Companies who want to enter the Chinese market may encounter great success, but naturally, they will also meet significant challenges. The key to smart company registration in China is timing and knowledge – because there is an ideal scenario for every circumstance.
This may come as a surprise, but you don’t necessarily need to open a company in China in order to do business in China – at least not at first. In fact, taking things slowly at first, as you gradually obtain more information about the Chinese market, is the smartest course of action. Once you understand more about your expected needs and prospective customers, you can make smarter decisions regarding company registration in China and the type of legal entity you should establish. Making informed choices when starting a business in China can ultimately save you precious time and money – not to mention unnecessary mistakes.
China law allows you to engage in valuable business development prior to establishing your official corporate entity. You can hire employees, deal with suppliers and kickstart product imports and sales. Once you’ve accumulated enough customers and understand the nature of your business, you can move confidently ahead and establish a business entity.
If you’re wondering how you can operate in China without a business entity, the answer is simple: outsourced services. PTL Group is an ideal example of an operational support company that can do practically everything you need to experience positive China market entry – and has tons of experience doing it. This includes employee recruitment, product importation and storage, accounting services in China, digital marketing, salaries and payments, and much more.
The Benefits of an Effective Operational Partner in China
The benefits of working via outsourced services in China is clear: it provides you with valuable time to learn and develop your business, without committing to anything you may have a hard time getting out of. But there is more to it than that. By working with an experienced partner in China, you gain access into valuable data regarding Chinese culture, customs and market expectations. You also benefit directly from shorter time-to-market, cost-effective operations, and less risk. In other words – it is more than worth it.
Think of it this way: With the right operational partner by your side, you will be able to focus on building your core business from the get-go. You won’t have to worry about bureaucracy, setbacks, regulatory challenges, or misunderstandings, because your partner will have that covered. Just think of the time you will save, and the peace of mind you will gain. This usually translates into profit.
So When Should You Set Up Your Company in China?
The short answer to this question is: Once you’ve gained enough business experience, and you know what you are doing and where you want to go, you should contemplate company registration in China.
Establishing a WFOE in China will provide you with full ownership of your activities in China. Think you’re ready for company registration in China? You may very well be. To be certain, analyze your business based on the following parameters:
- Stability and growth: Is your business stable financially? Does it occupy a significant market share? If so, that’s a good sign you may be ready to move forward with company registration.
- Participation in government tenders: You cannot participate in these tenders – or several other kinds of business activities, for that matter – without a business license that is your very own. A third-party business isn’t enough. So if you want to participate, you’ll need to establish a WFOE.
- Specific products: Some specific products require very special licenses that can be hard to obtain. Once you obtain them through a third-party and then open a local entity, you’ll have to obtain them again, which can be a financial burden and a time-consuming headache. If you need these licenses, it’s better to do it under your WFOE.
- E-commerce: Sometimes, companies operating in the E-commerce market need to set up a certain company structure that requires a local entity, complete with a bank account for payment deposits and overseas fund transferring.
Let’s Talk About Manufacturing in China
Many international companies selling their products in China rely on overseas manufacturing and efficient importation. That said, local manufacturing can be advantageous for many companies operating in China.
If you haven’t heard of China’s Industry Clusters, then continue reading. These specific areas are designated by the Chinese government as places from which manufacturing facilities can operate and benefit companies from specific industries. Each cluster is located in a different geographic location and tends to the need of a specific industry. By offering companies shared resources and facilities and knowledge within a small geographic space, the clusters help lower manufacturing costs and provide an incentive for local manufacturing.
Another reason to consider manufacturing in China is the current China climate, which is driven by innovation. The government is investing a great deal in manufacturing automation throughout various industries, and the country is filled with state-of-the-art production facilities. In addition, China is making great strides in sustainability and carbon emissions, and is also making a great effort to protect local manufacturers from IP theft. In other words, China becoming more and more advantageous for advanced companies that are looking for optimal manufacturing conditions. Now more than ever before, manufacturing in China seems like the ideal route to sell in China and in the APAC region.