Strategies for Doing Business With China6898410
So you've realized how profitable it could be for your procedure to setup business in China, you've done your research and you surely have a set of connections and practical locations. At this point you need to create your Chinese office up and you've got a choice of three corporate set ups to do this.
A great agent office, this allows you to establish an occurrence in China relatively quickly and cost effectively. It allows companies to engage in a quantity of activities by using a legal entity with their business name signed up in China. Activities that their representative office can engage in, include marketing, research, business liaison activities and coordinating activities but you may be thinking what it doesn't allow you to do is engage in direct sales. By using an agent office, you can't concern invoices in Renminbi, the area Chinese currency.
A relationship can either be an equity joint venture, which most companies decide on, or a contractual relationship. A joint venture, commonly abbreviated to JV, is a small liability company produced with a Chinese company and another company; the foreign company would own a minimum 25% of the new entity. It is far from a merger; it is a new entity, which is partly owned by the foreign company and the Chinese company. With a joint venture, you can make between an fairness partnership or a contractual partnership. An equity joint venture means the revenue and looses are divide in line with the shares each get together has in the organization. With a contractual joint opportunity, the gains and losses are split according to what is explained in the contract.
For 7 years and counting, companies have been able to setup overseas invested commercial enterprises (FICE), which are either totally foreign owned enterprises (WFOE) or joint enterprises to be able to establish retailing, franchising or distribution functions in China. More and more companies are choosing to purchase China through mergers and acquisitions and in the end the merger or obtain will either be a wholly foreign owned business or a joint opportunity.
So which one will you go for? In some industries, such as telecommunications, where restrictions on overseas investments exist, setting up a joint venture may be your only option.
Having a wholly owned overseas enterprise you have a hundred percent ownership of the business in China and tiawan which means it's much much easier to install your own corporate culture, with your own systems and types of procedures. You also get to keep 100% of the profits also it's much better to protect your intellectual property. However, on the down side, you have to fund 100% of the business enterprise and you also have to establish your own sales and distribution systems.
With a joint endeavor your joint venture partner should give you the facilities and the work force and they should also provide sales and distribution sites, although you should hold out research as you will need to check the sales and circulation networks they say they have do actually can be found. On the down aspect of any joint venture you will have to talk about the gains with your joint venture partner, it's also much harder to set up your own business culture, your management policies and system procedures and its harder to protect your perceptive properties.
