Do you know that China represents 13.3% of Global GDP? It’s the leader in export and an economic powerhouse. It recently surpassed the US when it came to GDP and purchasing power in 2014.
For the last three decades, China has experienced wave after wave of reform that encouraged foreign investment and export. If you are a business person who wants to enter this lucrative market, there are a few things you need to mind, beginning with the following.
China has over 56 different ethnicities that consist of over 94% of the population. The country has a hard time balancing between modernity and tradition. Consumers exhibit vastly different behaviors from region to region and event cities. There is a drastic difference between the minimum wage in local and higher areas. This is a complex landscape; do your research before entering the Chinese market.
Business law is a new file in the Chinese market, and it’s evolving right now. The state heavily regulates foreign investment and one must be given approval from authorities before a business sets up. If you want to learn which types of investments are sanctioned by the state, you have to consult with the foreign investment catalog. This catalog is classified into the following categories:
Restricted Sectors: Covers the creation of educational institutes, car making, and airline industries along with others.
Prohibited Sectors: These sectors are the production and maintenance of nuclear fuels, tobacco sales, audio recordings, and their publication online among other examples.
Needed Sectors: The sectors where investment is encouraged are subway construction and management. These sectors are followed by retirement, home creation, and maintenance, architectural design, textiles, industrial design, etc.
The sectors that are not mentioned in these categories are authorized. There are a few recent updates; these updates help open new channels of investment for foreign business people.
For instance, direct selling, distance selling, and online selling were recently restructured by the local government, and it is now authorized. This update opens up excellent business opportunities for online retailers around the world. This is important because China has established itself as a leader in e-commerce sales.
If you want to establish yourself properly in the Chinese market, you have the following legal options:
Representative Office: A simple corporate model that doesn’t conduct sales or directly purchase activities.
Equity Joint Venture or Cooperative Joint Venture: This is encouraged by the local government as it requires you to join hands with a local Chinese partner.
A Completely Foreign Owned Enterprise: This is perhaps the most versatile option. It lets you bypass patterning with a Chinese investor. Therefore, you get better control and autonomy.
Taking on a new market on your own is quite the challenge, so it’s best to find a local partner. Doing so will avoid some common pitfalls and help you adapt to the market efficiently. The law requires you to partner with a Chinese body if you want to invest in a given industry.
If you choose to go this route, pay close attention to the rules of partnership. You will have to outline the legal structure of collaboration.
If you are interested in even more business-related articles and information from us here at Bit Rebels then we have a lot to choose from.
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