How Small Businesses Can Tame the Chinese Dragon

China recently announced its 2017 GDP growth target was 6.5%. This is impressive and China’s expanding economy presents plenty of opportunities for small businesses. China is in the top four priority markets for exporting businesses. How do you begin to do business in the world’s second largest market?

Focus on your USP but be flexible

China’s population of 1.38 billion is exciting, but avoid the low cost/high volume market. Domestic competition there is intense and foreign companies cannot compete on price alone. Instead, differentiate yourself on your unique selling proposition, quality and know-how. It’s also important to be flexible and localise your products or services quickly. Businesses who assume their offering has the same appeal as in their home market are more likely to fail.

Build local relationships

Market research is crucial before investing significant time and resources in China. Investigate major market trends, seek customer feedback and watch the competition. Local contacts can help you deal with language and cultural issues, manage local customers and understand how to market your products or services. Look for an agent that has up-to-date industry knowledge, government contacts and has worked with international firms before.

Think about the practicalities

If you plan to hire full-time workers based in China, the law states they must be employed by a Chinese entity. The corporate requirements for setting up companies in China are complex and often change. Setting up a Chinese subsidiary of your company can take up to 12 months and requires a registered Chinese office address and Chinese business plan. To repatriate profits to your country, you may have to allocate a percentage of post-tax income to a local reserve fund. This step is not necessary if you plan to sell goods from overseas, through distributors and e-commerce platforms.

Protect your intellectual property (IP) rights

IP rights in your country may not transfer to China, so trademarks and patents need to be registered in China. Trademarks are granted on a first to file basis and typically take six months to a year to be processed. It’s a good idea to create an IP plan, specifying what you will be registering and for which of the 45 product categories.

If you’re selling in China and do not register your IP, be prepared for copycat products to appear swiftly. To minimise the chances of that happening, choose your partners carefully. If you’re manufacturing products locally, consider sourcing the components from different plants and assembling the final product in a separate facility.

Ultimately, there is no better way to build your knowledge than visiting the country. Come to China armed with small gifts, your own interpreter and be prepared for copious banquet dinners. The Chinese are wonderful hosts and welcome the opportunity to show off their country to international visitors.

Are you considering expanding business into China?

Adapted from an article by Avi Nagel, Guardian Small Business Network