As China's auto market continues to rapidly expand, local governments are putting in place plans and policies to attract auto-related business. Having already convinced Toyota to set up its China R&D base there, Changshu of Jiangsu province is trying to leverage that and draw suppliers.

"The Yangtze Delta region houses 60 percent of China's auto suppliers and 90 percent of the mold and equipment manufacturers. Changshu is strategically located in the center of the Yangtze River delta with highway, river transportation and seaport," a Toyota official was quoted as saying.

Toyota established the wholly owned Toyota Motor Engineering & Manufacturing (China) in November to focus on developing vehicles that meet the needs and wants of Chinese consumers. The company expects to eventually grow the R&D staff there to 1,000, according to a recent Nikkei Business report.

Changshu officials pledge to provide "the best business environment and living environment" to business, particularly small and midsized ones.

Electronic components maker Bi Technologies is in the process of building a plant in Changshu. It is crucial for small and midsized companies to choose the right industrial cluster with the right mix of companies for an overseas site, an official commented.

Some plastics recyclers in China are facing a new taxation method - taxes will be calculated and collected based on a company's electricity usage instead of reported business revenues.

Tax authorities in Wuning, Zhejiang province, believe this will be a good solution to problems caused by plastics recyclers, especially small shops, failing to report revenues truthfully, according to the Dongyang Daily.

Two different formulas have been developed: one for those that sort and clean the scrap, and one for those that reprocess the waste into pellets.

I wonder how accurate and effective the formulas are, but no details are available. If this new method proves to effective, it will likely to be adapted in other regions.

Local governments in China are trying to better regulate the plastics recycling industry, sometimes at the expense of job losses and market disruption. In Wen'an, Heibei province, nearly 100,000 people are reportedly jobless from a recent crackdown.

Aiming to stop the pollution caused by washing and reprocessing plastic scrap and to improve the local environment, according to the Beijing News, Wen'an's government started in July what it called "the most forceful campaign" in July, not only shutting down recycling operations, but also blocking trucks that carry raw plastics waste from entering the town, known as "the capital of plastics scrap" in North China.

Unlike previous crackdowns, the report said, the new town officials are enforcing the ongoing campaign thoroughly and consistently. They dissemble and confiscate processing equipment, and even shut down power supply.

About 125 miles away, scrap collectors and brokers in Beijing saw their inventory rise and prices drop, with the exception of PET bottles, which are recycled in Beijing.

A trade group official told the Beijing News that Beijing generates 1,800 metric tons of plastic waste every day, the majority of it landfilled. The recyclable ones, estimated to be 200 to 300 metric tons, mostly end up in Wen'an.

But since the majority of plastics scrap that flow into Wen'an is imported, the current crackdown has also lead to pileup of imported plastic waste in nearby ports.

After reading my last post on Wen'an shutting down local plastics recyclers, did you wonder why the Wen'an government is so determined to put a brake on apparently the largest industry and employer in town? Let's take a deeper look.

Water pollution is one of high-profile reasons. Thousands of acres of wheat crops that were irrigated with water from the local river had almost no harvest this summer, newspapers reported. Local residents only drink water from deep wells and bottled water.

The rivers are polluted by untreated waste water from the recycling shops. The local water treatment plant, built in 2009, couldn't handle the work and is often idle.

But some of the local residents don't seem to take the pollution and health issue seriously. Plastic waste is burned in back yards and around the farmland all year round.

For the government, however, the real incentive for the iron-fisted crackdown is economic.

Out of the 4,000 recyclers, 95 percent are not registered, and 98 percent don't pay taxes, officials said. The county received less than 500,000 yuan (US$78,271) in annual tax revenue from the plastics recycling sector, which employed nearly 100,000.

A spokesperson from the China Renewable Energy Society told the Beijing News that Wen'an should learn from the successful experience of Laizhou, Shandong province, where the government facilitated 2,000-3,000 under-regulated small shops to merge into a few hundred bigger, registered companies.

I hope Wen'an can push beyond the current crackdown and transform its plastics recycling industry into a truly sustainable business that not only makes money but also preserves the environment.

The change won't happen without pain. But Wen'an, and many other small towns villages in China, need it, desperately.

A Japanese business executive with extensive experience in China wrote a very interesting column this week for the Nikkei Business Tech-On Web site, telling a story about how a Japanese machinery manufacturer lost a Chinese customer.

Yamada Taro, president of Yourop Corp., said what Japanese sales managers routinely practice in Japan often fails in China.

A Japanese machinery salesman usually starts a dialogue by asking what the customer needs, prefers and for what applications. However, the typical Chinese customer would ignore the questions and ask for a sample for testing without providing any details or specifications.

The Japanese company patiently explains that it is difficult to fulfill that request, as they don't know which equipment from their broad range of products would fit the customer's needs.

Then, Taro-san wrote, the Chinese firm claims that they don't have much understanding themselves and they need a free loaner. The Japanese seller grows suspicion that the Chinese company is not a sincere buyer, only wanting to get their hands on the Japanese machine so that they can have a cheap copy made. So the Japanese firm politely declines by saying "We need to consult with the headquarters" and never getting back to the Chinese buyer.

After a week or so, the Chinese firm nudges the Japanese suppllier, who hesitates to give a definite answer - really, that's the polite way to say no.

Another week passes. The Chinese company calls the Japanese sales manager with the news that they have purchased a machine from another supplier, and a big order of 20 more machines will follow. "We believed that your machines are the best, but we were made to feel that you were unwilling to sell to us, so we had to go with someone else."

Similar mistakes have been made in China many times, Taro-san said. He gives lectures to top universities in China and Japan.

He didn't go on to discuss the issues of mutual trust, intellectual property protection, or cultural differences. Instead, he noted that, with a few exceptions, many Chinese companies still don't have real R&D capabilities. Even many of the large-scale enterprises can only make products based on drawings, but they are unable to create the drawings based on product requirements.

The take-away from this story is that Chinese customers require a lot more education and help than their counterparts in developed countries. They have money to spend and quick decisions to make, so the key is to help them understand and develop what they need.

Lastly, a little thought about the loaner machine. Is there an effective way to prevent the customer from taking it apart and stealing the technology?