Strategies for Doing Business With Chinese suppliers7956738
So you've realized how profitable it could be for your procedure to build business in China, you've done your research and you surely have a set of connections and practical locations. Today you need to put your Chinese office up and you've got a choice of three corporate houses 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 wanting to know what it doesn't allow you to do is engage in direct sales. By using a consultant office, you can't concern invoices in Renminbi, the area Chinese currency.
A relationship 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 restricted liability company shaped with a Chinese company and another company; the foreign company would own a minimum 25% of the new entity. It is not necessarily 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 pick between an value partnership or a contractual partnership. An equity joint venture means the earnings and looses are separate in line with the shares each get together has in the business. 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 international invested commercial enterprises (FICE), which are either totally foreign owned enterprises (WFOE) or joint enterprises to be able to establish retailing, franchising or distribution functions in China. More and more companies are choosing to purchase China through mergers and acquisitions and in the end the merger or purchase will either be a wholly foreign owned business or a joint endeavor.
So which one will you go for? In some industries, such as telecommunications, where restrictions on international investments exist, setting up a joint venture may be your only option.
Using a wholly owned international enterprise you have a hundred percent ownership of the business in Chinese suppliers 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 also it's 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 endeavor your joint venture partner should give you the facilities and the work force and they should also provide sales and distribution sites, although you should hold out homework as you will need to check the sales and circulation networks they say they have do actually are present. On the down area of any joint venture you will have to talk about the earnings with your joint venture partner, it's also much harder to put in your own business culture, your management policies and system procedures and its harder to protect your intelligent properties.
