5 steps to start business in China
- June 28, 2018
- Posted by: Yolandy
1. Do the Research Analysis Before one enterprises decided to enter another country to expand its business market, the comprehensive research and analysis about the target market is crucial. The business market environment analysis is usually from 6 aspects: Policy, Economy, Society, Technology, Environment, and Law. The Foreign-funded Enterprise or investors need to analyze the advantages and disadvantages between the target market and its own business requirements according to the above 6 factors. Also, the Foreign-funded Emterprises or investors can research the current situation about other enterprises in China that from the same country or same industry, to learn how they succeeded and especially how they failed. 2. Choose an Entity Status Before you register with the government, you need to decide what type of business entity to register. The most common for foreign businesses are joint ventures, representative offices, and wholly foreign owned enterprises. A joint venture requires a partnership between a foreign business owner and a Chinese citizen. Though joint ventures may sound like the safest route, experts warn against them. Representative offices are an easy, low-cost way to go, but it drastically limits the scope of what enterprises allowed to do in China. As saying, “A representative office is just there to represent your offshore entity.” In other words, you cannot deliver any services or products, which means you also cannot generate revenue. A representative office affords you little more than the ability to show your face and build your brand name. The most common type of entity, therefore, is a wholly foreign owned enterprise, known as a WFOE. Not surprisingly, though, a WFOE is much more complicated to set up. It takes more time to get approval from the government, and it requires a minimal capital investment that you must put in a Chinese bank. Enterprises need to choose a suitable method according their own situation and business requirements. 3. Develop a Business Plan A detailed five-year business plan is crucial, because once the government approves it, you will be able to operate only within its guidelines. If you start offering a product or service that is not in your business plan, the Chinese government can shut your business down. The same goes for where and how you operate. Make sure the business plan is as broad as possible to allow the company to operate freely.While it needs to be broad, it should also be specific. Make sure you include your location, projected revenues, product or service description, expected number of employees and budget requirements in the plan. 4. Pick a Target Zone At this point, you have an entire country at your disposal, but you can’t set your business down just anywhere and expect to be a success. First, get to know the big cities. Shanghai, Beijing and Guangzhou are the major business, government, and industrial centers. The very nature of your business may require you set down in one of the big cities. If you’re a tech company, for instance, Beijing may be the place for you. Find out where the action is happening in your industry. In addition, you also need to consider your operation requirements, such as the transportation needs, logistical needs, culture needs, environment needs and so on. 5. Find a Partner Find a cooperation partner in the target market is crucial for investors. For investment, China’s huge investment market, in addition to its infinite attractiveness, also has unfamiliar with the environment and its confused of business procedures. At this point, a well-matched partner is crucial in this important business decision. For example, the registration process is different between WFOE and Joint Venture, but as a Foreign-funded Enterprise or investor, they cannot learn it clearly on the large extent. If they can find a local partner to help them to deal with these registration process, it will be more successfully.