3 steps to set up a business in China

China is the world’s first major economy to recover from COVID-19 disruption, making the country one of your best bets if you want to launch an international business. It’s the world’s second-largest economy behind the US after a truly remarkable few decades of growth, and it also came third in US News’ 2020 Best Countries to Start a Business list. This high ranking was down to factors like China’s innovation, technological expertise, skilled labour force, and well-developed legal structure.

So, if you’re looking at the East Asian powerhouse as your next business destination, here are the main steps you need to take to launch a company there.

1.    Conduct market research

China is a mammoth country with lots of geographical, political and cultural factors to consider, so extensive market research is essential. This will help you ascertain where to do business, how competitors operate, and whether there are any good business opportunities you can exploit. Once you have all of this information, you can decide whether your business is viable in China, where to set up shop, and how exactly to approach customers.

Some of the best market research methods include surveys and interviews, as well as secondary research approaches such as analysing market statistics and trend reports. However, do prepare for some barriers. Market research is difficult in China due to unreliable secondary data, potential hesitancy to engage with research inquiries and cultural factors that might influence findings, and the fragmented nature of Chinese industries.

2.    Sort out the legalities

Visas

In order to enter China, you must obtain a visa prior to flying out. For initial visits to do things like conduct market research and set up an office space, you will probably only need a short-term business visa valid for up to 60 days. As noted by visa agents Gulf Visa: “You are eligible for this documentation if you are visiting the nation for commercial or trade-related activities.” However, you will likely require a permanent residence visa if you move there full-time.

Business structure

Your business structure legally impacts aspects like your personal liability and tax responsibilities. Your options in China include:

Wholly foreign-owned enterprises

This is a business established by non-nationals without direct involvement from a Chinese investor. Wholly foreign-owned enterprises (WFOEs) can operate across China and hire both local and overseas staff. This is the most popular legal structure for foreign businesses as third-party operators aren’t needed.

Joint venture

In a joint venture (JV) structure, local and foreign businesses merge. This is most commonly used in industries where foreign ownership is restricted such as the automotive, tobacco and legal sectors. Entrepreneurs can harness a local company’s expertise and network, though have to share the profits.

Branch office

A branch office allows companies to expand their reach by opening branches elsewhere in China. However, most foreign businesses need to set up a WFOE or JV first in order to do this.

Intellectual property

Intellectual property (IP) theft in China has made headlines around the world in recent years, but the country is improving its record on protecting IP and there are a number of preventative measures available to businesses there, such as:

Registering your IP

You’ll need to first register your trademarks in China as it doesn’t recognise trademarks filed in other countries. As a first-to-file nation, the first individual to apply for a trademark gets the rights to it. The Chinese government recognises logos, symbols, unique words, designs, letters, numbers, and colour combinations as signs of a trademark. You should also file a patent if necessary. Applications must be translated into Mandarin and completed before any public disclosure of your invention.

Requesting takedowns on Chinese websites

Once you’ve registered your IP, you can ask popular Chinese websites like Baidu, Alibaba and Taobao to remove infringing products and content. This typically involves submitting identification and proof of IP rights, and it can take around a week to resolve a complaint. That said, sites will generally allow the defendant to either challenge the takedown or appeal it.

Contacting customs

Chinese customs will not only block infringing products from entering the country, but those leaving China too. As such, registering with them can prevent your IP from being infringed outside the country, and protect it within every nation that imports your products.

3.    Use a Chinese recruitment agency to hire employees

It’s highly advisable to hire Chinese staff when launching a business in China, even if you do want employees from your own country too. Natives will better understand the local markets and can offer crucial insights to push your company forward. They’ll also help you navigate cultural and linguistic challenges, and it’s often much more convenient to employ Chinese workers than recruit from overseas. However, the talent is in high demand and can be hard to find, plus you may find it difficult to vet candidates properly and ascertain whether they’re truly right for the job.

This is why you should work with a Chinese recruitment agency. With their extensive range of contacts and expertise in assessing and recruiting, they’ll be able to find the right people and save you plenty of time in the process. When looking for a Chinese recruitment agency, it’s important to consider their experience, how in-depth their searches are, and whether they offer a guarantee. This will help ensure that you do indeed find the right candidates and get value for money from the service.