DO YOU see red if I say China? Are you afraid of the country, not because of its political leanings, but because you don't know enough about it? You have probably realised by now that China can no longer be ignored as being some place beyond a big wall. But if you are willing to set up shop there and don't know where to start, there is help at hand: `Insider's guide' to Doing Business in Beijing from China Knowledge Press (www.chinaknowledge.com).

Charles Chaw C. Loong writes in his foreword that Beijing offers unique opportunities that are not found in more than 200 cities across China. And that "Beijing has begun inviting and recruiting, for the first time, overseas professionals into its local government." BOCOG, the Beijing Organizing Committee for Olympic Games, is a hub of activity. "Already, people from all walks of life are working hard to learn English in order to communicate and interact with the wider world."

So, welcome to a city that is 3,050 years old, where "the Peking man lived and multiplied in primitive communities 7,00,000 years ago." If you're travelling by train from Hong Kong with your kids, please note that in China "children who are less than one metre tall travel free of charge", whereas in Hong Kong, children below five years travel free. If you are travelling by bus, "it is important to have the destination written in Chinese characters, as the driver and the ticket seller generally do not know much English".

What about taxis? They are "reliable, plentiful, and safe", and "the smaller and older the car, the cheaper the fare". However, "when arriving at the airport, avoid drivers who approach you in the terminal or outside the terminal," advises the book, because they will almost always quote triple or more the actual price! "There is a taxi line just outside the terminal. Remember to insist that the driver use his meter; and make sure that the driver puts down the flag."

It is increasingly common for a foreign investor to begin with a JV (joint venture) partner to facilitate setting up a business and dealing with government officials, states the book. "Eventually, these foreign investors simply buy out the JV partner and start on their own." Did you know that there are three main types of FDI in China? EJV (E for equity), CJV (C for cooperative) and WOFE (wholly-owned foreign enterprise). Collectively, these are called FIEs or foreign invested enterprises. There are also the FIHCs or foreign-invested holding companies, engaging in direct investment.

The book describes the different stages of setting up an FIE, documents to be filed for setting up RO or representative office, and most important `top ten tips' such as `pay attention to guanxi'. What is guanxi? "A lot is said about Chinese guanxi (relationships). Relationships are important everywhere, not just in China," advises the book. "Good guanxi is a network of relationships with people at various levels across a broad range of organisations." The secret is, "With manners, diligence, courtesy and goodwill, you can construct your own web of supporting relationships."

A well-produced guide to relate to!

Guide to Sukuk

EUROMONEY'S Islamic Bonds is `your guide to issuing, structuring and investing in Sukuk,' written by Nathif J. Adam and Abdulkader Thomas. The book is distributed by Bharat Book Bureau (www.bharatbook.com). Sukuk is Islamic investment certificate, explains the book. "Foremost among sukuk applications is the generation of bond-like instruments that may find a ready market in the global bond and asset-backed securities markets," write the authors, and report a new analysis of the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) on "the underlying Islamic financial concepts and how they may be structured into investment securities".

For instance, on the legitimacy of documentation of contracts, the book cites `sura 2:282 of the Holy Qur'an': "When ye deal with each other, in transactions involving future obligations in a fixed period of time, reduce them to writing... It is more just in the sight of God, more suitable as evidence and more convenient to prevent doubts among yourselves." A discussion on ethical investing mentions the case of Amana Mutual Funds that has earned "four-star ratings from Morningstar in the US."

One learns that the AAOIFI has issued its 17th Shari'a Standard for Investment Sukuk, where it is defined as certificates of equal value representing, after closing subscription, receipt of the value of the certificates and putting it to use as planned, common title to shares and rights in tangible assets, usufructs and services, or equity of a given project or equity of a special investment activity.

It should be a worthwhile exercise to study the other standards from the accounting body.

Most of the sukuk issuances to date have been sukuk al-ijarah, according to the authors. "The ijarah (lease or leaseback) agreement should be executed independent of the initial asset purchase agreement and the two should not be conditioned one upon the other."

To explain here is an example of `a recent securitisation of automobiles leased to large companies in a Gulf Cooperation Council state': "The company sought to restructure its balance sheet and focus on its skills managing automobile fleets and their leasing to corporate obligors. The company, which has a successful track record in its local market, raised $28 million."

More details follow: "The periodic lease payments were passed from the locally established SPV, which is the actual lessor, to a Channel Islands-domiciled SPV, which purchased the initial sukuk. When the periodic rental payments are made, up to 25 basis points are withheld form the payment to the offshore SPV and placed with a Channel Islands-domiciled trustee in a credit enhancement reserve.

"When the pool grows to a specific dollar amount, no further payments are made to the reserve fund. In consideration of the initial and growing reserve fund, the sukuk are able to secure an investment-grade rating."

A subject that deserves exploring!

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