China is the top destination for foreign direct investment worldwide. Plus, relative to other global locations, GDP growth in China itself is expected to soar. China also has a number of trade agreements in place that lower the hurdles for doing business internationally; therefore, if you want to start a business in China, you should go for it!
Before setting up a business in China, international enterprises should conduct their research. Comparing China to the United Kingdom, there are differences in how to take your first step in the Chinese market. This will require more paperwork and increased government intervention as you are doing it abroad.
Therefore, let’s look at three crucial steps to making your first step in China:
1. Pick a Business Location
You must choose the location of your company before launching a business in China. China is a sizable, developing nation where new commercial hubs are continually growing. However, you could choose to concentrate on places such as Beijing, Shanghai, and/or Guangzhou, which are already thriving economic hubs.
Our model enables some operational flexibility as one of our core advantages.
Shanghai is a preferred option because of its unique benefits. Our team of experts can help you discover many other locations too, with even more benefits. In fact, the government promotes innovation and international trade; for instance, many foreign enterprises are able to operate in Shanghai’s Free Trade Zone (FTZ) without having to pay as many taxes as usual (not only restricted to Shanghai). Fewer sectors are off-limits to foreign investment. Some administrative rules that are in place in other cities are relaxed by the government.
2. Partner with An Employer of Record in China (EOR)
An Employer of Record in China (EOR) is a third-party organisation that employs and pays your local employees on your behalf. Put differently, the EOR acts as the official employer in China for tax purposes and is responsible for the employment arrangements and additional legal & administrative HR requirements. A market-specialist employer of record in China will ensure that the local operation is 100% compliant and abides by all national and local regulations.
Generally speaking, it is advised to hire Chinese employees for sales and service when starting a business in China. The local market will be more known to Chinese personnel. They could even be able to offer more suitable suggestions for how to make your goods or services. When it comes to managing the cultural variations that you might not foresee, a local team of Chinese employees is absolutely essential.
However, skilled Chinese workers are constantly in demand, particularly given the labour situation today. The best talent is frequently approached by organisations with alluring job offers, making it challenging to retain them.
It typically makes more sense for foreigners launching a business in China to find and secure outstanding local talent by using a local recruitment firm.
3. Choose a Legal Structure
The next crucial factor is selecting a legal structure if you decide against conducting your enterprise solely with a local service provider as a PEO and are planning to incorporate your firm . When launching a business in China, there are several different business structures to select from. Below, we list the most common types. After choosing a legal form, there are still a few things to think about, such as company registration in China and determining the minimum registered capital. The most common structures are:
- Wholly foreign-owned enterprises (WFOE)
- Joint Ventures (JV)
- Representative Offices (RO)
Our model can use an alternative to these, at least as a starting point. PTL Group helps international businesses enter the Chinese market by establishing and managing their on-the-ground operations before formal subsidiaries are registered. This allows a critical period of market learning with full operational flexibility before committing to a specific structure, location, business model and partnerships.
Please read here to learn more: “What Startups Need to Know about China Market Entry”
Do you feel slightly more confident about starting your new foreign-owned business in China? Although launching a firm in China can be challenging, you can easily start reaping the financial benefits of conducting business there with the help of PTL Group and research.