Tips on starting an expat business in China

Getting used to China’s totally different business world isn’t easy but can be very rewarding.

Every expat entrepreneur who arrives in China full of hope and new ideas soon realises the Chinese way of doing things is unfamiliar, to say the least. Western companies are increasingly wanting a piece of the action in this new global powerhouse, but getting it without ruffling Chinese feathers can be tricky. Even the process of setting up a company is fraught, due to the need for strict compliance with laws covering foreign investment on Chinese soil.

Prospective expat business owners need to get to grips with China’s 2015 guidelines for foreign investment in order to find out whether their business proposal is encouraged, controlled or simply prohibited. The best way to ensure the business plan comes under the ‘encouraged’ category is to have a reputable Chinese recruitment agency check it out. Nowadays, expat entrepreneurs are allowed to operate in China’s selection of free trade zones, with four major cities on the mainland open to foreign businesses as well as a number of second tier cities. If the business is to hire local talent, siting it in a first tier city such as Beijing, Shenzhen or Guangzhou is the best way forward. Again, a local recruitment agency’s advice could help, as choosing the right city is important as regards hiring locals.

Expat entrepreneurs have three options as regards starting up a business, with setting up a representative office the first and easiest as it can be done without investing large amounts of time and money. Secondly, the WFOE – wholly-foreign-owned-enterprise - option is perfect for businesses needing a physical presence and absolute control as regards effective and efficient decision making. The third choice involves businesses with one or two Chinese partners which need access to advanced business resources.

One aspect of founding a business in China must be taken very seriously as it involves the threat of intellectual property piracy, commonplace in China and a real threat to business success. Another development to watch carefully is the ever-increasing scope of China’s anti-trust laws, with expat companies advised to register their trademarks, patents and IP rights as part of a protection plan.