the world, lead the small group in worship via video. And no one needs to prepare a Bible study with discussion questions. You can just add an online sermon. There are thousands and thousands of them available online for free. There’s no need to reinvent the wheel every week.

YouTube has the capability to create playlists. Here is a sample worship YouTube playlist embeded below.

You can embed your playlists on your blog or a forum, post them on facebook or email the URL to people. For the best viewing experience embed the playlist on your blog and play it at full screen. Try it out above, you can set it to play at full-screen and when videos advance from one to another seamlessly. If you were to watch a playlist on the YouTube website with autoplay enabled, at the end of each video, it pops out of full-screen as it loads up the next video.

Lots of Worship Videos Available on YouTube

There are a wealth of videos on YouTube that people have made with lyrics and (mostly) pretty good audio. I’m in the process of collecting worship videos in English, Chinese and Japanese. You’re free check out my playlist videos below:

• English
• Chinese
• Japanese

I’ll keep adding to those playlists as I find good worship videos. Please feel free to create your own playlists and share them below in the comments.

How to create a playlist on YouTube

1. First make sure you have a YouTube account. If you already have some kind of Google account, like GMail, you’ve already got one.

2. Search for a video you want to add. Here’s a tip. If you want to find a particular worship song video, search for the name of the song or artist along with the word “lyrics”.

3. Once you find the song, look for the “Save to” box below the video and click it.

4. A drop-down menu will appear below. Click on “Create a new playlist…” and type in the name of your playlist.

5. Repeat steps 2-4 until you have added all the songs and/or testimony or Bible study videos that you want for the small group meeting.

6. Once you have your videos in your playlist, to get to your playlists click on your username in the upper right-hand corner and select “My Videos”. Then on the next page, click on “Playlists” in the left side menu. Your playlists will be listed now in the left side menu. Select the playlist you made.

7. You will now probably wish to make sure the videos are in the order you want them rather than in the order that you added them. To see a list of the videos in your playlist, scroll down to the bottom of the page. To change the order of the videos, double click on a blue number next to a video in the “Position” column. An edit box will appear in its place so you can edit the position number of that video.

8. Now we want to embed the playlist on your blog or forum. To do this, scroll up until you find the field entitled Embed. You’ll need to copy the embed code for pasting it into a blog or forum post. If you don’t know how to copy and paste, watch this video for the Windows OS or this video for Mac users.

9. Finally go to your blog or forum post and paste the embed code when you have set the editor to HTML mode. Here are some videos which show you just how its done.

How to embed a YouTube video on a Blogger blog post.

How to Embed into WordPress 2.9

Here are other videos that show you how to embed into forum posts.

It took a lot of Google Translating of their webpages to get through the signup form. The last field on the signup form requires a promo code, which I found somewhere online. Look for プロモーションコード in the last field which means Promotion Code. It looks like they prefill 12601231 now. Here’s the form translated into English for your convenience.

At some point you might also need the account management page.

It took a LOT of trial and error before I was able to finally connect via the BB Mobile Point hotspots which are available at McDonald’s across Japan. To save someone else from frustration, here’s how to do it.

First connect find a McDonald’s near you. You can use their online map to search for available hotspots. Here’s a link to a map of area of Hamamatsu where I’m living. Hotspots don’t load up right away on the map, you may have to click and drag the map.

Once, you’re at a McDonalds, connect to the mobilepoint wifi hotspot.

You have to connect via WEP and enter this code: 696177616b

There are also passwords for livedoor Wireless and the NRT-Airport.

Once you’ve connected to the hotspot, open up your browser. You’ll be taken to a login form that says “BB Mobile Point” at the top.

For your username enter: your-user-ID@wig

For your password, just enter whatever password you had set when you signed up.

Unfortunately, the BB Mobile Point hotspot at the McDonalds (i.e., the one near Zaza in downtown Hamamatsu) where I’m first trying this is very spotty and continually loses connection. I do not recommend the Wireless Gate wifi service. Save yourself the headache and stay home. Maybe the connection is better at other McDonalds. I hope so.

UPDATE: The MobilePoint connection at the McDonalds on the ground floor of the Hamamatsu eki is reasonably fast. It also doesn’t drop quite as often … only once in the last ten minutes! Also, I’m sitting at Tully’s (which is right by the McDonalds) so I’ve finally almost duplicated my Starbucks in the U.S. with free AT&T wifi work environment.

UPDATE 4/28/2010: MobilePoint speed test at the Hamamatsu eki McDonalds.

I’m very excited about MooEditable because I’ve never before felt that I could have complete control over the previous HTML editors that I’ve used before. It is much more intuitive for the user to be able to interact with elements directly in the editor when possible rather than having to use the toolbar. With MooEditable, I can finally do that. So far, I’ve got a pretty robust link functionality. Next up: write a customized image button which utilizes Ascribe Dialog, allows uploads from the users computer and browsing of photo albums in the Ascribe CMS for photos to insert.

Source code of this fork

Demo … try clicking on a link in the editor

According to Facebook Terms of Service, although you maintain ownership of any photos and videos you upload to Facebook, the very act of uploading them to Facebook grants Facebook a non-exclusive, royalty-free license to use your photos and videos worldwide for any purpose … as long as you haven’t specifically informed them not to in your privacy settings. As of May 1, 2009, the TOS reads:

You own all of the content and information you post on Facebook, and you can control how we share your content through your privacy and application settings. In order for us to use certain types of content and provide you with Facebook, you agree to the following:

For content that is covered by intellectual property rights, like photos and videos (“IP content”), you specifically give us the following permission, subject to your privacy and application settings: you grant us a non-exclusive, transferable, sub-licensable, royalty-free, worldwide license to use any IP content that you post on or in connection with Facebook (“IP License”). This IP License ends when you delete your IP content or your account (except to the extent your content has been shared with others, and they have not deleted it).

Under these terms Facebook allows advertisers to use your photos in their advertisements on Facebook. In the privacy section of your Facebook account, Facebook allows to to set whether or not you wish advertisers to have this permission:

Facebook occasionally pairs advertisements with relevant social actions from a user’s friends to create Facebook Ads. Facebook Ads make advertisements more interesting and more tailored to you and your friends. These respect all privacy rules. You may opt out of appearing in your friends’ Facebook Ads below.

So if you don’t want your mugshot appearing in an ad for “hot singles in your area” on your spouse’s Facebook page, then take the following steps to specifically deny permission to use your photos in ads.

1. Under Settings, click on Privacy Settings.

2. Then click on News Feed and Wall.

3. Click on the Facebook Ads tab.

4. Set Appearance in Facebook Ads to “No one”.

5. Click on Save Changes and your done.

Remove Your Public Search Profile

Another security risk is the public search listings available on search engines like Google. If you have a Facebook account, do a Google search on your name. Chances are your Facebook public search listing is near the top on the first page of search results. Or pick almost any name you can think of and search it on Google. You will probably be able to find a public Facebook listing. The public search profile shows the person’s current profile picture, a link to send the person a message, eight of the person’s friends with their pictures and a sampling of the products, companies, television shows, etc. that he or she is a fan of. This is a LOT of information about you that you probably don’t want public available and easily searchable on the Internet. In Facebook, because you have to sign in with an account in order to use Facebook, as a user you are lulled into a feeling of security that only your friends and family will be able to see your profile picture or know what kinds of television shows you like to watch. On the contrary, Facebook makes it public to the planet by default.

The good news is that you can shut off your public profile. To do so follow watch this video.

[youtube]http://www.youtube.com/watch?v=SK6RlI-oZqs[/youtube]

Banish Facebook Ads

I was annoyed sometime last year by the content of some ads on Facebook, so I decided to see if I could get rid of them. It was astonishingly easy. Use the Stylish Firefox add-on to add site-specific CSS styles to hide the ads from view. To do hide Facebook ads on the Firefox browser follow these instructions.

1. Use the Firefox browser.

2. Install the “Stylish” add-on:
https://addons.mozilla.org/en-US/firefox/addon/2108
(requires browser restart)

3. Go to a Facebook page.

4. Look at the bottom-right corner of the browser and click on the icon of a pen on a document.

5. Mouseover “write style…” and select “For facebook.com …” in the sub-menu.

6. Under “Description” you can name this style rule anything you want (e.g., remove facebook ads).

7. Down below in the style code box use this code:

@namespace url(http://www.w3.org/1999/xhtml);
@-moz-document domain(“facebook.com”) {
#ssponsor, .home_main_item .social_ad { display: none !important; }
}

All you have to do is copy and paste in the code the is bold into the appropriate place in the box.

8. Click “Save” and you’re done! Ads are gone!