Key steps to start a business in China

What are the key steps to start a business in China? Wish to export and import to China? What should the westerns do to establish, invest a business or register a company in the central business areas (Shanghai, Hong Kong, Beijing, Guangzhou, Shenzhen, Tianjin, Chongqing, Suzhou, Wuhan, Chengdu, Hangzhou…) in China?

It is almost inconceivable to talk about the process of establishing a business in China, without taking in consideration the Free Trade Zones (FTZ), The Special Economic Zones (SEZ) and import and export regulation. Today this post however will start a sequence of articles regarding the issues to be considered to set up a business in China. Chinese market is not simple and research is essential for success.

Since Quabbala Lawyers and Economists corporate with companies, especially Spanish companies in China mainland and Hong Kong SAR both, here we share some important steps to take in consideration when stabilishing a business in this area:

Firstly, like doing business in any other country, knowing the regulations is fundamental: types of enterprises (WFOE Wholly Foreign Owned Entity, RO Representative Office, JV Joint Venture), the minimum capital requirements, the registration process for company incorporation, labour costs, rental costs and tax rates.

Despite the basic knowledges on the regulations, to manage your business successfully in China, advanced and particular negotiation skills with your (potential) Chinese business partners and deeper understandings about the culture itself are of great help for building a China Strategy.

For doing business with Chinese people successfully, building and maintaining relationship are important (Guanxi):

– Friendship first, business later.

– Be cultural-smart, open-minded, patient and have a good sense of humour. Most importantly, there is no substitute for humility.

– Find the right intermediaries: it is very common in China because of historical reasons. A right and matched intermediary could use his or her own guanxi to reach the key connections and build the bridge.

– Once the relationship is built, it is a long-term relationship that can be the key to success in the Chinese market; once the trust is established, a company could grow incredibly fast.

– Understand the priorities of the Government. The government officials could become the most important allies: licenses and permit requirements are complex and numerous in China. National, provincial and local government agencies and related offices are involved in nearly all aspects when doing business.

– Avoiding politically sensitive topics.

The Chinese negotiation style:

– It is essential to know who you are dealing with because top – level Chinese executives tend to focus on evaluating the relationship and sincerity of the others instead of bargaining. In fact, they (top level executives in China) rarely do.

– Substantial dialogue is preferable.

– With a proposal you submitted, the Chinese, most possibly, would not response directly. Chinese people would offer a ¨kankan¨ (let´s see), or ¨yanjiu¨ (study the proposal).

 – Nothing is settled until everything is settled: the Chinese are holistic who tend to focus on the whole package

Managing conflicts and ¨face¨ (mianzi):

– The core of Chinese society is harmony: the Chinese prefer turning big problems into smaller ones, and small problems into no problems at all¨ (da shi hua xiao, xiao shi hua liao)

– If you cause the Chinese embarrassment or loss of ¨face¨ by breaking promises, displaying impoliteness, impatience, anger, frustration or aggression, it can be disastrous for business negotiations or even make a permanent enemy: mianzi defines one´s social statue or prestige, reputation for integrity and morality, and in China, social position, respect and personal honour are very important. [1]

 

Reference:

Harvard Business Review

[1] EUSME CENTRE: Negotiating and dealing with Chinese business partners