Every potential investor out there is always looking for opportunities to rapidly grow his/her business into a revered global brand. Over the last ten years, China has stood out as one of the leading investment destinations because of its awesome business environment. From good infrastructure to supportive government policies, China has all that you would want to see in a good investment destination.
Despite the lovely business environment, you will be surprised to realize that a lot of businesses still fail while others perform poorly after going to China. However, you can avoid these setbacks and catapult your business to success by planning ahead. Here are the main things that you need to think about when incorporating a company in China.
The Right Business Formation
In China, there are a number of business formations that you can use to do business. The commonest and best business formation is the wholly foreign-owned enterprise (WFOE), which means that you are allowed to own 100% of the shareholding. This implies that you have total control over the business decisions, such as who to hire, product development, and capital management.
Another business formation that you can select is a representative office (RO). As the name suggests, a RO is considered part of the parent company and is pretty fast to open. However, it comes with a lot of limitations because you cannot engage in profit-making activities. Therefore, this company is considered a great option for market research purposes.
Although joint ventures, which were created through partnerships between foreigners and local Chinese, were very common, the government is halting their operations in the country. This is part of the widespread reforms that are being implemented by the Chinese administration to make China a more attractive investment destination. Indeed, even the already existing joint ventures have been given five years to change into limited liability companies, starting from 2020.
Where to Base Your Business
To make your operations in China easy and successful, it is advisable to ensure your company is based in the right region in China. Your aim should be identifying the region that provides you with a competitive advantage over others. So, here is a breakdown of the different regions and the most suited businesses to base there:
- Beijing-Tianjin-Hebei Region: This area is preferred for high-tech firms, electronic businesses, and finance-based companies. It is also a great option for the culture and tourism-oriented companies.
- Shanghai-Jiangsu-Zhejiang: If your company is in electronics information products manufacturing, bio-manufacturing, or financial services, this is one of the best areas to consider.
- Chengdu-Chongqing: Chengdu is the third biggest luxury market in China, while Chongqing is an international shipping hub. Therefore, if your company in China is in the electronics, high-end equipment, or luxury retails, this will be a great place to base your enterprise.
The Target Market
In addition to business formation and location, it is also imperative for you to understand the targeted market. So, will you be targeting the local Chinese or international market? Once you decide the target market, try to understand what the audience wants and deliver it in the best form. Also, think of the right methods of building a strong brand that your targeted clients can identify with.
Are these things too many and complex? Well, we must say that growing your business in China is not an easy task, but you should be determined to do everything possible to become successful. Indeed, you can simplify the process by working with agencies. Since they have been in the Chinese market for some time and are run by experts, you can count on them to make your business expansion into China easy.