Hong Kong Skyline at Night: Companies Expanding into China might get to enjoy this beautiful view!
No matter your business experience and expertise, entering a new market can be intimidating. There are so many unknown factors that it’s no surprise many companies are afraid to step outside their comfort zone. While market entries can be scary, they are also exciting. The prospect of potential new revenue streams and new expansion routes can be very attractive to the motivated entrepreneur. When it comes to making a market entry in a Chinese industry, there are many unique things to consider that can make or break your business.
Wondering about what things to consider before entering China?
Here are seven important things to consider before beginning a new business venture there:
Chinese business law recognizes two types of companies, Legal Liability Company (LLC) and Joint Stock Limited Company (JSLC). An LLC is the more common type of company found in China and the type chosen most often by foreign nationals due to the perks it offers over the JSLC. Setting up an LLC in China offers the business owner protections in the form of shareholder liability, meaning personal assets are safe from losses incurred by the company, while also allowing the company legal protection of assets which includes intellectual property, something that is further protected by China’s New Foreign Investment Law.
Business viability can be a bit of a tricky one. Starting any business can involve taking risks, sometimes significant risks, this is even more so when starting your business in a foreign country and heightened again by that foreign country being China. That being said, with great risks come great rewards, so if you do your research and believe in the business, setting up in China could prove very much worth the uncertainty.
Protect Your IP
Becoming an LLC in China gives you some protection for your intellectual property. The first thing you need to do regardless is to register your IP in China. Your IP from your home nation will not be recognized.
Choose the Right Partner
When making sure you’re choosing the right partner for your business in China, you have to decide what role you are looking for them to play. There are numerous different kinds of people you will need to team up with to make your business tenable in China.
Use Good Contracts
Contracts in China can be a bit of a minefield, and therefore are an important thing to study before you open your businesss. A good place to start when drafting your contracts is finding a bilingual partner who can help you with the process. It is not mandatory for contracts in China to be written in the local language, but it is a good idea to use the local language and get one drafted in your language too.
Understanding the Country’s Initiatives
One initiative that anyone looking to set up a business in China should be paying attention to is their ‘encouraged industries’. China has a negative list which contains industries that foreign companies are either forbidden from investing in or their involvement in is highly restricted. There is also a list of industries where foreign investment is encouraged and for any business that operates in these areas, this could prove to be a potentially lucrative opportunity.
Identify the Values You Will Bring into China and Vice Versa
China has been described as a hierarchical society with a strict set of social norms. This means that when you do business in China as a foreigner, it is highly likely that those you’re going to be dealing with partners who have a different set of values to your own. You should familiarize yourself with the local business customs as it will make your Chinese counterparts happy and build good relationships.
If you found the above information useful for your business and want your top China Market Entry questions answered, then we have just the resource for you.
A 42-page booklet combining TCP Growth’s years of hands-on experience in cross-cultural business between Western countries and China with Brainsfeed’s collective intelligence workforce of 5,000+ global analysts to break down the information you need to make a China market entry into 10 essential questions.
Brainsfeed and TCP Growth are offering this eBook for free to all companies expanding into China - whether you currently have an initiative in the works, are interested in expanding, or just want to learn more about the process before making a decision.
Brainsfeed & TCP Growth want to make sure you have all the tools you need for a successful venture during your China market entry.
Click the image below to download. TCP Growth and Brainsfeed expect to jointly release three additional 10x Series in the remaining year, with each tackling a different cross-border business issue.
About TCP Growth
TCP drives strategic and sustainable growth for our partners through Training, Consulting and Partnerships to reach their respective international business milestones. We represent our clients to facilitate development of international businesses and build gateways for their cross-border expansions. For training, we empower corporate executives and teams through our consultative coaching programs and signature workshops. As of today, our expanding alliance network covers Hong Kong, Shanghai, Shenzhen, Taipei, Kuala Lumpur, Ho Chi Minh City, Delhi and Mumbai.
Brainsfeed makes information more accessible than ever. Data, research, and insights are what help businesses function smoothly and efficiently in this world where the wealth of knowledge and information to analyze is perpetually increasing. We provide on-demand research for a broad range of industries. Brainsfeed gives you the tools to make more informed business decisions and to leave uncertainty behind. We partner with smart companies and experts to build a sphere of knowledge and crowdsourced information. Ask us a question - we’re the easiest way from Q to A.