Truth & Expert Tips About Starting a Business in China

China has been a formidable field for innovation and is seen as a land of opportunities by business owners and investors. This market has incredible potential in parts because of the growth of its middle class. However, China has its own practices, its own codes and it won’t be easy to succeed. Here is our guide to set you up for success in the middle kingdom.

“In China nothing is easy but nothing is impossible.”

Olivier Vérot – GMA CEO

The administration behind launching your business in china:

The first step into launching in china is administrative, because of always changing regulations, it can be quite a hassle. Before even starting the process, you’ll have to answer 3 important questions:

Is my sector  open to foreign businesses in China?

China is usually pretty open to foreign business, markets such as imported food, organic food, cosmetics, fashion, baby care, health care services & product, traveling, energy and environment, etc;  are in constant growth.

If there are many opportunities, you should research your industry history and development in China. Who are your competitors, and is the competition level high? It is possible that your product is rather new to the Chinese market. In this case, we suggest you first ask yourself if your products/services are appealing to Chinese consumers as well as study the trends to determine your success rate.

Structure of my business to settle in china

4 options are available to you to set up your business, here is a short introduction to them:

• The Joint venture, you operate your business with a local partner.
• The Representative Office which is strictly regulated and can only be used for communication purpose as no revenue can be generated from it.
• WFOE (Wholly Foreign Owned Enterprise). It gives you full sovereignty on your company but it takes time and resources to set up.
• Umbrella company, it will take of back office of your company and you won’t have to worry about creating a structure in China.

These 4 options come at different prices and will impact your financial status when arriving in China so think it through, read about it, and decide which of them is the most suitable to your business model, resources, and goals you want to achieve in China.

Read as well: Legal & practical ways to protect your brand in China

To Start a Business in China, first learn about its Finance & Taxes Law

Answering the previous question is crucial for your budgeting. How much should go into setting up the back office of your business in china and how much should go into your marketing effort? Being able to fund your business until your Chinese venture can sustain itself is a key point of your success, but you are not learning anything here. Some country offers some aid to invest in China, we suggest you have a look at your country’s government website.

The Taxation system in China is a whole topic in itself and a rather complicated one and there are several types of taxes. The transaction is strictly controlled by the government. The standard corporate income taxes rate for instance is 25% but can be lowered to 15% for industries encouraged by the Chinese government

How to have a successful business in China:

Launching a company in an unknown country can be overwhelming, not only the administration can be obscure but the business mores and habits are from another world.

When starting a business in China, get a Trustworthy Local partner

It would be foolish to believe that you won’t need a guide to make your way into China. China has a long and complex history and the business landscape is intrinsically linked to it. A local, that grow up in this socio-cultural environment has a deep knowledge of the business culture in China. Though having a local partner won’t necessarily make it easy or flawless it will certainly help you avoid finding yourself in a delicate situation.

Not mastering the local language can be a huge barrier especially if you intend to grow your connections. In China, having good connections or “Guanxi” is extremely important and can impact your business from finding partnerships to finding retailers or even an office local.

Adapt your knowledge to the market

Now, you are a business owner and are not clueless about how to run a company. Your knowledge is valuable and instead of throwing it by the window, you should adapt it to the subtlety of the market.

For instance, Chinese companies tend to be focused on the hierarchy, giving little to no trust to their employees encouraging young talents to move from one company to another simply looking for a better package. Offer your trust to your employees, teach them, and give them responsibilities, in other terms a reason to work with you.

With the new generation of workers thirsty for knowledge and governmental measures to fight against corruption, the way of making business in China is evolving, bring your own touch.

In China, you will need a Complete Digital Marketing Strategy

It should be clear by now that China has its own culture and business model and that company wanting to succeed in the middle kingdom has to adapt on every front including its online marketing strategy. China is super connected and your presence online is non-negotiable.

Chinese website is key when doing business in China

Chinese consumers are more educated than ever and are looking for quality in foreign brands. The country is well-known for its counterfeit poor quality products and the locals are all well aware of this issue. They took the habit of researching for information online before purchasing anything. In this optic, it is important for you to create a website in Chinese hosted in China or Singapore as it will help you rank on Baidu… It needs to be interactive and informative.

Baidu Seo/Sem/retargeting

A website is a good start but if no one can find you it is useless. Work on Baidu SEO and SEM to get traffic, the easiest it is to find you the better it is. Rank on your industry  Keywords. Here is some point to keep in mind when working on your SEO strategy:

• Chinese language & locally hosted website – Baidu’s crawling and indexation of non-Chinese language sites are poor.
• Chinese Language Focused search engine = Very accurate treatment of research request
• Little tolerance to duplicate content
• Crawling is frequent
• Use Chinese based website for backlinking
• Image results technology not efficient – Efforts on Image optimization
• Regular new content leads to better ranking
• Domain name authority matters, the older the better

Your SEO effort should be combined with SEM campaigns, they get you results much faster and are stable. To start creating you will have to register with a company account, provide legal documents and pay down an entry fee.

Baidu ads are difficult to distinguish from organic results but locals are fine with it compared to their more suspicious western counterparts.

Google ads are sophisticated and the more optimized your campaigns are the better the results are and the lowest the spending are. If Baidu is looking forwards to a similar model the current situation is simple, the most often, the higher the bit the higher the chance of ranking is.

Retargeting campaigns should not be forgotten and retargeting tools on the Chinese internet have become more sophisticated over the years. They have become so good that approximately 40% of visitors are reached through retargeting.  Do not let your initial traffic forget about you!

Communication/E-reputation: Social Media&forum, Kols

E-reputation is defined as the following: how is seen a brand or personality by internet users. It can be challenging for new brands to create a reputation online. Why? If your brand is not known, internet users won’t have any interest in you. However, there are tools and practices for you to get people talking about you online.

• Wechat: With more than 1 billion users WeChat allows you to have an official page for your brand that can be used as a communication tool. Share quality content with shareable potential.
• Social Media and forums: As for the western market you have to be on social media to promote your brand culture and your products/services. Forums are a great way to integrate community and generate dialogue with your audience.
• Kols.: Chinese internet user tends to trust them more than official sources. Key opinion leaders have a great influence and can help to grow your reputation and get people’s interest in you.

China E-commerce

The last point we would like to talk about today is mainly for companies interested in selling products in China. China e-commerce is extremely well-developed. There are 3 e-commerce platforms we would like to introduce you quickly.

• T-Mall – Operated by Alibaba and well trusted by the public. Fees are pretty high, count a minimum of $15 000 to register. Dominate the market with almost 60% of the shares.
• JD.Com– Great fulfillment service also well trusted by the public and with a focus on technology. Fees are similar to T-mall.
• Wechat with its wechat store. Many brands are turning to WeChat for reasons such as lower fees but also less competition. You have to put a lot of effort into branding to get traffic.

Despite the appearances, there is nothing easy in launching your business in China. Like every market, it has its subtleties with demanding customers that won’t buy something just because it comes from the west. Your brand needs to build a reputation that will appeal to Chinese consumers. This takes time and effort but China’s super-connected population offers you a lot of channels to achieve it.

Need advice on launching your company in China? We can help you, we are a marketing agency helping foreign companies to set foot in China.