Read time: 3 minutes.
This is part two of this series. If you didn’t read part 1, I encourage you to read it here. This part will make more sense after you read it.
In this part, I will talk about some of the benefits of opening a company in China.
Most people doing business in China, at one point or another, consider opening a company in China. When I talk about your own company in China, I am not talking about the business license, which you need to have, but more importantly about the about your team in China that delivers value.
The most obvious advantage is that it gives you the opportunity to have a team of local people, that works with you for a long period of time, on a full-time basis, is familiar with “the way things are done” in your company, is loyal to the company, is trustworthy and bring into the company the local knowledge of both the industry and the Chinese business culture.
I worked with teams in China that not only were loyal and trustworthy but were also willing to walk the extra mile for the team and for the company they worked for.
Having such a team that brings to your attention the right information at the right time, contributes to the decision making and then executes your decisions is priceless.
The most obvious disadvantages are the fixed cost that is there also when there aren’t so many projects running and the time you spend on activities that are not directly related to your core business (usually admin related).
So for this option to be the best one for you, you need to have a constant flow of projects running in China.
Another major disadvantage of opening a company in China is that it won’t manage itself. Someone from your head office will have to manage it to one degree or another, and it all depends on the person you will hire to manage your company in China.
Now this is a VERY important subject and I am going to talk about this in the next post.
Based on the way you are doing business in China and after you decided who will manage your company, the next thing you will need to do is to register a limited company in China.
There are many terrific companies out there, each with their own specialty that will give you a great service. Prices and service scope depend on the service provider you choose.
If it is a global law firm you can rest assure they know all the ins and outs of this topic. Their price will reflect their expertise and ability to deal with a wide range of situations.
If your organization is not very big, and you think you will not benefit from most of the knowledge of these firms, because some of it is relevant to organizations much larger than yours, you could consider a local accounting firm that has thousands of registrations on their track record of companies similar to your company, understands the sub-Chinese business culture of your segment, and issue annual report of hundreds of companies. They may not know as much as the big law firms, but what they do know, may be relevant to you. So you will get a service provider that knows what you need them to know for a fraction of the price.
If you want to know how to research for such companies, you are most welcome to email me.
There are great opportunities in running an effective full-time dedicated team in China.
Having a team of local qualified people in China that is busy with one task and one task only, to protect and promote your organization’s interests in China is priceless.
It will save you time and money and will bring you a constant flow of valuable information that will change the speed and quality of your decision making,
It will also bring you a constant flow of new resources like service and product suppliers.
Along with the opportunities, there are some considerable risks you should be aware of, and they are all related in one way or another to poor management and poor communication.
Managing various areas in China is very different than managing the same areas overseas because of the different business culture, the different laws, and different industry practices.
Someone who is not experienced managing a company in China can easily turn loyal employees to bitter employees, a government official who wants to help, to someone who does their job and that’s it and a good supplier to a foe.
I’m sure all China veterans who are reading this can think of a nightmare or two that can happen as a result. The one thing these nightmares have in common is that they will cost you a lot of money, your customers, and your reputation.
Now, I’m not saying you should not open a company in China, all I’m saying is that there are risks, you should be aware of them, and you should know how to control them.
In the next post, I will talk about what you should keep in mind when you design the profile of your number one person in China.
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