When the term “foreign investment” is mentioned today, one of the jurisdictions that cross the mind is China. With a population of about 1.4 billion, a very stable social-political environment, and numerous bilateral agreements, China can only be described as the perfect launching pad for investors who want to succeed.
Despite the country’s high-potential, some businesses that are started there still fail. To ensure your company becomes successful, you should focus on two things; identify the right region for your business and avoiding the mistakes made by other businesses.
How to Identify the Right Business Location in China
When you decide to incorporate a company in China, the location will have a huge bearing on the success that you can achieve. So, here are the main factors to consider when looking for a good business location in China:
1. Proximity to Suppliers and Clients
It does not make economic sense to open a manufacturing business in Shenzhen if the raw materials will be coming from Beijing. The best place to locate your enterprise should be as close as possible to both your raw materials and market. If the two are very far, you will incur extra shipping costs, resulting in higher prices for your products. Therefore, carefully review the different provinces of China and pick the one that will provide you with a competitive advantage. For example, Shanghai-Jiangsu-Zhejiang is best for automobile and biomedicine companies.
2. Availability of Incentives
One of the reasons why China has become so attractive to foreign investors is that it provides numerous incentives. For example, the Chinese administration offers tax incentives to companies that opt to operate in the inland urban areas as opposed to coastal cities. Because even these inland cities are also well connected with roads, rails, and airports, they are also good for business and you can choose them to enjoy the tax incentives.
3. Locate Your Business in the Special Economic Zones
Since 1988 when the Zhongguancun National Demonstration Zone was started, China has created other economic trade zones for investors. The good thing about these special economic zones is that they also come with tax incentives, and you might qualify for financial support. Furthermore, they have well-developed facilities and programs you can use to incubate startup ideas.
How to Avoid Common Mistakes when Opening a Company in China
While China is full of opportunities that you can exploit, it is also crucial to be extra careful because a significant number of companies fail. So, here is a demonstration of how to avoid common mistakes starting a business in China.
- Even if your company has been very successful back home, going it alone in China is likely to result in failure. Instead, you should consider working with a professional agency to help you with both registration and drawing good strategies.
- Do not think that you can start a company and it catapults to success immediately. Like most markets, you need to appreciate that winning customers in China takes time. The best thing is to be prepared to meet the costs of your business for a period of about 12-18 months or more.
- One mistake that a lot of investors make is thinking that China is one homogenous market. China is a large country with different cultures and consumption patterns. Therefore, you should target understanding these individual cultures and markets to be able to deliver what customers want.
China is one of the best jurisdictions for your offshore company, but you need to get it right on company registration, location, and use the right strategy. Make sure to work with experts and avoid the common mistakes that made others fail.