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How to Enter the Chinese Market

How to Enter the Chinese Market

Many companies are taking their successful business models overseas, and one of the leading destinations is China. The 1.4 billion consumer market has attracted many investors and international companies worldwide.

Business forays into foreign markets typically require expert knowledge of domestic and foreign market situations on the ground. China’s consumer market is as vast and intricate as the most dynamic country in the world, always changing and growing at the same time.

Because of this, penetrating the Chinese market is full of challenges. COVID has shaken the world, and companies that wish to do business in China must have a comprehensive understanding of all aspects of Chinese society, business culture, economics, and finance, to name a few.

Know-Hows of Chinese Market

To make the most of the advantages of doing business in China, one must understand these aspects of the chinese local markets.

One aspect of operating in China is the business customs. You need to know how to behave or dress to gain the best possible impression of professionalism. In a country where the slightest wrong move often tests social graces, you must dress and act in a manner that will leave a good impression. Just a little careful attention to detail can go a long way in China, and skincare products such as sensitive skincare items are no exception.

Digital marketing in China is quite different from the Western world. The single most popular digital platform is WeChat. It is essentially a social networking website, but it also acts as an essential communication tool between international businesses and their clients. Wechat is used for making introductions between people and for business deals. Companies that want to do business in China can use Wechat to introduce potential clients or can use it for regular discussions with business partners. Companies may also use Wechat to find new suppliers for their products.

Another important aspect is that not all Chinese regions are the same. Southern China might be very different from the other areas as local tastes and average prices are dependent on the part you are trying to sell in. Please do not make a generalized plan and blindly trust it in all channels you will target.

Before making any significant steps, always make a predetermined plan that will consider all aspects. It is highly recommended to hire a local expert or a company that will help you in the beginning, as the document translation, local market demands, local laws, and regulations are very strictly controlled and change frequently.

Hiring the Workforce

The People’s Republic of China Government requires all employees to be hired by a legal entity. In general, the Chinese government has strict rules for foreign companies employing workers based in China. Suppose you are a foreign company seeking to hire people in China for specific tasks or even as a regular employee for your business. In that case, it is against the law to employ the employee yourself directly.

As Chinese law states, only companies officially established in China may hire employers. In the eyes of Chinese law, when a person provides professional services for you or your company and performs employment-like services, that person is your employee. You must comply with everything that is required to fulfill the employment relationship. The best option is to hire Chinese employees from a China-based business consulting company.

Picking the Right Location

It is crucial to choose the right location when you plan to penetrate the Chinese market. China is an immense country, and not all of its regions have the same characteristics and laws. Some areas give more opportunities for the business hubs to emerge and grow. However, it might be more efficient to focus on cities that have already been established as international business centers, like Shanghai, Beijing, and Guangzhou.

One of the leading foreign investment destinations in China is Shanghai. The government encourages international business and innovation. For example, Shanghai’s 120 square kilometer Free Trade Zone (FTZ) allows global companies to run businesses that pay fewer taxes than usual. Also, fewer industries are prohibited from foreign investments.

Laws and Regulations

As mentioned in previous paragraphs, the Chinese market is full of regulations and laws requiring scrutinized analysis and consultations with the local experts who have experience operating companies in China. Those laws and regulations are not static, they change frequently, and you need to keep up with China’s changing laws.

If you plan to export to mainland China, there are several government restrictions. You must meet the officials’ standards, as China is very strict about controlling the quality of the goods and services they import from foreign countries. International companies must thoroughly examine China’s trade policies and their resources, business experience abroad, and short and long-term plans before entering the Chinese market.

Also, without the legal registration and documentation under Chinese institutions, it is impossible for an international company to run business activities in China. Any foreign company looking to take on business opportunities in China must submit themselves to these constraints.

Create Your Business Plan

It is always recommended and useful to create a business plan when entering a foreign market. China is no exception; it is even more vital to develop a plan. Besides the overview of your industry and product or services, your business plan should also have:

  • Your business location
  • Estimated revenue
  • The approximate number of employees
  • Budget plan

COVID 19 has made it even more important to pre-plan everything you are going to do. 2021 is an excellent time to plan your employment process and operational workflow in China.

Conclusion

Starting a business in China is no easy task. There are several barriers that you need to overcome. You might even ask yourself, why should I even bother overcoming all these complex challenges? Well, a lot of companies worldwide have had huge ROIs in China , and the benefits outweigh the cost if you follow all the guidelines. With the right approach, in-depth planning, market research, and a little help from local experts, you can overcome the seemingly endless challenges of doing business in China.


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by Dirk DeBie // Contributor to Businessing Magazine.

Opinions expressed by contributors are their own.