Since 1970, China’s GDP growth has averaged 10% per year. By 2014, China became the second-largest economy based on nominal growth, but it is the forecast that it will be the largest by 2028 that is more exciting to investors. With the current growth not expected to slow anytime soon, you can take advantage of it to catapult your enterprise to the next level. So, are you ready?
Despite the long list of benefits of doing business in China, such as the highly developed infrastructure and a straightforward tax regime, the process is not without some challenges. However, you can still overcome them and achieve the targeted local and regional growth. Keep reading as we reveal some of the common challenges and the best solutions.
Company Structuring and Market Entry
Even before starting a business in China, the challenges will already be knocking on your door. The first challenge you are likely to encounter is company structuring and registration. In most cases, people are unsure of the company structure to use. For example, do you select a wholly foreign-owned enterprise (WFOE) or Joint Venture (JV) for faster growth?
Even after picking the preferred formation, the process of company registration is pretty complex. Often, investors find the list of documents that are required very long and challenging to prepare. If you do not have a business-related or legal background, some of the documents can be very challenging to prepare. Another challenge is that you will need to deal with multiple offices before the certificate of incorporation is issued.
The solution to this challenge is working with a professional with vast experience in company structuring and registration. The professionals will also come in handy to assist with the formulation of the right strategy for growth.
Stiff Competition in China
When expanding your business to China, some investors have a perception that there is already a huge market, and cutting a share of it is easy. Well, this is a misconception. Although the market is large, competition in China is very stiff. The same way you have identified China as an investment destination, the chances are that other companies are also headed there and ready to win more clients. Remember that you will also be competing against local firms with established clear networks.
To address the challenge of competition, the focus of your offshore business should start way before moving to China. It will be good to start by studying the market to understand the competition. Then, craft a good strategy that will help your business to stand out. For example, you need to identify targeted customers’ issues and design products that address them to make your company in China successful.
Compliance with Local Laws
One of the defining characteristics of the Chinese market is that company laws are very strict and penalties for non-compliance are severe. We will take one example here; payroll. In China, the labor laws require every company to remunerate staff and make all statutory deductions correctly. Managing payroll in line with all the regulations is a major challenge when doing business in China. Other challenging areas of compliance include following the Chinese accounting standards and filing tax returns.
These are only a few of the challenges that you should anticipate when doing business in China. To overcome them, you need to be innovative, and more importantly, work with an agency of experts. With professionals on your side, it is easy to tell what works and what does not and craft strategies to catapult your business to a multinational. Let an expert hold your hand and all of the challenges we listed in this post plus others will be easy to trounce.
