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How to Invest in China

How to Invest in China

China has become the Choice Location for Foreign Investors to Start their Business than any other countries.

Just walk down the streets of Beijing today, and you’ll be surprised to find an array of stores displaying plenty of global products. This increase in foreign business in the country indicates the saturation of foreign investment in China. However, it also shows the increased importance foreign investors have in this place. As more profitable foreign investors and funding pours into China, the local industry has also been benefiting too.

Domestic companies, who are partnering with related foreign companies in similar domains, have “significantly” improved their technology/marketing strategies in their respective industries through incorporating more efficient systems or operating processes. Changes in organisational structures may also result in a reduction of cost, more effective use of resources thus increasing profits which also gives added benefits the firm as it makes it more competitive. Additionally, such economic conditions offer an interesting problem for future investors into China in the next few years.

This means the China Market will continue to be MORE “competitive” as local industry starts to develop their brand equity. Including the fact that a number of foreign giants continue to enter China with millions and billions of capital, entering and investing in China is no longer as easy as it used to be.

In fact, the economic activities that occur in China are worlds apart from what it used to be; China is no longer location for a ‘low-cost competition market’, as reported by the Economist, which India, Africa and other Asian countries might be. Just like how others in the region, such as Hong Kong, were part of the fast emerging economies, China’s economy is now developing rapidly.

Hence, it can be concluded that China is not an easy place to invest in. Investors have to keep updated by researching on changing areas, even looking into details. There are few reasons why China market is fully charged and growing competitively

  1. Recent reports shows that in China, the consumers are helping INCREASE their market demands as seen in sales figures.
  2. Further, Chinese have STRONG national pride – in order to gain significant market share in China, foreign products MUST NOT be “too foreign to Chinese.”

Therefore, foreign investors who are planning to enter the China market needs to think about “how to market their products effectively” to the Chinese customer.

Guide to marketing products in China: Top 7 “Fastest” and “Efficient” ways:

 

1. Understand Local Persons and Business Practices

Like many other countries around the world, Chinese own distinct cultural practices make it truly different and unique from the rest of the world. Culture goes beyond getting used to the different types of foods in China. Understanding their business culture is VERY crucial for your success.

That means you need to understand how the people of China think about their local business practices so that you will engage faster and form better links with them. In order to accustom to China’s cultural practices, original organizational business practices MUST able to adapt. Hence, adaptability and flexibility is the key for your business to be successful in China.

2. Find a Local Party

One of the fastest and MOST efficient ways for you to figure out how the local people feel about a certain product would be to “search for a local party” that can help support you as they will be able to communicate to the locals better and also have a better understanding of the Chinese culture too. This allows you to know what kinds of products people will buy.

For a more complete understanding, searching online forums, local articles and publications is beneficial too. A market analysis of the different groups of people, education status, purchasing power and age for example, will allow you to estimate how much each group will pay and target each more specifically. Besides allowing you to decide what types of products will sell, it will also help in deciding the means of advertising. This could be either through TV commercials or print media.

3. Form Good Relationships with the Chinese Government

Chinese government isn’t VERY easy to communicate with too. There is more to interacting with the legal institutes than stated in the open. Many major foreign investors and companies often get confused with the laws and how the administrative procedures are carried out here in China due to the “bureaucratic style and policy of Chinese government.”

That is why it’s BETTER to find a “local party” that can handle all of your paperwork, finance, taxes or deals to minimize any delays and confusions with the Chinese government and bank. This includes decreasing the approval time for registering for different passes or licensing. It also ensure a smooth banking process in the future. The reason is simple: Locals are MORE likely to be familiar with the government procedures, what kinds of documents are needed and policies.

Plus, if they have a VERY good relationship with the concerned authorities, things will be MUCH smoother and issues will settle even faster. It will also be a form of protection of rights in the future as all legal matters would have been handled correctly and the two entities will have started off in agreement. Have a GOOD grasp of Chinese culture

Most foreign companies often seem to have problems finding a “suitable” Chinese partners as they DO NOT have the required network present in China. Having physical offices, property or estates in the country alone is not enough, foreign companies have to see themselves as being housed together with Chinese firms and learn how to live in harmony with them. In addition, if the foreign investors have HARD time understanding its culture, conflicts will likely arise when decision making collide.

This makes it difficult for contracts to be made and collaborative projects to be carried out.Hence, it’s imperative for foreign companies to get a good grasp of Chinese culture before investing in China. Success is only reserved for the party that can do so.

4. Establish a Local Presence

Foreign companies who are already enjoying success in China hold on to and practice a formula that is widely used. They establish a local representative office and form a STRONG domestic private sector partner who has access to important information and contacts in their industry.

5. Set up a Joint Venture

Another way of successfully start a business in China is to set up a joint venture. For a joint venture to be effective, of course, selection of correct trade partner is essential. Although finding the “right” partner may require MORE time, experience, energy, and patience in researching on different firms’ portfolio, nonetheless, these efforts are worth the effort as choosing a WRONG partner will definitely guarantees failure.

6. Incorporate Local Expertise into Management

In order to have an access to good source of information, right network of people to work with, and learning about social as well as cultural values that people of China take pride in, expertise and talent in Chinese market is very “essential.” In order to do so while retaining control over the privacy of the company, including locals as shareholders or part of the management will aid in the growth of the firm in China.

7. Form “Guanxi” (relationship) with the locals

Relationship is an important aspect in achieving success in business in China. Good relationships are the building blocks for development and growth. That means, top management must form and nurture close relationships with their local peers. Not only this helps them understand the Chinese market, but also creates an atmosphere for the largest form of help in times of trouble or danger. Building STRONG relationships with business partners will help alleviate operational and strategic risks. If you want to start a business in china, then we can help make the process simple. With years of experience and plenty of connections, we make it easy.

Start-up or established firm looking to venture into China but do not know how? Do contact us.

At Paul Hype Page & Co. will help you quickly set up a business in China, and help you provide professional accountants, tax and legal advisors to make your business operations even smoother.


Paul Hype Page & Co. is an ACRA-certified business adviser. Our team of seasoned professional can help you set up your company very quickly and easily following all legal entities, and offer you sound advice on how to make it successful too.

In addition to business registration, we’ll also guide you how to:

  1. Write a business plan – Learn how to write a compelling business plan by accessing our sample business plans, or other helpful market research information
  2. Perform market research – Understand your business market, learn how it can enhance your business growth, and how to properly conduct a market research for your business
  3. Legal issues for small business – If you are thinking about registration of company in Singapore, then you really need a lawyer. In addition, you will learn why legal counseling is very important part of any business.
  4. Manage your finances – We’ll offer you the best resources and information to help you fully understand all financial concepts and teach you how to perform basic accounting tasks like budgeting, bookkeeping, financial analysis, among others

By Eric Eio
Managing Partner of Paul Hype Page & Co.

Eric was awarded an ACCA graduate in 2000 and also graduated from University of Sydney with a Bachelor degree in Computer Science & Accounting. Since graduation, he had worked in Big 4 as an auditor , including a one year overseas stint with Ernst & Young, Shanghai in 2005. He left his last appointment as an Audit Managerial position with PricewaterhouseCoopers, Singapore in 2008 before setting up his own Certified Public Accountant Practice – Paul Hype Page & Co. His firm is being selected to be one of the advisory panel for Singapore top 500 SME.