Over the past three decades since the “Opening Up” of China, much has been said about China as a business opportunity.
On the one hand, it is difficult to ignore the country’s spectacular economic growth, which has seen it rise to become the second largest economy in the world with unprecedented speed. Poverty is on the decline, educated workers abound, and the country is hungry for business. A new middle class is emerging that is predicted to account for 20% of the worldwide consumption of luxury goods.
On the other hand, horror stories abound of well-known multi-nationals that have ventured into China only to run away with their tails between their legs, and their intellectual property lost to unscrupulous partners.
Of course, there are elements of truth in both opinions.
IPO Pang believes that the Chinese opportunity for many foreign companies can be real and substantial, provided prudent steps are taken to minimize risk. IPO Pang subscribes to the opinion that the failures of many foreign ventures that have occurred in China are not because China is a company-killer, but rather, because companies who venture into China unprepared are committing corporate suicide.
IPO Pang’s team of attorneys and business experts firmly believe that foreign investors who wish to do business successfully in China should begin their preparations with two important first steps:
- learn about the unique considerations of doing business in the Chinese markets, legal regime, and culture; and,
- find a trusted partner that has experience navigating the complexities of Chinese law, business customs, and government agencies, as well as with the residual subculture of counterfeiting and gamesmanship.
Important Considerations for Your China Venture
A lawyer? An accountant? A business consultant? Your China business venture may need each of these professionals to succeed. But IPO Pang makes a case for selecting one experienced professional to coordinate and lead your efforts and – most significantly – to protect you from the perils of running afoul of the law in China. Read more …
Foreign companies have a number of options open to them in terms of corporate structure. The optimal choice is primarily a function of which activities the company plans to undertake in China, as well as the degree of control and risk the company can manage. A company may also consider whether it is well-suited to take advantage of the new benefits offered to foreign enterprises in the Shanghai Free Trade Zone. Just as significantly, foreign companies that partner with Chinese companies need to be certain they know who they are dealing with. Read more …
An important strategy to reduce risk in China involves using qualified help to negotiate effectively on your behalf. In order to negotiate effectively in China, one needs to understand Chinese culture and Chinese business culture, because it is culture – and not regulations – that set the tone and thrust of negotiations. Read more …
China has gained a dubious reputation for IP theft. Not only have products been blatantly copied by competitors, but it has also not been uncommon for a foreign company’s trusted partner to suddenly emerge as its main competitor. Foreign companies can limit the risk to their IP in several ways, starting with the careful selection of an IP agent in China and of prospective local business partners. Read more here about Intellectual Property Issues in China and IP Registration in China.
Many foreign companies in China have been astonished by the vast array of permits and licenses required to operate, and particularly in years gone by, there have certainly been instances of foreign companies either being subjected to excessive administrative burden, or alternatively, suffering long delays or denial for the requisite permits. An experienced guide who remains constantly up to date on changes to laws and regulations can make all the difference. Read more here about general considerations regarding tax, labor, and environmental law in China.
Marketing Products in China
Finally, a brief word on marketing in China. It seems obvious that before launching any new business venture, a reasonable degree of effort should be directed at basic marketing analysis, and starting a venture in China is certainly no exception. Is there a demand for your product? Are your proposed distribution channels and promotional plans appropriate for the Chinese market? As obvious as it may seem to address these issues, it is shocking how often it is overlooked. One should never assume that a popular western product will be a popular Chinese product, or that effective marketing campaigns in the west will be equally effective in China. Examples abound of products that enjoy success in the west, but not in China, or products that could have been successful in China but failed because they were delivered or promoted in a western manner that is unworkable in China. Often as not in these circumstances, enterprising Chinese will seize the opportunity to turn a loser into a winner simply by marketing the same fundamental concept in a properly localized manner.
IPO Pang can assist your China venture in every aspect of its operation. We can:
- counsel you on optimal corporate structure and register it accordingly
- secure licenses and permits
- negotiate with government officials
- conduct due diligence on prospective partners
- resolve disputes through negotiation, arbitration, or litigation
- work with authorities to enforce IP
- ensure that you remain compliant with prevailing tax and labor laws
- conduct market research and offer localization assistance
Read in detail here about our comprehensive Services for China Business Ventures.
IPO Pang is committed to helping our clients navigate the complexities of doing business in China in order to take advantage of its limitless opportunities. Contact IPO Pang to discuss how we may be of service to you, or view our Video Q & A on doing business in China for answers to your questions and to meet our professionals.
IPO Pang founder Peter Pang recently authored a chapter on “Forms of Investment and Business in China” as part of the overall treatise on Doing Business in China (Juris Publishing, 2014).