China is usually a great location to consider for starting up a business. Many companies have always considered doing business in China. The country has a great population of more than 1.3 billion people and therefore the market share will be great. However, one has to have a market entry strategy that will be used in successfully setting up a business in the country.
It is always important that a company consider its resources, their business experiences and their long-term strategies before they venture into the China market. A company should conduct enough research on the market in order to understand how to set up a business in China market. Companies can get representation in China through a distributor, a Chinese agent or a partner who has enough information on the locals as well as local contacts in China. It is also important for the Intellectual property rights holders to understand ways through which they can protect their IP when operating under Chinese law before they venture into the Chinese market. In addition, they should carry out due diligence on the potential customers and partners before undertaking any business transaction.
There are different ways through which foreign companies may set up businesses in China. The country’s markets are now open to different types of businesses and is therefore important that before starting up a new business in China, a company should consider the different options on how to enter China Market. Foreign companies can set up businesses in China as Wholly Foreign Owned Enterprise (WFOE), which is a limited liability company, owned wholly by the investor. Companies can also set up as representative office, Foreign Invested Partnership Enterprise (FIPE) and Joint Venture. A representative office in China is an association office of a parent company and is prohibited from generating revenue in the country. FIPE is a new type of business in China where foreign and local partners can establish a Partnership Enterprise in China. A joint venture is a limited liability company created between a foreign investor and a Chinese Company Investor.
Company registration in China is the next step that is usually taken after deciding the type of business to venture in. Foreign investors are usually restricted from submitting the application documents directly to the relevant authority. The company has to look for a People Republic of China (PRC) entity that is not restricted to act as a sponsor. The PRC entity submits all the relevant documents for evaluation and approval by the State Administration of Industry and Commerce or the local Administration of Industry and Commerce.
After approval of company registration, a foreign company is required to open a China corporate bank account. The shareholders of the company should then deposit their initial capital contribution into the bank account. The investors should have a foreign currency and RMB bank account that will allow them to deal with the local customers with the Chinese currency.
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