An informative guide for foreigners who wish to explore the business landscape in China
China offers entrepreneurs in various industries promising opportunities.
For this reason, many foreign entrepreneurs like yourself are starting businesses in “the world’s factory”.
However, you need to follow the proper steps to fully take advantage of the opportunities for businesses in China.
Without the proper preparation, your startup could end up failing before getting established overseas.
If you want to achieve a better outcome, read this post on how to start a business in China as a foreigner.
Conduct market research
To start a company in China as a foreigner, you need to conduct market research. While researching, you will determine what the best opportunities available are.
Keep in mind that businesses thriving in the United States may not be successful in China. Different products and services may be in high demand in “the world’s factory”.
Also Read: A China VC gives you the lowdown on the future of Chinese tech (Pt. 1 )
You need to identify these products and services to achieve your entrepreneurial goals and earn a profit.
During this process, you should also learn about the “barter economy” and how it affects the market.
If you complete market research well, you will choose a promising product or service to sell. In turn, you will succeed in starting a business in China as a foreigner.
Choose a business structure
After you decide on a promising product or service to sell in China’s market, choose a business structure.
In China, you have four options to choose from. They include a joint venture, representative office, a wholly foreign-owned enterprise (WFOE), an umbrella company.
If you set up your business as a joint venture, you declare that you will run it with a local partner.
The representative office option does not yield any revenue because it is strictly for communicating. WFOE businesses take longer to set up than other options.
However, they provide entrepreneurs with full sovereignty on their businesses, making the extra time worth it for some foreigners.
Lastly, umbrella companies do not actually create structures in China. Determine which option would suit you the best to start and scale a successful business in China.
Pick a promising location
Moreover, entrepreneurs need to pick promising locations to launch their startups in China. The best way to choose a location is to travel there in person. Then, you can experience the areas first-hand.
Consider your transportation and logistical needs when visiting so that you can make a well-informed decision.
Additionally, you should research the culture before traveling to China for the first time. This is especially crucial for foreign entrepreneurs planning to network.
Also Read: A China VC gives you the lowdown on the future of Chinese tech (Pt. 2 )
If you accidentally disrespect a potential investor, customer or employee, you could create a bad reputation for your startup before it even launches.
Guarantee yourself success by not only picking a promising location for your business but also making a good first impression when you travel to China.
Then, you will succeed in starting up your company.
Gather the necessary documents
Foreign entrepreneurs also need to gather the required documents to launch startups in China.
These documents include Articles of Formation certified by the Chinese embassy, copies of your investors’ passports and bank references.
You also need to supply a business scope, registered capital, copies of your letter of authorisation and your new office address in China.
Furthermore, prepare copies of the Chinese legal representative and a resume as well.
You will need all of these documents to legally start a business in China as a foreigner.
Wait for government approval
Finally, you need Chinese government approval to start conducting business. Typically, foreign entrepreneurs hear back from the Chinese government within two to three months.
However, it depends on the size and location of different projects.
If you plan to set up a new business in a big city, it will likely take longer to receive notice from the government. Additionally, more extensive projects usually call for negotiations.
Therefore, entrepreneurs trying to start large projects in China should brush up on their negotiation skills to achieve their startup goals.
Regardless of the size of your project idea, you need government approval before you can officially start your business in China.
Entrepreneurs jump at the idea of doing business in China, which is also known as “the world’s factory”.
To take advantage of the possibilities the country offers, you need to determine what the options are through market research.
Then, choose one of the four business structures.
Travel to China to select a promising location for your startup, brushing up on your culture knowledge before departing.
Also Read: How China is outperforming the US and Europe in technology and innovation
Gather the documents the government requires foreign entrepreneurs. Lastly, wait for government approval and prepare to negotiate terms.
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