It has been made quite easy and accessible for foreign entities to start a firm/LLC/business in China while being located off-shore, this goes for both on-shore and off-shore foreign investments. Due to the relaxation of the Chinese business policies and strategical reliefs provided to improve business and international economic output. The government allows several benefits to international investors and businessmen. However, here are all the things that need to be considered before entering the Chinese market.Â
1. Thorough Market Research
One of the first and foremost steps to establishing a business is to understand the surroundings and environment along with the market that a business might be targeting, for this purpose, conducting extensive market research is the most important step before entering the Chinese market. The requirement to understand preferences, market trends, landscape, and regulatory requirements specific to your area and industry is paramount. A feasibility study can help encompass the viability of your business concept and identify potential challenges and opportunities that may arise during the business tenure.Â
2. Legal Compliance
Each state, not only limited to China, has a different set of legal regulations that a business must comply with to be called and labeled as “legitimate” or “state-worthy”. In China, an appropriate legal structure for a business must be adopted out of the three:Â
- Wholly Foreign-Owned Enterprise (WFOE). This is a limited liability company in China, wholly owned by foreign individuals or businesses.Â
- Joint Venture (JV). This is a business collaboration between both local China-based investors/businesses and foreign businesses.Â
- Representative Office (RO). An RO allows international businesses to carry out limited activities, such as market research, in China.Â
Each of these legal structures caters to a different business need and type. All factors that relate to business must be considered such as ownership restrictions, liabilities, and tax implications. Ensuring legal counsel to avoid breaking any hidden laws is advised for any potential business owner before entering the Chinese market.
For companies looking simply to hire employees in China, a China Employer of Record (EOR) solution may be sufficient.Â
3. Payment Gateways & Financing
Another important aspect of starting a business is to sort out the financial element, which is quite important when it comes to China as the state does not take financial discrepancies lightly and has strict measures in place to tackle such occurrences. To avoid such events, a business owner must be able to establish good banking relations with a reputable bank within the state to facilitate banking needs, loans, transfers, and capital arrangements for the initial startup of the business.
4. Licensing
Every business type or industry that deals with sensitive areas of production or material requires a specific license to continue their dealings. In China, all businesses are required to register themselves with the State Administration for Market Regulation (SAMR) for the business and the State Administration of Taxation (SAT) for the implication of taxes and returns. All other industry-specific licensing must be researched and obtained before entering the field/industry.Â
5. Local Trust & Relationships
As a new entrĂ©e in the Chinese market, the business must establish working relations with their local competitors, agencies, and other facilitators, with whose guidance, the business can navigate the local parameters of the Chinese environment with ease. It can help with cultural elements, facilitate market entry, and access local networks and resources which are sometimes more valuable than obtaining from traditional sources. It is important to conduct a proper survey and identify which specific partners can help shape the business for a better tomorrow.Â
6. Private Ownership & IP
Since China is quite overpopulated and business, e-commerce, and traditional trading remain the biggest source of income for most of its population, the element of competition is soaring at its peak in every possible industry that is allowed to operate in China. Intellectual properties of a business such as the legal name and other branding must be protected by obtaining proper trademarks, copyrights, and patents and registering them with the official governing entity that is the China National Intellectual Property Administration (CNIPA). CNIPA takes responsibility and action on infringements of copyrights and/or accusations of name pirating.Â
7. Digital Security
Ensuring your digital footprint is secured with the proper security measures is paramount. A business owner needs to ensure proper cyber security in their digital dealings in China to safeguard the success of their business.Â