By Phil Hantman

At the end of 2005 we decided to start a factory producing our own designed educational resources for Primary Schools. I knew it would be difficult - but how hard could it be?

It all began when our Shenzhen based manufacturers of our own-designed education products, moved to a cheaper site some five hours from the Hong Kong border.

Quality and production literally died overnight.

After 1 year of attempting to get decent stock from them and almost losing my customers in the process, the decision was made to try and go it alone. My English agent and his Chinese wife located the premises for me in Shenzhen. The Hong Kong based Engineer who had worked for the previous manufacturers and had left after the move, was recruited to run the factory.

So what could go wrong?

Everything!

Firstly - It took forever to set up the business registration and when it did get set up it was wrong. We were unable to get an export license.

Secondly, without a business registration document we could not open a bank account. So no money could be transferred in to China to buy equipment or pay wages. For four months cash was being carried across the border from HK to pay wages and construction workers etc.

Thirdly - when the account was finally opened we were allocated a bank to deposit our capital injection - a legal requirement for start up companies in China. Problem was - once in the account it is very difficult to get it out again. The funds were effectively locked until we approach the bank with a wealth of documentation, including the business registration, company chops and invoices for capital assets.

Fourthly - Just as we had everything in place to transfer our trapped funds out of the allocated capital account into a working account - so we could get on with our business, disaster fell. Our factory manager was travelling to the bank to complete the transfer of the funds. He arrives at the bank as they are closing for lunch. So leaving all of the company’s important documents and original information, on the front seat of his car, he goes for a Big Mac! As you would expect, the car gets broken into and it gets all gets pinched. We end up being held to ransom by some gang of thieves who contact my agent by phone that evening wanting the equivalent of $4000 for the return of the items.

The police were informed and a sophisticated sting operation was set up for the exchange of the items for cash at a deposit box in a supermarket. A policeman posed as the factory manager to collect the first drop - a sample document to show that they actually had the goods.

Maybe it was the fact that the Policeman just looked like a policeman - even in plain clothes, that alerted the thieves. Or maybe it was the fact that he climbed out of his patrol car when he walked to the supermarket - who knows. But our thieves and the documents were never seen or heard from again.

So how can a few documents be so important?

We are talking about the company registration document and the company chops. In China the banking system relies on company chops or stamps to sign all cheques and to make all transactions from the bank.

Signatures are not required. So obviously they are not something you want a thief to get hold of! We had to inform the bank urgently to put a stop on the Chop being used and place a display advert in the local papers declaring that this chop was no longer legal tender.

It then took another three months to replace the stamps and documents so we could eventually start trading and release the funds from the bank. Almost eight months after the company was supposed to have started trading.

So - plain sailing from now on then? Unfortunately not!

The last thing a new factory needs, after such a difficult start, is a go-slow followed by a walk out of 1/3rd of the work force!!!!!

Needless to say 2006 was not a great year for us!

However, after a senior management change the turnaround in the last six months has been remarkable. Now I see production and quality at an extremely high level and I am extremely proud of what has been achieved.

I can finally say that it has been worth it.

Phil Hantman, director of Edtech