Chinese Business Scam

Guilin City

Not a bad place to visit?

I have an interesting international business tale. It will be interesting to some and hopefully valuable advice to others.

So I listed our company and products on alibaba.com – a b2b website meant to match suppliers with buyers. Initially, it was developed to specifically help American companies find Chinese suppliers. It has since grown to a global marketplace with buyers and vendors from all countries, an orgy of globalization. I received an email one day from a distributor in Guilin, China. As always, I replied to “Kylie” with product info and pricing. She requested samples a few days later. I Google-searched the company. No website, but a dozen or so hits on market-research sites so I sent the samples. Weeks went by. I sent an email to confirm they received them. Kylie replied saying she did and that they needed to administer a product test, which can take up to a month. More than a month went by and I asked her if everything was OK. She said they were still waiting on the test results. She told me she would have more information in 2 – 4 days. Some two weeks went by and I forgot about her. One day, out of the blue, she emailed me a purchase contract with an order for $250K. In the email, she asked for somebody from our company to come to China to meet face-to-face and sign the contract. I was thrilled but trying not to get my hopes up. My GM looked over the contract and said everything seemed OK. I started looking into Chinese visas while emailing Kylie about various issues – primarily Mandarin translations for the packaging. We didn’t want to discuss or change packaging after the contract was signed because it would be hard enough to fill the large order in the stated lead time. We wanted to know exactly what languages would be on the packages before we went to China. Kylie danced around the issue and said we can discuss it face-to-face. Somewhere in all this mess, I decided to Google-search the company again. Same results (not much). I don’t know why I did what I did next but I thank God I did. I Google-searched “Guilin China scam.” Dozens of results came up with titles like “Chinese Internet Scam – Buying Center & Trip to China” and “Guilin China Fraud.”

I clicked and read. The links were forums (many on alibaba) describing the following scenario. Apparently, the scam is to lure small and medium-sized businesses to China under false pretenses of signing a purchase contract for a large order. They pick up the mark at the airport and take him to the 4 – 5 star hotel they had reserved for him. They take him around town to breakfasts, lunches, and dinners while talking business. The decision-making manager has a young female to translate for him the whole time. He negotiates hard and the deal slowly develops. Meanwhile, the Chinese are earning percentages from the hotel and all the high-end restaurants they take the mark to. (I assume the mark pays the bills because he is trying to win the customer’s business, and I assume the restaurants give them different menus with higher pricing because they know in advance who is coming). At the end of the mark’s trip, the decision-maker signs the worthless contract (which states that the contract takes effect after the first T/T payment of 50% is made). The mark is happy. The decision-maker says it still needs to be approved by the finance manager. Would the mark like to buy the finance manager a gift to win his approval? Sometimes the mark refuses. Sometimes the mark is thrilled about the deal and agrees. The mark is taken to an art gallery full of pieces that cost $10K – $30K. After buying one, he is told he can give it to the finance manager the next morning (the mark’s last day). The next morning, he is told that an emergency came up and the finance manager had to fly to Beijing. But the mark can give it to him when the finance manager visits the mark’s factory next month. The mark never hears from anybody again. The art is worth a couple hundred dollars.

As with anything, there is a lot of fraud on alibaba. I wasn’t born yesterday and I read newspapers. If I see Nigeria or Togo, I delete the email before I’m done reading. So I’ve become accustomed to what the scams look and read like. But this one didn’t feel like one. I dealt with this woman for almost three months before she placed an order. She asked skeptical questions and made me work for the deal. They wait so patiently, and at all the right times. Plus, they never ask for red-flag concessions like paying for a distribution license or granting credit for the first order.

There are a lot of people who made the trip and described the scam in the forums. One particularly angry victim is gathering evidence in an attempt to bring them to justice. I thank God I didn’t go. If I had, it would have been time for me to leave this company in January. Fortunately, management is actually very happy I found it. My colleague in exports (who handles the Spanish-speaking market) admitted she wouldn’t have caught that.

On the bright side, I didn’t immediately halt communication with the Chinese. I thought of ways to get something out of them – revenge, if you will, for playing with me. I knew they wouldn’t ever pay any money for anything. This kind of business only receives. But I decided to press harder for Mandarin translations. I told them we applied for our visas but our GM decided he absolutely will NOT buy the plane tickets until we have Mandarin text for the packages. They finally sent translations to me this week. I had my Mandarin-reading roommate look them over and they are accurate! So I have Mandarin texts if I need to sell our products into Chinatown USA, or even China for that matter. The whole office is in on the revenge. The colleagues want to tell the Chinese that we bought our tickets and have them meet us at the airport, just to waste more of their time. Preferably at 1am on a Friday night or something like that. Immature? Probably, but you need certain team-building activities to boost company morale. Right?

Here are links to two of the better comment forums with lots of stories from victims, would-be victims, and even former employees of the fraudulent companies:

http://resources.alibaba.com/topic/331887/Guilin_China_Fraud.htm

http://resources.alibaba.com/topic/267452/Guilin_Union_Guangxi_Union_SCAM_.htm

Did you find this blog after dealing with a similar “business”?  If so, leave your story in the comments.