Doing Business in China

ESEUNE Business School Weekly Articles

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Elizabeth Coral

Elizabeth is a system engineer graduated from Universidad de Lima in Peru certified as a PMP (Project Manager Professional) with experience in IT Project Management as consultant. Currently Elizabeth is living in Tianjin, China attending a Global MBA focused in global emerging markets.

China is one of the biggest countries in the world with a population of almost 1 400’ 000 000 persons which is translated into a great market for foreign companies. This big opportunity is based on the fact that Chinese society in changing through the time to a more consumption oriented society.

There are some important facts that should be considered when planning to start a business in China, but the most important one is to have clear the objective of the business, what are the advantages for the market that the product/service will offer, who are the competitors, authors property rights problem, laws.

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It is important to have a clear idea of what kind of business is wanted to start in China, this idea must be based in a previous and deep investigation due to the complexity of the market that requires to be known and understood.

Because of the big opportunity this market represent not only for foreign companies but also for local ones, it is important to be sure of the advantages the product/service will offer and be able to distinguish it between similar product/services that already exist in it.When thinking in the product/service must have in consideration several points like what does this market really need in terms of quality, new products/services, but also consider what is the trend of this society that is opening to the world, Chinese society want to be as similar as they can with western but without losing their identity, this means that need a product that makes them feel as western people while keeping their ancient costumes and beliefs, the most successful product/service will be the one that offer all this characteristics.

In this market we will find different kind of competitors from locals to different parts of the world, with lots of experience in the Chinese market, with products with hight and very low quality, the important is to know who are the ones with whom our company will compete, what are the characteristics of the products/services they offer, how successful are they.

It is also very important to be well informed that China is a country where the laws to protect the author property rights are still no enough strong, it is important to be well informed of what companies should do to prevent this kind of problems. The first recommendation is to register as soon as possible the company, create the webpage of the company in the Chinese pages.

Chinese laws are still not enough flexible even though the government is making a big effort to make this market more attractive to foreign investors. There are some spects that should be considered when planning to open the company in China:

  1. When planning to open a company in China muct have in that the process to create it could take months.

  2. When working on the budget to open the company, should also consider the budget in case the company fail, it is not easy as in other countries to close it, it taked time and money.

  3. Contracts with providers, customer, etc must be as detailed as possible.

  4. Take in consideration all the taxes imposed by the governmet.

One option to avoid this problems could be to create the company in Hong Kong, even though Hong Kong is China it still has its own laws and procedures.

As we can realized China is a market with big opportunities to epand business, however it also presents big challenges for new investors, the most important and what will allow succed is to be well informed about the market but also the procedures that are required to open a company in this country.