International Trading Company with Minimum Budget

I. Introduction to International Trading…………………………………… 02I.1. New Trends………………………………………………………... 03 I.2. Data and Statistics………………………………………………… 05

II. Business Sizing and Scaling……………………………………………….. 12

II.1. Trading Busines Preparation……………………………………. 13II.1.1. Transaction in minimum scale………………………… 13II.1.2. Main Core Business……………………………………. 14II.1.3. Trading Focus…………………………………………... 16II.1.4. Demographic Acknowledgement ………………………17

II.2. Business and Office Setup……………………………………….. 20II.2.1. Legal Set up Preparation and Requirements……….. 20II.2.2. Office Set up…………………………………………... 25II.2.3. Company System……………………………………… 25II.2.4. Daily Office Operating Procedures………………..… 26II.2.5. Money and Finance Administration……………….…

27II.2.6. Warehousing……………………………………………28II.2.7. Paying Term and Method……………………………..29II.2.8. Financial Capital……………………………………… 29 II.2.9. Illustration ……………………………………………. 30

II.3. Business Expansion and Integration…………………………….32II.3.1. Footage ………………………………………………….32II.3.2. Trading Business Service...…………………………….33

II.4. Manufactured Processed and Collaborated Products………….34

II.5. Retailing Service………………………………………………….. 34II.5.1. Local Logistic and Delivery Services ………………... 34II.5.2. ASIA Based Hypermart and Mall .……………….......35

II.6. Trading Company Representatives Expansion………………… 36II.6.1. Duplication……………………………………………. 36

II.7. Sinergizing Trading Commodities to Direct Consumer……….. 37II.7.1. Mini Market and Online Shops Franchising…………37

II.8. TipTop………….…………………………………………………. 37

III. Abreviation & References .……………………………………………….. 38

Research and Development – Trading & Retail – SGP/MRM/20120803

I.Introduction to International Trading

Years before international trading claimed to exist, a so called trading by sea and land crossing border of continents had been done by people centuries a go, it had been known as a beneficial activity with rules applied, wherein nowadays is called as Trade and Tariff which is controlled by a lot of organization which centralized in a gigantic organization, known as GATT or we may know now as WTO. The oldschool activities involving in raw materials, merchandises, and agent services, and not forgetting rules of pirates that occurred and had been going on and on for centuries until the new age arrived and acknowledged its existence. The new age has made so many changes and so many rules concerning with trade and tariff, it used to be a very simple trade, but now, with so many heads merging in it, the trading has become something harsh and it is seen to be hard to do. The new age named it as International Trading.

The International trading has radically shaped the world and persistently made everything “your wish is my command rule” come to existance in a zip. The polar bear can be forced to live in africa, and african camel can be seen or consume in asia, and insha allah, with higher technology transfer, such as artificial intellegence, all human being do not have problem to live even in deserted area. Such examples are possible things and commonly done by the world everyday 365days in a year. If there used to be only Eurasia, Europe, and Asia, we have now a lot more complicated rules to adapt such as a country rules, ASI rules, CIS rules, BRICS rules, AFR rules, MEA rules, NAX rules, EU rules, and CSC rules. These organizations are unified by a bigger organization namely WTO which is established in 1995, replacing GATT which is commenced in 1948.

However, those organizations are only a few of them, there are still so many of them unified by, for example; their mutual production, such as OPEC or mutual agreement, or mutual multilateral agreement, or simply because they just want to collaborate creating rules on their trading tariffs and protection which force us to follow the rhythm of their dynamic behavior. We are urged to learn and to follow monthly statistics, trading trends, and so many organizations policies related to world trading. Those activities are inevitable and have to be learnt consecutively. Today we may find this international trading in the real world just as we confront it face to face, but tomorrow it could be different and perhaps within a week, it could change into180° on the opposite way. We may never know if we just come to the trading spot, we stop for a while and the we leave the area. The right way to do it is to be with them all the time, to connect with them and to be side by side with them. There’s a saying “close to your friend and sleep with enemies within”.

This Prospectus is served with updated data and statistics, facts and opinion which summarized and concluded from trustable sources, such as; WTO, OECD, CEIC, economy watch, Indonesia ministry of trade, Trading specialists, and so on. However, as we have proclaimed before, this international trading is a dynamic life chain activity which entails us to march and follow the flow in order to get a fast newly updated fact on international trade and tariffs behavior.

In this prospectus, you will be able to see and to value the real money flow that is going and travelling from places to places through out the world.

a brief of international trading and retail business/stp/mrm/20120803 2

I.1.New Trends.

It is very important to be able to understand and comprehend the needs of the world consumption on every single country commodity. Whether it is merchandises, raw materials, or manufactured products, they are all even though linked to each other, however share a significant difference in amount of percentage among them. If we ask ourselves, what is the urgency or the importance of knowing the new trading trends earlier than other trading companies that are considered to be our competitor, the answer would be pioneering in each step and linkage of international trading. The pioneer might be able to cooperate and be trusted to deal with big companies and as well as big organization such as OPEC, or even mentioned in G8 and or G20 as a most recommended company.

It seems that knowing what the new trends is, could be a source of delicate money for a gold digger and a must have tangible asset in the company. So, how can we know the new trends? Every country keeps on tracking their own trail and fulfill their destiny pursuing what they’re expert on. Arabs on oil resources, Japanese and German on Hi Tech, and Indonesia for raw materials. Even so, few countries are keen in trying to get in to every aspects of trading commodities, even though they are not meant to be. For instance, The People’s Republic of China who keep on trying to lead the international trading which turn out to be a success, in spite of its numerous population.China has been producing all kind of stuffs, although it lacks of natural resources. It has proven that everything can be accomplished when you keep on pursuing things that you believe. Does it really have to do with new trends? Well, If you have become a part of leading countries, then the answer would be a yes. Pursuing your natural talent until it does really exist can lead you to a success in achieving and determining the new trends.

These several facts below on new trends are considered as something essential for those countries in which their main product is in agricultural products.

1. A study in 2008 based upon data from WTO stated that “one of the notable trends is that processed agricultural goods have become more important within trade in agricultural goods over the past decade.They accounted for 48% of global trade in agricultural goods in 2001 – 2, rising from 42% in 1990 – 1. This upward trend can be observed across countries and agricultural product groups throughout the 1990 – 2002 period.” IFCBA – WCO Trendsdoc – Trade in agricultural and manufactured goods page3.

This shows that the trend in agricultural goods in that year period has focussed on processed agricultural goods, namely manufactured products. Countries that demographically created to produce agricultural goods have to pay attention and alert on this trend, otherwise, they could only be watching trading companies do the trading for them putting zeros away from them and leave with an independent zero.

2. According to WTO International Trade Statistic 2011, Indonesia’s 2010 export on agricultural products has risen up to 42%.

Although it only ranks 6 of all major exporters of agricultural products in 2010, this is somehow still a very good response on how an agricultural country reacts on trading trend.


Following data is Indonesia’s export statistic from 2001 – 2011 issued by Indonesia ministry of trade. The statistic shows that in the last decade, Indonesia has shown a steep progress of 210,62%.

From this chart we can see the correlation between WTO data and Indonesia’s on agricultural products, although the Indonesia ministry of trading doesn’t show diversification on type of agricultural products, whether it is processed or not.

Furthermore, based on the example above, we could say that a more serious study has to be done by all countries that demographically share the same domestic products, or typically stereotype in some commodities to ensure that at least they can be in place when the new trends approach and knock on their door. It also goes the same to all countries in the world with their own proportion. This may sound unsupportive, but in reality, to really get in touch with the new trends is not as easy as it looks, a full commitment to market research and alert on what happen to the world should be emerged and be developed gradually.


I.2.Data and Statistics.Data and statistics that are presented to support the needs of research in evaluating and acquiring new trends when they come approach come from Indonesia Ministry of Trade OECD, and WTO.

Indonesia’s Export Statistic from 2001 - 2011

We can see that from 5 different commodities categorized by the ministry of trade, Indonesia’s export on non oil and gas placed number one and has reached the highest a brief of international trading and retail business/stp/mrm/20120803 5

point, up to 16.2019,5 in 2011 and meet the lowest point in uncategorized commodity known as others at 4,2 in 2004.

Indonesia’s Import Statistic from 2001 - 2011

In the last decade, the highest import according to the statistic above occurred in raw material support in the year 2008, which reached an amount of 187.226,5 and the lowest as we see happened in 2002 on consumption goods as low as 2.650,4.


Indonesia’s Export in comparison with Import in the last 10 years.

If we compare the export and import data above, we may find that Indonesia has develop a good trading statistic during the past 10 years. The import covering 34,3% up until march 2012 and the rest is export. However, this graphic is not presentable enough to be acclaimed in the international trade.


World Merchandise Exports by Product Group 2010 according to WTO International Trade Statistics 2011 is as follow:

1. Fuels.2. Non – pharmaceutical chemical.3. Food.4. Automotive products.5. Telecom Equipment.6. EDP and office equipment.7. Integrated circuits and electronic components.8. Pharmaceuticals.9. Iron and steel.10. Clothing.11. Non ferrous metal.12. Ores and other mineral.13. Personal and household goods.14. Textiles.15. Raw materials.

WTO, based on the statistic concluded that: The strongest recovery in merchandise trade was ores and other minerals, which

grew by 54,1% in 2010, followed by non –ferrous metals (42,7%). Within manufactured goods, iron and steel and integrated circuits registered the

strongest growth (29,4% and 35,3% respectively). As of 2009, exports of food overtook exports of automotive products.

The share of primary products in world trade increased from 22% in 2000 to 30% in 2010.WTO International Trade Statistics 2011-Table A10.

OECD reported that Merchandise trade grew moderately in most major economies in the first quarter of 2012. Total imports and exports of G7 and BRICS grew by 1.0% and 0.6% respectively. In contrast, trade slowed sharply in China, with exports contracting (by 4.2%) for the second consecutive quarter and imports contracting (by 3.8%) for the first time since the first quarter of 2009. Imports and exports grew in Germany (by 0.9% and 1.8% respectively), Japan (by 1.5% and 2.1%), the United Kingdom (by 2.7% and 1.6%), the United States (by 4.0% and 2.0%), India (by 5.7% and 5.9%) and South Africa (by 6.3% and 4.8%). Import growth was flat in France and contracted (by 3.2%) in Italy but exports rose in both countries (by 0.7% and 1.3% respectively). Imports grew (2.4%) in Canada but exports decreased (-0.3%) for the second consecutive quarter. Exports also declined in Russia (by 0.7%). OECD - dataoecd

In US$BillionG7&BRICS


CHINA

UNITED STATES

GERMANY

CANADA

FRANCE


JAPAN

INDIA

RUSSIAN FEDERATION

SOUTH AFRICAN


ITALY

UNITED KINGDOM

BRAZIL


II. Business Sizing and Scaling.

In every business movement there’s always step zero and then step one, and then two and so on, until you finally reach the level that you aim to. There are so many saying to illustrate and to certify that in order to succeed we have to start to step forward. Since we are trying to start a trading business in China, I would share to you a famous chinese saying in doing business which is famous among chinese around the world which is qian li zhi xing shi yu zhu xia. Yes, it is philosophical words from Chinese Philosopher, Lao tzu which literally means, a journey of a thousand mile begins with a step. This phrase is a strong meaning for every chinese to encourage them to start a single movement, whether it is a small or even a big one. It tells you if you want to reach a distant you should try to step on your foot to begin. This saying also tells you that you should go through the journey step by step, because if you do this, eventually you would reach the destination.

In this trading business ,we would propose that we start at least at the level of setting our footstep down to the ground and tied with the system, engaging, collaborating, integrating and synergizing all resources that are available with minimum set up. Of course by saying so, it means to prepare everything in details and by saying minimum set up, it means cost effective. Since the key to step forward on to level to next level is to go through the phase and of course, along with it, work capital should be boasted up gradually. Thus, business will emerge and it will start making money. A classic rhetorical statement which frankly doesn’t go along with the trading business rhythm.

On the contrary, in Trading Business Sizing and Scaling, every time we step up to other level, we gain power, and again, and again, and again, until finally a new business model is formed by the act of mischievous events. The power here of course refers to work capital as well as money and or profit. In normal trading business, we don’t let the money sleeps and stay like a boss, but, we force it to work the whole day, consecutively 365days a year. By doing so, we could move faster and optimal in performance. Nevertheless, there are rules and requirements that have to be adjusted and applied.

II.1. Trading Business Preparation

As we discussed before, the preparation should be done intensely, gradually and consecutively. This is essential and obligatory for business owners who’d like to have a strong business foundation. These four points below are suggested to be prepared:

Transaction in minimum scale. Trading Focus. Main Core Business. Demographic Acknowledgement

Those four elements are obligatory for us to run through stages and will be discussed in details inclusively with the WH questions and the How.


II.1.1. Transaction in minimum scale.

What is the minimum scale of every trading transaction? Can we say in container? Or Should we answer it in USD or in RMB?In general, the answer maybe vary and subjective to the doer. We can start with half of 20 foot container, one 40 foot container, or even more than one container, perhaps 3 or 4 containers, it depends on subjective view. If we answer it in term of money, then the result would definitely be vague. So, how do we indicate and distinguish the minimum scale of transaction? In our terms, we can place things in accordance to certain margin target that is required to run the operation and wanted by shareholders and businessmen. If 30,000USD - 100,000USD can be sufficient, then 30,000USD – 100,000USD per transaction is pegged as the minimum scale. Moreover, It is very important to conduct the idea of profit margin being the definite decision to indicate the minimum scale transaction.In this brief acknowledgement of international trading business and retail rightnow we would say in two conditions:

1. We start to operate trading companies in China, buying stuffs that are considered as sold out commodities in Indonesia and put them into warehouse as a stock and start offering them to market. This kind of model can be done only if we are ready with marketing and sales system. The minimum scale is subjected to size of the company.

2. We start in making links and connecting to all buyers and preparing a good marketing and sales system, while going back and forth to China to outsource,buy goods as samples and to set up companies. This kind of model is done by beginner who’d like to start to make a career in trading busines. The minimum scale is around 10,000USD – 30,000USD per transaction. If most of transactions exceed 30,000USD, then it is the time to run operation in China.

II.1.2. Main Core Business The idea of this business is to move in a field of trading and expand it into retailing. In time to come, it shall evolve into a bigger company that provide people to do trading business and connect them with supplier and handling their essential work such as payment and controlling production. It will have a new born company wherein the core business is trading agent, offering commercial services. The final assessment for the company is to give birth a company wherein the core business is retail. In the end, we would have at least 3 different group of companies with 3different core business. Until then, we have a lot of homework to do to keep up with world desire and demand.

Furthermore, the product that will be traded is divided in 5groups below:A. Raw Material Product.B. Assembled Product.C. Processed Product. D. Finished Product.E. Consignment Product.

A. Raw material product.Basic material that needs to be processed to a finished product or to an assembled product, which is mainly from natural resources. To make it easy to comprehend, the products would be said as follow:Coconut shell, Polyprophelene, Polyutherene,Leather,Yarn, Cotton, etc.

B. Assembled Product.Basic material that comes from processed natural resources For example: Carved wood, Coloured leather, Textiles, etc.


C. Processed Product.A new product which is basically from customer demand, which require a serial of time consuming process.For example: Garment, Furniture, Plastic bag, etc.

D. Finished Product.Ready use product that is available in market.For example: Machine, Food, garment, etc.

E. Consignment Product.Product that is sent and consigned to an agent to be sold.For example: Raw material product, Assembled product, and Finished Product.

How do we choose which one to start with?First, we have to verify the place in which we operate. As we all know, Indonesia is rich with raw materials and assembled products, and China has pretty much all of the 5 items above. However, most of Indonesian finished products sold in market are made in China. Thus, we can decide that we will start with raw material, assembled and finished products.

Why don’t we start by doing all of those 5 items, since we are about to set our foot down in china anyway?There are learning phases in every stage of business. In order to be a leading company and pioneer in business movement, we need to know things in details and really master the products. We have to be alert on every new trend and improvement related to those products. Going through 5 group of products altogether is time consuming, inefficient and can be also outdated. Since new trends and technology are volatile, then it is a wise decision for a new player don’t come and run through the mainstream at once.

What are kind of products that included in the raw material, assembled and finished products?According to ministry of trade of republic of Indonesia, leather & leather products, medical instrument & appliances, processed food, essential oil, fish & fish products, handicraft, and spices, are included in 10 main export commodity that are exported to China. In China side, there are so many products that can be exported to and distributed in Indonesia, namely machinaries, Electronics, Ceramics, Textiles, and so on.

How to outsource the products?In indonesia, agents are everywhere claiming to own some product, which they don’t. However, in some part of businesses, agents are inevitable. Since they are the only link to the proprietaire. Despite of all that, the best way to outsource the products are visiting villages where the actual proprietaire are there. It goes the same thing in China, where asian mindset turn out to be the same. We have to visit remote areas where the actual manufacturers, suppliers, and vendors are there.

What is the best way to do the outsourcing? The best way is to set up Company In some developed cities in China, starting with keqiao, the textile city.

How about the rest of the 5 group of products? When are we going to touch them?The rest of the group of product will be traded when the three main core business, ie; trading commodities, trading service, and retail has emerged. They are all will be collaborated and sinergized, linked to each other.a brief of international trading and retail business/stp/mrm/20120803 14

II.1.3.Trading Focus.The trading Focus can be devided in 3 level:

A. Bilateral. China Indonesia and Indonesia China.B. Random Nation. China Random Country throughout the world.C. Groups of Countries. Indonesia, China, Brazil, Egypt, Canada, Turkey, HK and

India APEC – ASI – CIS – BRICS – AFR – MEA – NAX – CSC – EU.D. All Nations. Indonesia, China, Brazil, Egypt, Canada, Turkey, HK and India

The world.

A. Bilateral In the first level, we will focus on 2 countries occupying China and Indonesia. Once we have settled branches and expand the business into trading agent, then we will start to prepare to go to a bigger trading, which enable us to automatically connect with the world passively.

B. Random Nation. The next focus will be expanded into trading with random companies throughout the world.

C. Groups of Countries.In this phase, the company will have had office branches in China, Brazil, Egypt, Canada, Turkey, Kazakhstan, Hongkong, and India connecting to groups of united countries, such as APEC, ASI, CIS, BRICS, AFR, MEA, NAX, CSC, and EU.

D. All Nations.When we have connected to all nations in the world, it means, our mission is accomplished. This focus will take place when the 3rd born main core business is established.


II.1.4. Demographic Acknowledgement.

Since Deng xiao ping policy of open economy , which is known as gaige kaifang started in 1978, according to Oded Shenkar, a scientist and a researcher who had been focusssing on China for about 30 years, China has been fast moving toward to a greater develoment. Proclaiming itself become an OEM country, China made a steep progress to ODM, until finally has succeed its final research and launch its OBM.

Nowadays, China Brand is all over the world, from low quality until the high quality of high - end technology. Below is list of top 50 Chinese brand in 2012:


After that, we can see United States Dollar against Chinese Yuan Renminbi ‘s journey in data from forecast-chart.com.

Year USD/CNY Year USD/CNY Year CNY/CNY1981 1.71 1992 5.53 2003 8.281982 1.90 1993 5.78 2004 8.281983 1.98 1994 8.64 2005 8.191984 2.33 1995 8.37 2006 7.971985 2.94 1996 8.34 2007 7.611986 3.46 1997 8.32 2008 6.951987 3.73 1998 8.30 2009 6.831988 3.73 1999 8.28 2010 6.771989 3.77 2000 8.28 2011 6.461990 4.80 2001 8.28 2012 6.341991 5.33 2002 8.28 2013 6.68

On the data above, we see that when China annouched the new political reform of open economy in 1978, it started to have relationship with the world and started to develop its economy since then. The 2012 data is served by xe.com and 2013 is forecasted by forecast – chart.com by using HDTFA method.


We can see opinion from a reliable source synchronized with the data above. “When it was pegged to USD up till mid 2005, the USD/CNY rate was 8.2765 (1 USD buys 8.2765 CNY). Between mid 2005 and mid 2008 (in 3 years), USD/CNY rate fell to 6.8217. This means that CNY strengthened by 17.5% against USD. It then stabilised at this rate for 2 years until August 2010 when the next round of appreciation of CNY occurred. For one year and eight months, CNY appreciated to touch 6.3034 on 27 April 2012. CNY strengthened by 7.6% against USD during this period. So all in, the appreciation of CNY was 23.8% since 2005”

China has been enlarging the business and has become one of the pioneer in international trading. It is recorded that China is one of three big countries (China, US, Germany) that hold 1/3 world 2010 merchandise trade, according to WTO International Trade Statistics 2011.We can also see data from National Bureau of Statistics of People’s of Republic of China from 2001 to 2010.

Table 4: China's Trade with the World, 2001-10 ($ billion)Notes: *Calculated by USCBC. PRC exports reported on a free-on-board basis; imports on a cost, insurance, and freight basis.Source: PRC National Bureau of Statistics 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Exports 266.1 325.6 438.2 593.3 762.0 968.9 1,217.8 1,430.7 1,201.6 1,577.9 % change* 6.8 22.4 34.6 35.4 28.4 27.2 25.7 17.5 -16.0 31.3Imports 243.6 295.2 412.8 561.2 660.0 791.5 956.0 1,132.6 1,005.9 1,394.8 % change* 8.2 21.2 39.8 35.9 17.6 19.9 20.8 18.5 -11.2 38.7

Total 509.7 620.8 851.0 1,154.6 1,421.9 1,760.4 2,173.7 2,563.3 2,207.5 2,972.8 % change* 7.5 21.8 37.1 35.7 23.2 23.8 23.5 17.9 -13.9 34.7Balance 22.6 30.4 25.5 32.1 102.0 177.5 261.8 298.1 195.7 183.1

Despite of its 1.7 billion citizen, China has proven to the world that it is able to conduct the world economy in a short period of time. Not only did China manage to scatter the world with mass production, but it also shocks the world with its powerful Chinese Yuan Renminbi.

II.2. Business and Office SetupThis is the next step of the business expansion, or we may call it as the gate. In this level, we may discuss a lot of things concerning with legal, hiring people, daily SOP, company system, financial capital and of course, profit sharing or dividend.

Before we start to enter this phase, we have to make sure that we have make a checklist on duties that we have accomplish during the preparation, such as observation and facts finding, and perhaps asking experts on business that we are about to explore. Afterwards, we could freely jump free and start enjoying everyday of rest of the journey.


II.2.1. Legal Set up Preparation and Requirements.

Are we cleared that our business is in international trading? Are we going to set up company in China? Are we going to start to run the business in China?If the answer is yes, then keep on reading, because you are about to view and experience the busines in theory.

What to start in order to be able to move freely in doing trading business in China?We need to have trading company and an offshore company.

Why do we need to have 2 companies?Actually, with only 1 company we can operate in China, but , to reduce tax, we need to have an offshore company. Firstly we have to be cleared of what an offshore company is. According to wikipedia, an offshore company can be defined as:

1. A company which is incorporated outside the jurisdiction of its primary operations regardless of whether that jurisdiction is an offshore financial center (sometimes known as a non-resident company) i.e. a Canadian company may be 'offshore' for the purposes of a USA citizen.

2. Any company (resident or otherwise) incorporated in an offshore financial center, i.e. offshore jurisdictions.

What are the benefits?

According to wikipedia, Offshore companies have the following features which may be beneficial:

Taxation - In most jurisdictions authorities will not seek to tax companies which they treat as non-resident, save perhaps for a nominal fee -$350 BVI, £320 Isle of Man etc.

Simplicity and Reporting - except for regulated businesses, such as banks or other financial institutions, some jurisdictions make it relatively simple to set up and maintain companies especially with reference to lesser reporting requirements than so-called onshore jurisdictions - the level of information required by the registrar of companies varies from jurisdiction to jurisdiction.

Legal and asset protection - some jurisdictions have stricter provisions for allowing a court to pierce the corporate veil, and in many cases corporate governance rules require the laws of the jurisdiction where the corporation is chartered - rather than where it is sued - to apply. For example Gibraltar makes it illegal for the trustee of an Asset Protection Trust to surrender its assets to a creditor of the settlor and in Switzerland it is illegal to disclose banking information.

Fees - some jurisdictions impose much higher fees to incorporate than other jurisdictions. They may also impose much higher maintenance fees on a corporation's yearly renewal of its charter. This will vary from service provider to service provider and will be significantly based on the cost of local disbursements.

Anonymity - by carrying out transactions in the name of a private company, the name of the underlying principal may be kept out of documentation, since the company is a separate legal entity. Having said that, current anti-money-laundering regulations often require banks and other professionals to look through


http://en.wikipedia.org/wiki/Maintenance_fee

http://en.wikipedia.org/wiki/Settlor

http://en.wikipedia.org/wiki/Pierce_the_corporate_veil

http://en.wikipedia.org/wiki/Offshore_jurisdictions

http://en.wikipedia.org/wiki/Offshore_financial_center

http://en.wikipedia.org/wiki/Offshore_financial_center

http://en.wikipedia.org/wiki/Incorporation_(business)

http://en.wikipedia.org/wiki/Company_(law)

structures. This will always be the case for any reputable bank but it does not render ineffective the use of corporate structures, rather it ensures they remain legally compliant.

Thin capitalisation - Some offshore jurisdictions tend not to impose "thin capitalisation" rules on companies (except for regulated entities such as banks and insurance companies), allowing them to be formed with a purely nominal equity investment.

Financial assistance - offshore companies are usually not prohibited from providing "financial assistance" for the acquisition of their own shares, which avoids the needs for "whitewash" procedures in certain financial transactions.

Cost of operation - In many cases, i.e. where a self employed consultant provides services to a number of jurisdictions and travels frequently, it is a matter of choice where he chooses to incorporate. In this case the fact that companies in an offshore financial centre are considerably cheaper than buying or renting premises, arranging to engage accountants, receptionists, IT providers etc. would be.

How can we have those companies?Here below are the requirements.

Do we agree that investors will be put on behalf of company and that investors will act as shareholders in the company, and or can also be part of the company action? If we share the same view, then the requirements are as below:1.Business license copy with notification from Embassy of PRC.(2pcs)2.Original Bank letter to show the amount in the bank more than registered capital in China.(2pcs)3.Director of company's passport need notify from notary public office then certified by the embassy of PRC. (2pcs)4.Audit report of last financial year.(original)5.Passport of the legal person or Chief of Executive Officer of new trading company need to be notified from notary public office then certify from embassy of PRC.(2pcs)

What if we can’t present the company? Then, on behalf of individual investment would suffice.Here are the requirements:1.Passport need to be notified from notary public office then certified from embassy of China.(2pcs).2.Bank certificate under individual name to show the amount in the bank more than register capital in China.(2pcs)3 Passport of the legal person or Chief Executive Officer of new trading company. It needs to be notified by notary public office then certified by embassy of PRC.(2pcs)

How long will the process take? Register time will take around 3months.

How much do we have to pay in order to set up a trading company?Paid up capital: 80,000-150,000USDAgent Service: 20,000RMBGovernment Fee: 6,000 – 7000RMB

Can we operate before the business license is issued?Yes, we can. Please refer to page 13, the transaction with minimum scale


http://en.wikipedia.org/wiki/Offshore_financial_centre

http://en.wikipedia.org/wiki/Stock

http://en.wikipedia.org/wiki/Financial_assistance_(share_purchase)

http://en.wikipedia.org/wiki/Insurance_companies

http://en.wikipedia.org/wiki/Bank

http://en.wikipedia.org/wiki/Thin_capitalisation

http://en.wikipedia.org/wiki/Thin_capitalisation

http://en.wikipedia.org/wiki/Offshore_Financial_Centre

How about the Offshore company, how to have an offshore company? What are the requirements?

Company name along with Directors name. Bank Account. Set up Cost.

How much do we have to pay for it?The charge as follow :Belize : set up charge : 8500RMB renewal charge : 6000RMB.BVI : set up charge : 9500RMB Renewal charge :7000RMB

What are other legal that we need to have?Residence permit for Company CEO in China.

How to have this? The requirements are as follow:

Business License. Copy of Passport and Visa. Letter of application for residence permit. General Medical Check up. House/Appartment Contract. Letter of notification of accomodation registration for alien from local Police. Photograph. Personal Statement/ Curriculum Vitae. Police Statement of Criminal Records. Invitation Letter from Company. Z Visa.

How much does it cost?These are items that need to be paid:Code :80RMB.Stamp:100RMB. Z visa letter :160RMB.Employment card :120RMB. Residence visa (400-800RMB).General Medical Check up: 650RMB.House/appartment: 1500RMB – 2500RMB.Z Visa: 300RMB / IDR450.000.Agent service: 2000RMB.Plane ticket: App 6000RMB for twice roundtrip.

What are other things that we have to pay?For legal stuff, at the mean time, we don’t have to pay anything.

How about the tax?According to some agent in China, it only requires 600RMB to register company tax, and personal tax of 500RMB each person.

However, here is last partial update of China Tax on February 2012:

China Tax Rates 2012 The tax on an individual's income is progressive. As at 2012, an individual's

income is taxed progressively at 3% - 45%. The 2012 corporate tax rate for domestic and foreign companies is 25%. Small companies pay 20% corporate tax in certain cases.


Capital Gains An individual's capital gains are taxable in China at the rate of 20%. Capital gains tax for a Chinese company is added to the regular tax. A 10% deduction at source is made from the capital gains of a foreign company in

China. On taxing capital gains from the sale of real estate, when calculating the capital

gain the purchase cost is deducted from the sale price at the 20% rate. When the capital gains are in excess of 50% of the purchase price, the rate of capital gains tax fluctuates between 30% - 60%. (It is 60% when the capital gain is over 200% when compared to the cost).

Table of Income Tax Rates in China for an Individual in 2012

Tax % Monthly Income (CNY)

3% 1 - 1,500

10% 1,501-4,500

20% 4,501-9,000

25% 9,001-35,000

30% 35,001-55,000

35% 55,001 - 80,000

45% 80,001 and above The table relates to income from a salary. Income from other business is taxable at 5% - 35%. Passive income such as interest and royalties is taxable at a standard rate of 20%.

Overseas Income An individual and company who are Chinese residents are also taxed on their

income outside China and receive a credit for overseas taxes. Qualification for residence for an individual:

Permanent residence in China while an individual who has no permanent residence in China but has lived in China for less than 5 years is taxed on his income in China, or overseas income that has its origins in China.

Individuals staying in China more than five tax years are taxed on their worldwide income too.

Reporting Dates and Payment The tax year in China ends on December 31. It is compulsory to file a report and

pay advances monthly or quarterly (monthly for individuals). The date for submitting an annual report and arranging payments is up until May

31. There are fines on arrears. Foreign companies in China are obligated to submit an interim report every three months (advance payments should be paid within 15 days of the end of the quarter).

In most cases when the annual income is less than CNY 120,000 an individual whose entire income in China is from a salary or whose income is subject to a deduction of tax at source is exempt from submitting an annual report.

An employer is obligated to submit a monthly report on his employees' wages and to pay the tax deducted within 7 days of the end of the previous month.


DEDUCTION OF TAX AT SOURCE

Taxation of Employees An employer is obligated to deduct tax at source on a monthly basis from a

salaried employee and to make additional contributions to social security. Social security in China consists of 3 parts, basic pension, personal accounts and

additional payment. The rates for social security vary in different cities.Rates in the major cities are

employer - around 30%, employee – around 11%.

Other deductionsThe following payments are subject to a deduction of tax at source:

Dividend - 10%. Interest - 10%, (plus 5% business tax) Royalties -10%, (plus 5% business tax) Capital gains -10%

What about the correlation of China Tax with Offshore Company? Theoritically, if we move company expenses to offshore company partially, it could reduce tax, as an offshore company is tax free in China. However, further study on China Taxes has to be conducted by specialist on how big we can save on tax.

If we have finished all those above, can we start officially without any problem in business legal?If we have fulfilled everything, then supposedly there would be no problem concerning with that.

II.2.2. Office Set up.

Place is one of the most important parts when we decide to set up a company. Since Shanghai is the most developed city in China, then we reside nearby it. The nearest and is considered as a strategic city goes to keqiao, a textile city which is located near hangzhou (capital of zhejiang province). The reasons are as follow:

1. Low operating cost.2. Cheap living cost.3. Strategic, because it is in the middle of China’s developing Cities.4. Near to Shanghai.

Here below is description of the proposed trading company:Name: N/APlace: Keqiao.Type: Trading Company.Size: SME.

Costs to set up an office in Keqiao:Rent: 2000RMB - 5.000RMB Interior: Not less than 15.000RMBOfficer Salary: From 2.000RMB

II.2.3. Company System.


The company system would integrate with jakarta, everything will be centralized in portion, such as Standard Operational Procedure, Monthly report, Financial report, etc.The China company relation would be drawn as seen in this chart below:

II.2.4. Daily Office Operating Procedures

In this step, China Company will do outsourcing and gradually will reach the step where it has the capacity to become a service agent in helping people in doing trading. Meanwhile, It will become outsourcing agent, marketing for Indonesian product in China, and making research on each city that will become Company branches.

A diagram of an offering of Chinese commodities that is done by Indonesia Company.

RI CHN

FREIGHTFORWARDER

SUPPLIER

CUSTOMER

SHOWROOM

CHNRI

CUSTOMER

RI

inquiry out sourcing

samplingcheckingoffering

orderRI

orderCHN SUPPLIER

order delivering

CHNprocessingtrucking

trucking trucking


A diagram of an offering of Chinese commodities that is done by China Company.

A diagram of an offering of Indonesian commodities that is done by China Company.

For your information, on each of every diagram doesn’t present details information, it only explains roughly how China office connects to Indonesia office in every operation.


In addition to those information above, we would like to emphasize that China company is in daily activity entitled to explore and prepare to step into the next progress, which is to search and absorb information concerning with local products, local culture, and government regulations on local trading in several targeting company branches to be.

II.2.5. Money and Finance Administration

Money plays a very important role in running the business, so does the finance administration. It is the essence of a successful business. Hence, to start a good sustainable business we have to come out with a good administration. Furthermore, to avoid the overpaid on tax, there should be at least 4 Bank accounts that actively and progressively connected. It means that there will be 3 major components of administration to proceed transactions. First is Indonesia account for Indonesia company, second is any bank account connected to BVI offshore company, third is China company account and the fourth is China personal account. The 2 accounts will be held by Indonesia company and the last 2 accounts will be held by China company. The game plan will be played like this;

Transaction (export and import from China).Either big or small money from customer will go into BVI account with all possible expenditures borne by China company as BVI offshore company trading service agent,then, after the order is finished, the China company will only get an agent fee which goes to China company account. Please refer to page 25 on Company System.

Transaction (import from China).Small amount of money from customer will eventually have to be transferred directly to China company and regarded as a trading transaction.Then, all expenditures will be paid


by China company, while the rest of the money will be kept in China company account as working capital.

Monthly expenses and Payroll.This expenses will be taken from China company account from the amount given by BVI Company and income from small transactions which is directly transferred from the bank account to each personal bank account in China.

Those are the 3 main game plan for the finance administration.It will not last forever, due to dynamic system changing in each period of time. A system adjustment will be done gradually by China company accordingly.

II.2.6. Warehousing

The warehouse that we will have in this level would be only one in Indonesia, and none in China. Even so, It is possible to have it also in China, as we know that there might be a possibility to have a big order for Indonesia commodity. Meanwhile, in some extent, while we are preparing for big order from China, we fix the time table of delivery and trucking that the goods ordered by companies in China arrived without any warehousing duty.Please refer to page 27;a diagram of an offering of Indonesian commodities that is done by China Company. Despite of that, if problem exist, then we may have to rent warehouse in Shanghai port.

II.2.7. Paying Term and Method

Since we’re new player in this business field, then we should be playing with this 3 ways;Cash in advance, T/T or wire transfer, paypal. While the term of payment is in accordance to agreement between both party.

II.2.8. Financial Capital

We all know that all company start with financial capital. If it doesn’t have any, then the company won’t be existed in the first place. The financial capital of the company is as follows:

Fixed Capital which consists of company paid up capital agent fee and assets. Paid up capital: 80,000-150,000USDGovernment Fee: 6,000 – 7000RMBCompany tax register: 600RMB Code :80RMB.Stamp:100RMB. Z visa letter :160RMB.a brief of international trading and retail business/stp/mrm/20120803 27

Employment card :120RMB. Residence visa (400-800RMB).General Medical Check up: 650RMB.House/appartment: 1500RMB – 2500RMB.Z Visa: 300RMB / IDR450.000.Plane ticket: App 6,000RMB for twice roundtrip.Offshore set up charge : 9,500RMB Office Rent: 2,000RMB – 5,000RMB Interior: Not less than 15,000RMBAgent Service: 22,000RMB

Approximately 68,810RMB + 80,000USD till 150,000USD

Working Capital, which consists of cashflow and monthly expenses either it is fixed or variable. Cashflow: N/AOfficer Salary: From 2,000RMBCEO: N/A

II.2.9. Illustration (Retail)

This is only a very small sample of how the business starts. The following picture is an embroidery machine which can be purchased at the rate of 8,500USD and can be sold in Indonesia for about 14,000USD.


How about this embroidery machine? Can we have this in Indonesia for about 7000USD? We surely can’t right?! But we can get it in China at that price, even lower than that.

How about this aluminum printing along with the mesh? Can we get it lower than 150IDR? Nope! Can we get it 50IDR in China? Surely we can!


What about Indonesian leather? How much is a leather jacket in China? Guess what?! 1000RMB – 2000RMB, even more than that! That’s about 1,500,000IDR – 3,000,000IDR. What if we just sell the leather to them without getting a lot of headache in production? How low can we get in Indonesia? How about 200RMB already dyed?!

Perhaps this rotary machine + the dryer could add a joy with the price of 1800USD CIF Jakarta price. In indonesia market it is sold at least 2500USD.

This is only a small sample on how China could change our point of view in this business. Moreover, it will not be enough to illustrate how international trade emerged and bloating the world.


II.3. Business Expansion and Integration

Business expansion in business term is essential and obligatory in order to evolve to a bigger business. It may seems a bit harsh to say that it is obligatory, but it is the fact that business is like a journey;when you decide to go on, you will meet a bigger obstacle and may find a problem solving which eventually make your journey even further than you might expected before. Even though there are still few group of companies that are considered to walk toward boundaries,and whenever they step ahead, they only found bars and obstacles.When they finally has cracked the obstacles, they accidentally jumped into another one. Are they growing any bigger? Yes they are, but only they don’t go anywhere. They earn more money, big income and huge profit. Nevertheless, Their business is not expanding and the fact is that they may not be able to evolve. In the end, they may find themselves working everyday, the whole years of their life.

Hence, the expansion is an obligatory for us to move toward to a wider business horizon. When we are in this phase,we are able to conduct the next main core business, ie; trading business service agent, which is occupying the work with companies in random nations.

We help them to connect with China and Indonesia, and broaden their view in the extent of adding zeros to more zeros, cost effient budgeting, fast forwarding time efficiency, and we offer them, the most crucial part, ie; expansion.

II.3.1. Footage.

China is developing and slowly begin to conquer the world. This statement is supported by facts below:

1. Xiao Chuan’s (Governor of Bank of China) statement in G8 summit 2008 on internationalization of RMB replacing dollar.

2. “When it was pegged to USD up till mid 2005, the USD/CNY rate was 8.2765 (1 USD buys 8.2765 CNY). Between mid 2005 and mid 2008 (in 3 years), USD/CNY rate fell to 6.8217. This means that CNY strengthened by 17.5% against USD. It then stabilised at this rate for 2 years until August 2010 when the next round of appreciation of CNY occurred. For one year and eight months, CNY appreciated to touch 6.3034 on 27 April 2012. CNY strengthened by 7.6% against USD during this period. So all in, the appreciation of CNY was 23.8% since 2005”. See also page 19, the USD against CNY rate history chart.

3. Oded Shenkar’s facts, data and statistics in his book the chinese century.4. WTO report in International trade statistics 2011 that China ranked 1st in

world 2010 export and ranked 2nd in world 2010 import. China has been bumping and humping countries since the last 2 decades and yet has been a winner since then. It has been showing tremendous action in history of reforming economy. China passively control the world, but hereinafter, it will actively have control on world economy. In regardance with that situation, we are preparing to really enter China and be part of its essential existence.Hence, it is required to spread the company wings to these cities below:


1. Hangzhou2. Shanghai3. Tianjin4. Lanzhou5. Lhasa6. Chengdu

8. Beijing9. Guangzhou10. Urumqi11. Kunming12. Harbin13. Nanning

7. Xi’an

We can see from the map below that we have spread the branches, which are chosen due to their fastest growing population and popularity.

Those cities will report to the main office in Keqiao, from then, the report will be forwarded directly to Jakarta.

II.3.2.Trading Business Service

The trading business service will occupy the work of:1. Trading of local commodities with companies throughout the world.2. Engaging with Companies throughout the world to become outsourcing

partner in China and providing an interpreter.3. Becoming a representative or partner of trading companies world wide,

Occupying the job of Outsourcing – Placing and managing order – Diversifying order – Controlling production – Trucking and Cargo inspection – Managing export documentation & custom formalities – Observing payment.

Changes may applied due to variation of rules in China in concern with foreign own company.Thus, research has to be done continously and consecutively since the first set up of the Keqiao office.

II.4. Manufactured Processed and Collaborated Products


In stage 3, we will need to enter manufacturing industry. However, we don’t actually invest on manufacturing and run the business. We just have to pump up a sum amount of money to this business expansion’s effect, which is the next main core business, as stated in the main core business section on page 14. We have to create some derivative products out of the finished products by adding a bit of diversification. In this phase, we will combine all groups of products and make it into some kind of collaboration of a new found glory of a brand. Thus, will need research on factories, products, brands, and preparation and evaluation on market review to step in to the next page, which is being a retailer.

II.5. Retailing Service.

Retail is the world industry that had been going on for ages as the smallest level of marketing and it is considered as something powerful because it reaches the smallest part of people.As we know, the biggest margin in sales chain is existed in retailing industry. This level is indeed a continuation of the previous level as a pursuance of products manufacturing.

It is essential for a retailer to have products and places to sell them. In addition to that, by the time we reached this stage 4, the company should have had manufacturing chains and international logistic system to manage supplies to all related market. This is one of the four main elements (raw material, manufacturer, logistic, human relationship) in order to become a leading retailer and pioneer in every movement. It is regarded as a cost efficient and cost cutting strategy, which enables us to control market.

II.5.1. Local Logistic and Delivery Services Organization.

It is very important that before we build hypermarkets and malls, we have comprehended and organized the local logistic and delivery service in each countries where we targeted in. We don’t want to impair the money chain by risking a failure system to operate. Thus, a serious study on facts finding in concerning with local logistics and delivery services must be engaged and pegged once the targeted cities are pointed.II.5.2. ASIA Based Hypermarket and Mall.


The sales focus would be targeting developing cities in Asia by establishing hypermarket and mall around them. The targeted cities may be available a year before the establishment, this is due to the rapid change of the world economy. Therefore, steps and progress should be fast forwarded if we targeting this phase to emerge earlier. The following picture illustrates a rough view on how hypermarkets, malls, and company are connected.

II.6. Trading Company Representatives Expansion.

The level of succeed in international trading hasn’t reached until it’s finallyy engaged actively with the world wide activity. When the business is growing and expanding, it is somehow unstoppable and has to be pursued. In this stage, we will have reached the


supreme level of international trading in connection with the world. To illustrate on how the movement will be perceived, these several graphics will explain all the detail.

We see that within this phase, we will have acquired branches in HK, Egypt, Canada, Turkey, Brazil, Russia, and India. Those countries are needed to connect to each group of countries, as based on WTO international data and statistics 2011, trade happened among groups of countries allied. Even so, the common trading activities are still applied, where countries randomly choose their import destination based on their needs. Thus will enable Indonesia, China, and the rest of the countries wherein the branches are located, trade with the world.

II.6.1. Duplication.

The step of setting up representative in HK, Egypt, Canada, Turkey, Brazil, Russia, and India is similar to the set up of trading company in China. Therefore, duplication is applied, although adjustment must be made due to culture and local regulation and multilateral agreements. Please refer to page 20.

II.7. Sinergizing Trading Commodities to Direct Consumer.

Synergizing is all about power of combining form of objects become one unity in order to strengthen the existance. The correlation with direct consumer is that we withhold the synergy and then push forward it altogether at the same time at the same target point. The idea is to create buying leads for customer that is correlated with the needs of each person in different countries with different character and different need. All process of


creating this system will start at the very beginning of trading business set up until it is finally emerged. For your information, the result can be premium or a doom if there is malfunction during the application. Therefore,serial of studies have to be engaged with applied system during the whole journey to this phase.

II.7.1. Mini Market and Online Shop Franchising.

Mini market and online shop franchising is realization of the system above. We will make people able to shop things that they need easily without wasting their time to go through on one stuff to the other. The mini market and the online shop will be integrated and operated by either the shop keeper or the owner. Furthermore, franchising provision will be made in custom in regard to local regulation.

II.8. TipTop.

In every business there is culmination point wherein a business reaches the highest achievement in its history. After that, generally, degradation and fluctuation below the level of its top achievement will occur and even it may be eventually drop down. Thus, the best is to sell the business at the culmination point and start forming a new one. However, preceeding the plan on selling the business, the company should have well prepared on the next business plan to attract investors.

III. Abbreviation and References

AFR AfricanAPEC Asia Pacific Economy CooperationASI AsianBRICS Brazil Russia India China South AfricaBVI British Virgin Islanda brief of international trading and retail business/stp/mrm/20120803 36

CIS Commonwealth of Independent StatesCEO Chief of Executive OfficerCNY Chinese Yuan RenminbiCSC Central and South American and the CarribeanEU European UnionGATT General Agreement on Tariffs and TradeG8 Group of EightG20 Group of Twenty Finance Ministers and Central Bank Governors / Group of TwentyHDTFA Historical Data Test Forecast Accuracy HK HongkongIDR Indonesian RupiahIFCBA International Federation of Customs Brokers Associations MEA Middle EastNAX North AmericaN/A Not availableOBM Original Brand ManufacturerODM Original Design ManufacturerOEM Original Equipment ManufacturerOECD Organization for Economic Co – operation and DevelopmentOPEC Organization of Petroleum CountryPRC People’s Republic of ChinaRI Republic of IndonesiaRMB Renminbi SME Small Medium EnterpriseT/T Telegraphic TransferUSA United States of AmericaUSCBC United States-China Business CouncilUSD United States DollarWTO World Trade Organization

WTO.org Oded Shenkar, the Chinese CenturyOECD.orgCEICdataIndonesia Ministry of tradeEconomywatch.comTradedata.netKemendag.go.id

WikipediaUschina.orgForecast-chart.comChina-profile.comFactsanddetails.comCfr.orgImf.orgChinasecurity.us

Uscc.govWpp.comWorldwide-tax.comUnzo.comTravbuddy.comChinaleather.org
