There is no doubt that China is a manufacturing powerhouse and one of the economic leaders in the world. China is also attractive for businesses for a myriad of reasons including low wages, a large market, favorable government policies, and more. Even with all these upsides, there are still some downsides to establishing and doing business in China. We are going to look at some pros and cons of doing business in China so you can see if it would be great for your business.
Access to a Massive Manufacturing Pool
China has one of the most robust manufacturing sectors in the world. You can get almost anything manufactured in China, which can open up new opportunities for your business, For example, you will likely find a manufacturer willing to accommodate the product specifications you have at a favorable price. This way, you get to make enough profits to keep the business running whether you are selling to the local market or exporting your goods outside China.
Faster Product Turnarounds
Due to its massive manufacturing capabilities, it is likely that the product you have in mind has already been manufactured in China. All you have to do is send the specifications you have, make a few changes during the consultation phase, and the manufacturer you choose will be able to duplicate it for you.
Doing this results in a faster turnaround than you would get if you and the manufacturer started from scratch, as would likely happen if you hired a manufacturer outside China.
Favorable Government Policies and Entrepreneurial Environment
The Chinese government has been very accommodating and is at the forefront of pushing for entrepreneurial support for different manufacturing sectors. This has resulted in a positive and favorable entrepreneurial environment. This environment makes it easier to find investors and partners in China, two things that are important if you are expanding into China and need to move rapidly.
Additionally, the Chinese youth sector is motivated and empowered and they are in the middle of a business ecosystem that is very facilitative.
Political, social, and economic stability are important for businesses that want to thrive in a new market. China has all three, and they have been helping China grow for the last 30 years.
China has a complex payroll tax and withholdings system. This is mainly because different rules apply to different cities. This complexity forces many business owners and managers to have to learn what rules and regulations to follow depending on the cities they would like to establish their businesses in. For example, if you are a foreign business hiring foreign employees, you are not required to pay into the Chinese social security while foreign employees are required to do so in other cities.
If you do not want to deal with all these complexities and the costs associated with being compliant, consider payroll outsourcing. Businesses that do this work with professional employment organizations (PEOs) such as New Horizons Global Partners. These PEOs help businesses set up a China Payroll outsourcing system that simplifies the process while ensuring they do not have to establish a legal entity in China if they do not have to. New Horizons Global Partners, while acting as the employer on record, also provides HR services, handles administrative tasks and taxes so business owners can focus on building and running their businesses in China.
Business owners have to do their due diligence to find manufacturers who can produce products that are of acceptable quality. In some cases, business owners are surprised by quality deficiencies upon the receipt of their products.
Language is one of the biggest hindrances to doing business in China. Communications can struggle or be misinterpreted, and this is why it is so important to either hire an interpreter or go into business with Chinese business interests who understand English.
Additionally, the Chinese people are very polite and might not give you a response if they think that is not what you want from them. This is why it is always a good idea to work with a representative or an intermediary.
Scams are a Major Problem
Unfortunately, scams are prevalent in China and those who suffer the most are the people who do not do their research before contacting a manufacturer. Businesses that want to work with Chinese manufacturers must be ready to check the registrations of all businesses they would like to work with.
It is also worth it paying for a lawyer to check out a manufacturer’s credentials at the provincial office. Lastly, avoid doing business with businesses that do not have a strong reputation online. Doing so increases your chances of being scammed exponentially.
Although the downsides of doing business might seem too much to bear for you, doing proper research and taking the time to understand everything that is going on will help you out a lot. If you can do this, you will find establishing a business or working with a Chinese company very lucrative.