You've heard the hype about China: Its crumbling regulatory barriers, low labor costs and unprecedented growth.

But behind the headlines are American entrepreneurs like Katha Diddel-Warren, who went to China to start her small business, Katha Diddel . Tune in every week for the real story.

In 1980, China was just beginning to open its trade doors to the rest of the world, but New York native Katha Diddel-Warren didn't go for economic reasons.

She was 20, had just graduated from Brown University, spoke Mandarin, and was fascinated with China's culture and history.

Once in China, Diddel-Warren began developing products for the China Trade Division, a new department of the Associated Merchandising Corporation.

But after only a year, she struck off on her own and started her first company, Twin Panda, which traded in needlepoint and home accessories.

Culture Code

Diddel-Warren started her company with few business contacts and little startup money. She made ends meet working as a disc jockey and illustrating children's books. "I had to save every penny," she explains.

Katha Diddel-Warren

Besides her fledgling business, Diddel-Warren had difficulty with everyday things she took for granted in the States, like booking train tickets.

In a Communist country, she reports, you have to push and elbow through several thousand travelers for one ticket.

Though Diddel-Warren says she was genarally respected as a woman in the Chinese business world.

Passion's Not Enough

After she started her business, several artists approached Diddel-Warren to find a foreign market for their handiwork, which included needlepoint, lace and hand embroideries.

She was taken by their charming craftsmanship and thought she'd have no problem finding a market for those products abroad.

All it would take was the right fabrics, colors and designs, and the aesthetic was sure to appeal to a foreign market, she thought.

"I was a bit naïve," she admits.

With no knowledge of the Chinese export market, Diddel-Warren dove into the U.S. marketplace six months after Twin Panda was established, products in tow.

Away Too Long

Diddel-Warren soon found that the U.S. market looked different up close than from an ocean away.

Before she returned to the U.S., she had sent out thousands of letters -- this was pre-Internet -- using listings from the American Chamber of Commerce.

Once she arrived, she spent most of her time traveling to various buyers schlepping bags with products ranging from lacquer boxes to pillows and bed linens.

When no buyers took an interest, Diddel-Warren was shocked. She thought diverse product lines were enough to appeal to any customer base. But U.S. markets are huge, she discovered, and the right customer is often hard to find.

"You have to dig through a lot find something good," she explains.

Missing China

Because of limited resources, finding a lucrative demographic in the U.S. turned into a tedious, challenging and physically draining experience.

In contrast with China, Diddel-Warren wasn't taken as seriously in the States. "I was looked at as a blonde," she explains.

Buyers without any real interest in her products often had meetings with her just out of curiosity.

If you're planning on exporting to another country, advises Diddel-Warren, never waste your time mass canvassing.

She soon gave up this method and turned to trade shows and market centers.

"Make sure you target the right customer from the beginning ," she says.

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