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CHINA SHOOTING ALL - NOT KNOW RIGHT FROM WRONG

13 Jan 2007 – China put out the news release below showing that the government can’t tell the difference from right or wrong. A friend of mine called the other day and said he wanted to go to “Canton” to promote his MLM and meet and Internet “friend.” I told him ..... NUTS! To both!

http://news.xinhuanet.com/english/2007-01/12/content_5599130.htm

China law update and USANA update

Sep 10, 2005...

I have been traveling in China this week. I am writing this in Bejing, China. This country is truly amazing! What the Chinese have accomplished in ten years thru capitalism, despite a communistic government, shows the spirit of the people..they want to succeed!

I went to to the Great Wall yesterday..it was one of my lifelong dreams to see it. It was built over 2000 years ago... covering thousands of miles..taking 300 years+ to finish... I would love one day to walk it out..but not today..to much to do in MLM Asia!

The Wall was built to keep invaders out. Today a different Wall is here...new MLM laws that effect how MLM companies can do business in China.

Two news laws were passed in Bejing yesterday.

#1 it requires that any Direct Sale Company (and you cant call it MLM) to do business in China must have 10 million in capital in China, and a $200,000 insurance deposit.

#2 Stiff penalties for illegal MLM violators. Companies that operate without legal approval become blacklisted. That happened to Unicity recently here. They are blacklisted now.

In December a new law will be passed that will allow a company to pay only one level. It will be interesting to see how that effects Amway and Nu Skin.

The fact is that there are great leaders in China. Prior to 1998, many MLM companies were doing well here. In 1998 they outlawed MLM. Many leaders are waiting for the laws to change. They are hoping to finally get over this Great Wall against empowering the the people in free enterprise. The reason why they wait is because if they get caught doing meetings.. being a Top leader in a MLM company...the Fine is $200,000 dollars (US).

So today what happens here is a lot of new leaders challenge this Wall... they operate a black market MLM... and for now it works for them.

This reminds me of the early 1960's in the US. It takes time to change. Hopefully in the future we will see in China what we see in many free countries.

Best to all of you, Jeff Altgilbers

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July 30, 2005 10:57:21

Reporter Chen Liang

China Business - On the afternoon of July 27, Wu Yan, a director of the department in charge of cracking down on pyramid sales for the State Administration for Industry and Commerce (SAIC) says SAIC has teamed up with the Ministry of Commerce to conduct an investigation into the phenomenon of overseas direct-sales enterprises entering China.

Because China will soon create a law for direct sales, a large number of overseas direct-sale enterprises have stepped up efforts to enter China, through any possible channels in an attempt to gain the upper hand and grab as large a share of the market as possible.

Many overseas companies attract members via the Internet. These companies send merchandise to their members so that they can sell them in mainland China, which is called "online trafficking."

According to one source, some of these "traffickers" registered in China as traditional distributors of various commodities. Others are not registered in China and have no factories or companies in China.

According to one source with insight into these enterprises, "online trafficking" occurs with overseas direct-sales enterprises - such as USANA, AMKEY and Unicity. "Online trafficking"-oriented marketing teams from these enterprises are active throughout mainland China.

USANA's "trafficking"

According to an article entitled "Another scandal hits USANA," some of USANA's overseas sales teams regard Hong Kong as an initial accomplishment and "hire" people from mainland China. After the headquarters banned this sort of "employment", these teams set up a website similar to that of their own headquarters. These teams provided false information, resulting in false registration, and used false IDs when enrolling additional people into the pyramid sales scheme and continued to conduct business in mainland China.

According to this article, before USANA officially entered the mainland China market, this company had a sales team called The Evergreen Team, "smuggled" into the mainland China market to conduct business and to recruit even more people. The leader of this team is surnamed Wang. According to our reporter, this team is very "active in an area around Nanjing and on the Internet."

Under the leadership of the overseas sales team of USANA, another member, surnamed Huang, has created four legs, or distribution channels in mainland China, including the Xinjiang channel, the Hunan channel and the Guangxi channel. A woman, surnamed Tan, was "honorably" designated the head of the Hunan channel which covers Shanghai, Hunan and Chengdu. Tan says, "Mr. Huang is very busy. He has no time to answer phone calls from people who are not part of the distribution chain. All four channels are full. Our channel is the third of the four distribution chains and there are over 200 people that are a part of this channel."

A reporter of the China Business tried many times to contact Huang, but failed. Later, the reporter got in contact with Tan, disguising himself as someone involved in the pyramid sales scheme. According to Tan, all those working for the pyramid scheme conduct business via the Internet. "Administrators of the scheme contact and work with new and veteran members of the scheme via QQ, an instant messaging software. The administrators also send detailed promotional materials through the Internet. The work day begins at 20:00 everyday." According to Tan, all members of the scheme place orders via the Internet. Only members of the scheme are permitted to access to the "placed orders" link after they pay a fee of over RMB200 and inquiries about achievements and bonuses are also made via the Internet.

In a reply to the group's fake website, Tan says, "Our system used that working website, but it is useless now." The reporter accessed this website on July 13 and read the introductions provided on the webpage. The introductions were very brief. Later the same day, the reporter tried to access to this webpage again but failed.

Operating covertly

The head of Amkey's sales team in Guangzhou is surnamed You. He has been busy recruiting people for his chain. According to You, Amkey has its own overseas sales teams. His team obtains merchandise through friends in Singapore and Malaysia and then sells them in mainland China. In discussing the security of the team, he says a person "is banned from accessing certain web pages, through the use of a password, with more detailed information until this person officially becomes a member of the scheme."

According to Quan, the head of Unicity's sales team in Shenzhen, Unicity has a factory near Wuxi city. But, this factory has not begun operations yet. Information about this factory is still a secret. And Quan and the sales team are not aware of other details.

Quan depends on a close friend of his to ship the merchandise he deals in. Quan primarily shuttles between Hong Kong and Shenzhen. He picks up commodities at the Unicity in Hong Kong, brings the merchandise to his office in Shenzhen and distributes them among his sponsor members in accordance with placed orders. His profits are calculated with the following formula: price in Hong Kong X 1.1% of shipment costs (including tariffs) X the renmenbi exchange rate." This operating model is an ideal solution to difficulties in bringing products into mainland China.

According to another source, He Zhaolun, the largest distributor for Unicity, who has been labeled a member of a pyramid sales scheme by the government, was fired by Unicity in June. This dismissal has caused a stir in the distribution industry. According to one commentator, He Zhaolun is a sacrifice with which Unicity entered mainland China. "Unicity wants to point out that the trafficking of goods into mainland China is responsible by a few large distributors."

Looking for loopholes in regulations

"As the countdown to the direct sales law began, direct sales enterprises, including Amway, are more enthusiastic about non-profit public projects in an effort to create an excellent corporate image. At this time, other direct sales enterprises, including USANA, are 'working underground'," says a specialist with insight into direct sales enterprises.

According to Hu Yuanjiang, a direct sales specialist and general manager of the webportal (www.zhixiaowang.com), "trafficking" is just one of many illicit channels through which foreign direct sales enterprises enter China. All enterprises that do not have offices, are not officially registered at the industrial and commercial administrative authorities and do not manufacture products in mainland China, are regarded as "trafficking enterprises." These enterprises see Hong Kong, Macao and Taiwan as "bridge towers" with which to enter mainland China, bringing merchandise through mail or way of smuggling.

According to lawyer, Jiang Wenbing, "trafficking enterprises" obtain members for pyramid sales schemes via the Internet, and then salespeople enrolled in the schemes use the Internet to conduct business and financial affairs, and finally, bonuses are managed both overseas and through the Internet. This e-commerce model is very flexible, adapting itself to the fullest extent possible for any given situation by capitalizing on loopholes and flaws, much like a "touch ball."

In fact, it is very easy to register a domain name for a website on the Internet. Any agent company may register and own the website it registered.

The Evergreen Team has replaced its former website with a new one. Ms. Tan says there is an agreement between USANA's sales team and their headquarters. According to this agreement, as long as no one complains about an employee ID number, the headquarters has no right to cut the distribution channel of the Evergreen Team because members of this team have not registered. According to Article 19 of the "Measures on the Administration of Internet Information Services," in the event of a problem with a "trafficking enterprise", this website should be ordered to deal with it within a given time frame and should be fined between three and five times the amount of illegal gains. If the case is serious, the website should be shut down.

An official with the Telecommunications Administration of the Ministry of Information industry admits that there are loopholes in website regulation. "Information provided on websites is out of our scope of responsibility." In terms of taxation, "trafficking merchandise" is suspected of evading taxes. There may also be loopholes in Customs regulations.

Punishment in accordance with the law

Officials in charge of direct sales at the Ministry of Commerce and officials in charge at the Administration of Industry and Commerce say, "We will not make any comment before the law is promulgated." Guo Liang, director of the Zhongyuan Direct Sales Research Center, says, China is a large market. It is easy to make money in China. Trafficking is driven by profits. According to Hu Yuanjiang, direct sales enterprises traffic commodities into China because they want to enter China but do not want to deal with the policy-oriented risks and avoid the high costs they would face if they enter China through legal channels. "Trafficking" is a flexible commercial model that allows for all possible actions..

It should also be know that headquarters of direct sales enterprises often turn a blind eye to "trafficking." This shows that overseas enterprises are still uncertain about the Chinese market.

The reporter makes an IDD call to the headquarters of USANA in Salt Lake City, Utah, USA. Peter, who is in charge of global services, says it will take at least a year for USANA to enter mainland China. USANA now has a subsidiary in Hong Kong and one in Taiwan and has set up a factory and company in mainland China. Relevant information will be published as soon as the Chinese government issues the law for direct sales and it gets its business license. Additional detailed information is still a secret.

When asked about activities of "trafficking teams", including The Evergreen Team,in mainland China, and when asked about USANA's attitude toward trafficking, Peter admits that "trafficking" happened to USANA. He emphasizes the point that, "There are too many people under USANA for management to carefully supervise. It is too of a task and very troublesome."

Shang Ming, director of the Department of Treaty and Law of the Ministry of Commerce, admits that on the one hand, direct sales creates new sales channels, which flattens distribution structure, cuts operating costs and brings convenience to consumers. On the other hand, direct sales are non-open in terms of organization, are secretive in terms of business model and are sporadic in terms of the location of direct sales people. Ineffective regulations and guidelines permit direct sales to be a factor that ultimately disrupts the market and impacts social stability.

According to Wu Yan, a director of State Administration of Industry and Commerce (SAIC), some direct sales enterprises have been in violation of related regulations and have been punished accordingly. For instance, Unicity has been punished by the local authorities of the industrial and commercial administration in Guangdong province. The SAIC is probing into other direct sales enterprises at the moment. Current laws remain valid before the new law is officially issued. "It is possible the industrial and commercial authorities will handle trafficking cases in accordance with the current laws for the moment."

Editor: Ping Xin Source: China Business

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