In financial terms, high incomes involves high risks, and that’s how we can define in a few words the opportunities of Chinese market for business projects development.
At this point China has become the second strong economy in the world below USA economy, and according to some serious reports made for the top Consulting Groups including USA McKinsey Consulting group, the projections are pretty clear for China to become the number one economy in the world for the years 2020. That’s why all the companies who wants to maintain or start to grow up in the global market are considering or either has already developed their operations in China.
However, if the market potential is pretty clear it tends to be really complex in terms of legal affairs, taxes, marketing and business operations as well. In this post we will try to highlight some important aspects to be consider in the design of the strategy for business projects in Chinese market.
Chinese history, geography, culture, values and way of life are definitely top topics to consider before even think about get into this market, we need to manage this topics to design our strategy and business operations around that. The history and culture is really rich full and offers great opportunities to develop interesting plans for any investment, in fact Chinese people really appreciate that foreigners get interested on their culture and perceive it as a nice gesture, so definitely this is a must to build any commercial relationship.
The geography is divided on provincial and economic regions, but when you talk about provinces or villages in China is almost comparable with a small country in Europe because of the population, around 10 million persons which means great business opportunities and also a really important aspect to be consider on your business strategy, be conscious that you need a really good and trustable market research in order to establish your operations and then try to expand to other regions, this decisions definitely needs to be supported for local advisors or business partners to be success. In terms of Chinese way of life, it is really interesting to get involved and understand from the inside how big the opportunities are to develop successful business investment, considering the fact that Chinese people way of life is seriously focused on high consumption on health, personal cares products and luxurious brands to demonstrate their status and also prove to others how successful they are, and also they have serious interest on foreign brands because must of all Chines brands still not have a good perception, this means great opportunities in a huge market that still on develop and definitely a place to be if your plan is to maintain or become a worldwide business company.
Usually companies who wants to establish business operations in China begin using this figure known as “Representative Offices” consider an extension of the parent company and don’t require specific requirements for registered capital, also can hire local or foreign staff, however is not allowed to establish economic activities and is often used to conduct marketing research, liaison activities with potential customers and partners.
Joint ventures is also a way to start doing business in China, instead it demands make a good research of the partner and needs to be approved by the Minister of Commerce to get the business license, in other way the decisions for many issues demands unanimous resolution of the board with 51% of influence on your local partner which can become a serious constraint for the business.
Chinese fiscal system is a serious thing to consider on your business plan, it is recommended to hire people with proven expertise on the field in China to ensure the best way to deal with this issue, there’s around 20 different types of taxes so you should be forewarned and having the right advice on the subject. For example, the geographical location of your operations has serious influence on the tax payments, some regions offers tax incentives for governmental interest to attract investments and develop job positions on those areas and this is definitely a good way to enter the Chinese market having local government support, in that order personal connections plays a serious role in Chinese society, in their culture this is known as “Guanxi” and can aloud you to achieve goals in a effective and efficient way, people tend to develop this sort of clouds or links with influence that may be key for their personal interest, it is a costume offer luxurious gifts to your connections and maintain a close relationship being thankful in that way, this is definitely an important issue that you must consider as part of doing business in China and maintain a good relationship with your stakeholders.
China is definitely one of the more challenging places on earth to do business, however a place with unlimited opportunities for those who are capable, clever, patient, respectful and specially willing to take the necessary risks to achieve great benefits.