Strategies for Doing Business With China4624936
So you've realized how profitable it is usually for your procedure to build business in China, you've done your research and you will have a set of associates and practical locations. Right now 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 an amount of activities by using a legal entity with their business name listed in China. Activities that their representative office can engage in, include marketing, research, business liaison activities and coordinating activities but you may be questioning what it doesn't allow you to do is engage in direct sales. By using a rep office, you can't concern invoices in Renminbi, the area Chinese currency.
A collaboration can either be an equity joint venture, which most companies decide on, or a contractual collaboration. A joint venture, commonly abbreviated to JV, is a small liability company created 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 collateral partnership or a contractual partnership. An equity joint venture means the revenue and looses are break up in line with the shares each get together has in the corporation. With a contractual joint endeavor, the gains and losses are split according to what is explained in the contract.
For 7 years and counting, companies have been able to create 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 businesses in China. More and more companies are choosing to purchase China through mergers and acquisitions and finally the merger or obtain will either be a wholly foreign owned venture or a joint opportunity.
So which one do you really 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 better to install your own corporate culture, with your own systems and methods. You also get to keep 100% of the profits in fact it is much much easier to protect your intellectual property. However, on the down side, you have to fund 100% of the organization and you also have to establish your own sales and distribution systems.
With a joint opportunity your joint venture partner should supply the facilities and the work force and they should also provide sales and distribution systems, although you should take out research as you will need to check the sales and division networks they say they have do actually can be found. On the down part of your joint venture you will have to talk about the gains with your joint venture partner, it's also much harder to setup your own business culture, your management policies and system procedures and its harder to protect your intelligent properties.
