A Guide to Conducting Business in China
China can be a great location to consider when setting up a business. There are no nations with population vaster than 1.3 billion. This Guide focuses on the key points to form a WFOE, a Wholly Foreign Owned Entity in China. Foreign companies can go into China and create a WFOE, as part of a Joint Venture (JV) or as a Representative Office (RO). Nowadays, over the half of foreign companies are opting to enter China as a WFOE. Here are five questions a WFOE should answer before conducting business:
1. Is your business in the particular industry restricted in China?
To make sure your business will be legal in China is quite important because the Chinese government has stipulated plenty of specific regulations in industries that foreign companies are not allowed in China. Most of these restricted industries are monopolized by the government, for example, telecoms. Have you chosen a good location for your company?
2. Have you chosen a good location for your company?
China has a large area with different types of resources and variety of markets. To support the development of industries, some cities continue to accumulate resources, such as Wuxi’s pharmaceutical industry. Such cities usually have important infrastructure such as famous universities, which can greatly reduce the company’s operating costs. The local government will also launch incentives. There are various Investment Zones which were established alongside the economic liberalization of China. It includes:
- Economic and Technological Development Zones (ETDZ)
- Export Processing Zones (EPZ)
- Free-Trade Zones (FTZ)
- Hi-tech Development Zones (HTDZ)
- Open Cities (OC)
- Special Economic Zones (SEZ)
Every zones have different requisites for a setting up in China, and in the same time, they also offer varying advantages. Therefore, foreign investors who looking to establish in one of these zones should check the local regulations and policies to see which is the best appropriate to their needs, product or service.
For example, China has a total of 4 free trade areas, respectively, in Shanghai, Tianjin, Guangdong and Fujian.
3. Have you got a thorough knowledge of intellectual property protection strategy?
Although China’s intellectual property protection in recent years has improved, there is still a big risk for foreign companies. It is wise to consult local lawyers in order to design effective intellectual property protection program.
4.What’s about marketing and advertising?
Traditionally, advertising in China does not have the influence on the consumer mind that western countries have become acclimatize to. The Chinese rely more on the endorsement from friends and associates, they even rely on their own research and reading. Therefore, your biggest tool remains the uncontrollable asset of word-of-mouth.
In the same time, China’s advertising market is growing even faster than the economy as a whole. Nearly 100% of households possess their own television. All the recognizable advertising corporations are present in. Similarly, there is a huge amount of local agencies that offer small-scale advertising (flyers, the internet, and mobile phones). Marketing is severely regulated by law. It emphasizes that advertising should not be detrimental to the physical and mental health of Chinese citizens. It also must conform to the country sociological and political principles, not corrupting the dignity and interests of the State.
This current law has many different interpretations, and as such advertising varies from region to region.
5. Are there any official agencies that can help me?
There are many different official agencies who may offer help to create your WFOEs in China such as countries’ business chamber in China. For example, the China-Britain Business Council help you achieve success within the Asian nation. CBBC is the UK’s foremost authority that helps British businesses setting up in China. Whilst its services are open to all British-registered businesses on a pay-as-you-go basis, it is also a membership organization with almost 900 members. They will offer you high-level of networking and a vast array of practical help. Over one-third of CBBC members is small or medium enterprises. For companies that are really willing to establish themselves in China, the CBBC membership will provide them efficient guidance, continuing support, exclusive services and discounts and networking opportunities. The CBBC is a business-focused synergy of industries and governments. They maintain an impressive record of fostering British business in China dating way back to the 1950s. CBBC is acknowledged and respected at the highest level of both Chinese and British government.
Before creating a WFOE, it is important to understand how to enter China market, the first step of a successful development in China. Daxue Consulting provides all the customized tools to assist you in your China market entry. Using the different services of Daxue Consulting will help you to understand better the market and its complexity. Indeed, Daxue Consulting is the specialist in China market with vigorous and proven methodologies such as Focus Group in China, Feasibility Study in China and conducting a Business plan in China. The knowledge of the market is essential to succeed in business. Market dynamics is moving faster than ever. The behavior of Chinese Consumer has never been more complicated to track. This is why Daxue Consulting is here to help you getting the critical market information needed to manage and grow your business in China.