May 26, 2020  
 
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Doing Business in China

 

Is Doing Business in China the Right Move For Your Business?

Written by Bobby Jan for Gaebler Ventures

Doing business in China is not right for everybody. Here are a few things to think about to determine whether doing business in China is the right move for your business.

China has a large, emerging market that many businesses are aggressively trying to enter.
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If you are thinking about doing business in China, you must first consider if your business is suitable for the move.

Employees

Many manufacturing and other labor intensive businesses move to China to take advantage of the cheap labor. Many large technology businesses also built large research and development centers in China to take advantage of China's large pool of knowledge workers. However, China might not have an abundance of the type of employees you are looking for. Can your business take advantage of China's labor market?

If you are outsourcing jobs to China, are you and management ready to lay off workers in your home country? Before outsourcing jobs to China, you should consider how laying off domestic employees will affect your business, employee morale, and you personally.

Is China the Most Competitive?

Don't rush into China just because everybody else is doing it. China offers numerous advantages to many businesses, but it might not be the best for your business. Consider other similar markets as well.

Do You Have International Business Experience?

Although it is entirely possible to succeed doing business in China without prior international business experience, it is much more difficult. It is important to understand both U.S and Chinese regulations. Another thing to consider is whether you have anybody on your management that is qualified to help you run your China operations or the need to hire advisors and capable management.

Do You Have Patience and Capital?

Due to bureaucratic red tape, getting your operation started in China might take much longer than the United States. Also, many western business professionals believe that it takes longer to reach critic mass and profitability in China than in their home country. If you want to start doing business in China, you should take a long-term approach to your investments and have the capital necessary to ride out the start-up phrase.

Cultural and Legal Understanding

Chinese culture and regulations are very different from the United States. Your organization must be culturally sensitive and flexible when doing business in China. This includes knowing how to effectively manage Chinese employees, handle negotiations, and network the Chinese way.

Rules and regulations are also very different. Here are just a few examples of regulations you should be aware of:

- You can't buy land in China, only the right to use the land

- There are currency restrictions so you need to figure how out to repatriate capital back to your home country

- You have receive approval for business activities

- China's intellectual property rights laws are weak and may not adequately protect your company

Cheng Ming (Bobby) Jan is an Economics major at the University of Chicago who has a strong interest in entrepreneurship and investing.


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