For those in business community of other countries, the news over the last decade or so focused on the supply chain advantages of China. China became a massive export machine and manufacturing juggernaut, with its low labor rates, stable currency, highly disciplined workers, and excellent logistics infrastructure. Although there are still supply chain challenges with sourcing from China, China has proven to be nimble and capable of producing ever more complex products. Ongoing quality improvements, productivity gains, and increased management sophistication will further solidify China’s manufacturing prowess.
Most successful companies today, regardless of revenues, have created a concrete China supply chain strategy, thought about a China supply chain strategy, or figured out a way to combat a China supply chain strategy. However, moving forward it is clear that most global businesses will be talking about something else with respect to China – start a business in China.
China has roughly 1.4 billion people, with 56 percent living in cities, which are poised for considerable growth. New research shows that the country’s urban population will reach 926 million by 2025, and top 1 billion by 2030. There will be an enormous opportunity for global companies to support this trend with products and services.
It is no secret that 2015 GDP growth in China increased by 6.9 percent. China has had the fastest growing major economy in the world for the past 30 years, with an average annual GDP growth rate above 10 percent and per capita income growth at an average annual rate of more than 8 percent. China now ranks as the second largest economy in the world behind the United States.
As per capita income has risen and wealth creation has exploded, Chinese consumers and businesses have become bolder in their purchasing habits, buying Western brands and looking to utilize strong cash positions to purchase more. Consequently, in 2016, instead of further refining a China supply chain strategy, companies of all sizes will find it necessary to start a business in China.
Jingle Office, has compiled many best practices that companies should consider when implementing a China strategy and start a business in China, whether taking a supply chain or market entry focused approach:
Truly understand why China makes business sense. Certain business models have a very strong China angle, while others do not. Just because everyone else is going and start a business in China does not necessarily make doing so a fit for every business.
Relationship (guanxi) is extremely important for your business success in the China market. Often, once a good relationship is built with your potential partner, business deals will be smooth and secure. Building good relationships with local authorities can help you avoid unwanted difficulties and frustrations.
There are a number of complexities involved when start a business in China. A company should be comfortable working with government officials and should understand the legal landscape. The best way for foreign companies to manage these challenges is to have a strong, trusted local presence on the ground in China.
The laws, practices, and challenges associated with intellectual property in China are significant. There are several strategies that companies can use to protect IP, so be sure to give this due consideration before jumping in. Many Western companies have gotten burned in this area.
Things move and change very quickly in China, so be prepared to adapt and adjust business models and practices. Don’t be afraid to recognize and correct mistakes. Chances are that most companies will not get everything right the first time and even if they miraculously do, the capricious business environment will force them to make large and fast changes to keep up. That is why it is so helpful for foreign companies to have local support and experts who can help them be successful.
Be Patient, But Have Fun
There is an enormous opportunity in China. It is truly a unique place and many businesses will be wildly successful here. Take some time to soak in the culture, the atmosphere, and have fun. Western businessmen are often impatient, but the Chinese way of doing business is different. Respect and learn from it. The road to successfully start a business in China can be challenging and long, but be patient and enjoy the experience.
Jingle Office is always in the position to offer help, so do not hesitate to contact us if you have any questions.