Red Tape.

As countless companies have learned--to their chagrin--doing business in China can be like dueling blindfolded. So what keeps Jeffrey Bernstein going for a dozen hours a day in a drab warehouse in an out-of-the-way corner of Shanghai? He's found a small wedge into an underexploited corner of China's booming trade: logistics--getting goods to the right places at the right time. Because its distribution is so fragmented, the nation spends about 15% of its GDP (which was $1.2 trillion last year) on logistics, well above the U.S. rate. Thanks to barriers to foreign entry, few outsiders even try to get into this business in China. Which leaves an opening for Bernstein, 33, who spent six years as an energy and retail consultant for McKinsey & Co. in the U.S., Korea and China, grew fluent in Mandarin and has developed basic survival skills. He says of the 15 Western corporations that do business with him, 'They don't trust Chinese companies with their goods or money. And they don't want to open their own company in China in order to store goods, because of the cost.' So clients like DaimlerChrysler (selling gears, hydraulic pumps and the like), Gates Rubber (windshield-wiper blades, hoses) and Columbia Machine (machines that make concrete blocks) have Bernstein's three-year-old outfit, Emerge Logistics, take possession of their goods, get them to customers and fill out all the paperwork. From a staff of two, a Ping-Pong table for a desk and 4,000 square feet of empty rented space in April 2000, Bernstein has grown to 18 employees and three warehouses totaling 28,000 square feet, now stocked mostly with industrial parts.