Doing Business in China for Dumb and Dumber 2

Published on March 1, 2010 by JonT | This story has been viewed 752 views

Now that you fully understand that preparation and information are the main keys to success in China, the more informed you are the less beating you’ll take. That however, doesn’t give you asylum, you will get hit it’s just a matter of how and how bad.

What about when? That you should expect daily. If someone in China says, “NO PROBLEM” You had better believe that there is and find it fast. Clarify, clarify the no problem?

First things first, who’s your partner? Under Chinese Law you can’t be a sole foreign entity that’s not in a special administrative region, why would you? That’s like having a neon sign lit up in the dark, spelled out TROUBLE.

Ask the right questions;

• Existing distribution points with exactly what coverage area
• Appropriate facilities and/or storage space
• How’s their financial stability
• Staff that speaks English
• Agreed contracts in English and Chinese (Notarized)
• Performance and Intellectual Clauses
• Most importantly Escape Clause

These are just a few things you should be thinking about. Know your partner before getting into bed with them. Every experienced manager knows that no matter how inappropriate, you should be thinking about divorce on your wedding day.

So they say they have distribution…now? When? I recall one fall that all trucks with produce that was not from one particular province was either held for random or turned away, in Sz no less (mafia related). Do you have access and evidence of distribution? Can we go see?

Secondly, you’ll need a business license in the PRC. Depending on what product or services you offer you could opt for a Hong Kong business with an office in the PRC. The latter negates a whole slew of tax issues. To establish a Hong Kong Limited corporation is very similar to that of the US or UK. Just get a CPA, Lawyer, or number of toll free hotlines to handle this for you. I do recommend this route as long as you’re not intending on selling anything directly into the PRC. If you are then you’ll need a license with a tax number.

• Obtain pre-approval for company name
• Open pre-bank account, deposit funds according to your capital notice and obtain the Certificate of Deposit
• Obtain the Certification of Enterprise, for the person legally responsible for the business (Chinese National Only).
• Obtain Company Chop approval and Make the Company Seal
• Obtain the Certification of Organization Code
• Register with the local Statistics Bureau (This could be omitted, location)
• Register with the State and Local Tax Bureau (two step process)
• Open a formal Bank Account and transfer funds
• Obtain authorization to print invoices and receipts (specific to that company)
• Purchase Government Uniformed Invoices
• Register with the Social Welfare Insurance

Or you can pay an agent a nominal fee to obtain the business license for you (the legal party) and obtaining the Certificate of Deposit (which requires about $150,000USD). If your company capital is anything less, then it will be very difficult for you to find shelf-space. Remember, this is considered not illegal but not legal either. It surely isn’t recommended since; you don’t have any capital in your business and Limited in China doesn’t have the same protection as you do in the west. However, if you’re just starting out with limited funds, it’s convenient and it’s risk management.

Continued….                                                                                                                                                                                                                                 By: Jon Trewyn, Mba.

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Filed under: Shenzhen