China is the uncontested El Dorado of the 21st century. The rapid rise of China as a leading economic power within a time frame of about three decades is often described by financial analysts as one of the greatest economic success stories of modern times. The story of the Western world’s fascination with China dates back more than two millennia and began with a product that remains the symbol of this relationship: silk. Silk gave rise to the first myth of Chinese trade and the perception of the Silk Road as the main commercial avenue of antiquity. In recent decades, China’s economic growth has been accelerating at speeds the world has not witnessed since the 19th-century Industrial Revolution. With its dual appeal as the world’s factory and the largest consumer market worldwide, China has become the preferred playing field for businesses with global ambitions. In the next coming years the world’s most promising entrepreneurs and most ambitious companies will be growing in China, with China.
While there are still important challenges for Western businesses operating in China, the business environment and market access for foreigners has significantly improved over the last decades. China climbed the World Bank ease of doing business ranking by 15 places in 2019. It now ranks higher than many European countries. China has evolved into a dynamic, fast-paced environment offering a plethora of opportunities to challenge-driven companies and business adventurers. It has emerged as one of the most aggressive countries promoting 5G technology (the fifth generation of cellular network technology) and is predicted to become the world’s largest 5G market by 2025. China’s strategy for achieving global technological dominance manifests throughout the country’s signature foreign policy, the Belt and Road Initiative (BRI), an externally oriented development program designed to increase China’s presence and investments in countries around the globe and to expand markets for Chinese products. Sustained high growth rates over the past several years have been rapidly transforming China into an industrialized economy. The current downturn is the first of such magnitude since the 2008 financial crisis. Back then, considerable reductions in production were recorded for four consecutive quarters after the crisis, but exceptionally high increases were also reported in subsequent quarters. It remains to be seen whether the COVID-19-induced economic crisis will follow a similar growth pattern. With the advent of coronavirus, the challenges and uncertainties that dominated previous years such as higher trade barriers and Brexit have clearly moved to the background. COVID-19 has forced governments to intervene in the world economy. While the full impact of the containment measures remains uncertain, in the beginning of 2021 China’s economic recovery is gaining momentum. While much of the world continues to struggle with the virus, China’s recovery has been relatively speedy. One of the most encouraging parts of China’s recovery has been the recent rebound in consumer spending. At the same time, Joe Biden’s presidency is expected to follow a more rational approach to bilateral trade between the United States and China. While political tensions—due to the recent human rights abuse in Western Xinjiang and the erosion of freedoms in semi-autonomous Hong Kong—are expected to continue, Biden’s administration is expected to return to rules-based, free-market trade relations with China.
Entering the Chinese Market aims to assist Western entrepreneurs, businesses, and investors to understand and successfully enter the Chinese market. It is designed to work as a step-by-step guide to those businesses seeking to understand the investment strategies available to foreign companies operating in China and remain competitive in the tremendously challenging and profitable market that is China at the start of the third decade of the 21st century. My book Entering the Chinese e-Merging Market focused on the procedures and strategies that Western companies need to follow in order to enter China’s electronic market, a process that requires smaller amounts of investment. Entering the Chinese Market is a concise and pragmatic guide of use to anyone considering to expand or set up a business entity in China. It contains practical advice, suggestions, key models, updated data, and strategies for different types of companies as well as alternative entry strategies using third jurisdictions such as Hong Kong or Singapore. It details all applicable decision-making processes to help you choose the most suitable structure based on your company’s needs, business scope, and available capital. In addition, it discusses all relevant rules, regulations, documentation, and management issues related to the establishment of different types of structures such as WFOEs (wholly foreign-owned enterprises), ROs (representative offices), JVs (joint ventures), as well as other forms of investment. Topics covered in this book also include tax, legal, intellectual property rights (IPR), common pitfalls, and other vital issues facing Western investors who plan to enter China’s thriving market.
Considering the country’s rocky business environment, its uniquely complex legal, social, and political climate, and the recent COVID-19 crisis, China is a tough place to conduct business without the right preparation and planning. Even some of the world’s largest and most successful companies stumbled hard when they tried to enter China. The process of setting up a business entity in China involves several steps, requires a wellplanned strategy, and a great deal of organization, commitment, patience, and motivation. Finding the right strategy for your company is key. To achieve this it is crucial to know how the market really works and what role the Chinese government plays in the way your business functions. Always be ready to reconsider and adjust your strategy in order to respond to this fast-changing market. During the initial stages you might face one of the most unexpected challenges and brutal negotiations you have ever experienced. Remember that if you really want to succeed in China you must play by the local rules and do business the Chinese way.
The book begins with a general overview of the current Chinese market environment and presents in detail the various investment options available to different companies based on their business scope, available capital, and specific needs. It follows up with a detailed description of all available entry methods Western companies can use to establish a suitable business entity in China. Next, I move to an overview of relevant laws and regulations, practical challenges, emerging trends, as well as alternative strategy options. Finally, I conclude with recommendations on key strategies for different types of companies and a decision-making flowchart which many of my clients have found particularly useful. In the last section I have included useful links and a recommended reading list. All sums of money are expressed in Chinese Renminbi (RMB) and where helpful in U.S. dollars (U.S.$). Exchange rates are those prevailing at the year of the transactions referred to.
Besides providing you with information and advice on the best way to enter the Chinese market, an important message I want to convey through this book is that China is a market that Western companies simply cannot ignore and since you cannot beat it, you’d better join it. Chances are that many of your competitors are already in China and, more importantly, the country is now producing new its own international competitors as an increasing number of domestic Chinese companies grow and expand globally.