3 Tips to Establishing a Business in China
Going to China was an amazing experience to understand firsthand what it would be like to do business in such a unique country. We learned key tips and concepts in order to establish a business in China, and we were able to ask other entrepreneurs how they became successful in a country with such strong regulation and state involvement. The 3 takeaways for establishing a business in China, for me, are the following:
- Study the 5-year plan to understand what business opportunities would be financed
- If you are representing an existing business with capital, starting a joint venture would be the best way to position your business to acquire the entire company in the long run
- If you are starting your own business, understand what incubators are available to you
5 Year Plan
China is a planned economy, and the 5-year plan literally spells out how the government plans to grow the GDP in the next 5 years. The 13th 5-year plan is focused on the following:
- Innovation
- Greening
- Coordination
- Opening Up
- Sharing
If you want to establish a business in China, align your business with the 5-year plan, as the government is much more likely to support it. In the 13th 5-year plan, businesses that focus on innovation through scientific research, invention patents, and technologies, or businesses that focus on greening through sustainable development and the clean-up of environmental problems, are very likely to receive support.
Joint Ventures
China is a very unique market; even though there are 1.4 billion people in China, your company will never be able to reach all these people. You will always have many Chinese competitors to your product, so it is important to focus on a targeted, niche market. It is also important to understand the best way to reach your Chinese target market by communicating a relevant message that will be well received, and how to work with all of the state regulation. If your business is already established and you have the capital, starting a Joint Venture with a Chinese company allows you to understand how your business would be run abroad, learn about the Chinese market, regulations and taxes, and position your company to eventually take over once you fully understand the market. Tax regulations and laws can change almost every year in China, and it is difficult to keep up with this changing regulation, so partnering with a Chinese company that can help navigate this tax regulation in the beginning years will prove to be beneficial once your company is in the position to take over the business.
Incubators
If you want to create a start-up in China, that of course aligns with the 5-year plan, there are state funded incubators that could accept your project. We had the opportunity to visit one of these incubators called NeoBay on our trip. NeoBay is a global entrepreneurship and innovation community in partnership with Shanghai Jiao Tong University, the Government of Shanghai Minhang District, and Shanghai Land Group (SL). All 3 of these partners together provide the land, investment and resources needed to run the incubator. Connecting with one of these partners, like the university, can open up opportunities for your project to be accepted by the incubator.
In conclusion, establishing a business in China is tricky, but if done correctly, it can be rewarding; even though your market would be a niche market due to all of the competition and the fact that not everyone will want, or could afford, your product, a niche market in the market of 1.4 billion people still has a lot of potential.
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16 Mar 2017
por
Ashley Hodges
IMSD /
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