By John Byczkowski
The Cincinnati Enquirer

Marco Polo preceded Procter & Gamble to China by some 700 years. Both were looking to make a little money.

But "Marco Polo left China with stories, and nothing else," said lawyer Joe Dehner. P&G, on the other hand, last year had sales in China of $1 billion.

That would imply a lot has changed in China over the last seven centuries, but many of the panelists at Thursday's sold-out U.S.-China Business Summit at the Hilton Netherland Plaza hotel left the impression that it's still a very difficult place in which to do business.

It takes years to make progress. Contracts are just paper, the courts aren't much help and anything that can be counterfeited - from the movie Seabiscuit to shampoo - will be.

It's difficult, but not impossible, and full of promise. By 2012, China's middle class will grow to 23 million households from 2.3 million today, consultant Daniel Rosen said. More than 240 business people packed the hotel's Hall of Mirrors to hear how their companies can gain a foothold in the world's most populous country.

"Middle class" in China, however, means something different than in the United States, he said. It means an annual income of $10,000, plus the ability to purchase an apartment and take a vacation every year. Many auto companies consider $10,000 to be the threshold at which a Chinese family will buy a car, and those households are growing rapidly, Rosen said.

But getting there takes time, and it can be trouble. Cincinnati Vulcan Co. Inc., which makes lubricants and metal cutting fluids, contracted with its first sales representative in China in the early 1990s. Company president David Kellner said the company didn't check the rep's background thoroughly. "Ultimately, it was an expensive mistake," he said.

Vulcan opened its own office in China in 1999, sales finally hit a "realistic" level in 2000 and have exploded since, Kellner said. This year a third of the company's total sales will come from China.

Richards Industries of Cincinnati also found it's best to open an office in China rather than work through sales reps, said Kevin Kahn, director of sales and marketing. Results improve because the office puts the company closer to the customer in a country where relationships are important, he said.

One theme heard repeatedly during the summit: It takes time to develop those relationships in China. "You need to exercise tremendous patience," Vulcan's Kellner said. Some of his Chinese customers try to negotiate price on every order, even after they've signed a contract, he said.

Kahn said he visited China for two years before he found a sales rep he thought he could trust. Making sales also takes time. "There are different views of time, and how long it takes to accomplish something," he said. Companies that draw up business plans with aggressive timetables will almost certainly be disappointed, he said.

Counterfeiting is an enormous problem in China. More than 90 percent of all software used in China is pirated. A shipping container confiscated in Los Angeles held counterfeit cigarettes with a street value of more than $1 million. It cost the counterfeiters about $80,000 to make, said Ohio State University law professor Dan Chow. Counterfeiting may never be wiped out.

David Taylor, a P&G vice president who spent several years in China, said that in the past six months the company has seized 380,000 cases of counterfeited products. P&G found one of its suppliers selling shampoo bottles to counterfeiters. "In some areas of China, the counterfeiters would out-ship us," he said.

P&G suffered another way from counterfeiting: Its market research showed Chinese consumers disappointed by counterfeit products they unknowingly bought would stop buying that brand for a up to a year.

But P&G's battle against the fakers seems to be paying off, he said. This year counterfeiting of P&G products in China's major cities is down, Taylor said. "Chinese consumers really love well-made branded goods, and they're willing to pay for them," he said.

E-mail johnb@enquirer.com