An opportunity to operate a business in China is highly attractive for investors. In my previous articles I explained a lot about pros of setting up your company there.
While there are many benefits of doing business in the country, there are also some downsides, and it's important to know it before you attempt to work in China.
Lack of Government Protection
I would say it is extremely difficult to stand for your rights in China, as Government has a policy to protect Chinese companies over foreign owned ones.
In addition, it would be 2 times more difficult to get all approvals, business licenses, certificates and permits. You would need a professional lawyers team that know the law perfectly to help you in it. There are strict rules relating to how products can be designed, manufactured, sold and disposed for foreign companies.
Intellectual Property Protections Issues
One of the biggest and most well-known challenges of doing business in China is the problem of intellectual property. According to authorities the things will change for the better, but with current situation of massive counterfeited products it is hard to believe. Government protects Chinese companies over foreign ones and this trend seems to prevail.
China is well known for its counterfeited products everywhere, many of which are produced by the same factory. The problem of counterfeit products isn't just limited to designer clothing, but to extends to toys, auto parts, pharmaceuticals, and high-tech products.
If you have unique product, it might be a wall for you as for many American companies that had already faced it in China.
Rapidly Rising Costs
Before China was known for cheaper expenses but as the demand has raised the situation changed dramatically for investors. Many tech companies have moved to China, so the demand for a skilled workforce has increased, resulting in increased wages for these workers by as much as 40%.
The same situation is happening with taxes, they are increasing particularly for foreign owned companies.
Add on the facts that raw materials have also been increasing in cost over the last few years, and many products coming to the U.S. from China are now subject to tariffs.
Manufacturing and Scams
For those who hope to manufacture products in China, the situation is more difficult and expensive than people used to think.
If you want to try to find your supplier online you can easily fall for a scam – same as trying to find a broker the situation can be pretty much the same, as there are many brokers who are scammers themselves.
Even if you manage to find a trusted partner in China, their representatives often hesitant to deliver bad news and will often only give you answers that you want to hear. Additionally, even manufacturers known for quality may change their standards at any time, leaving you with products that do not meet your expectations. The last happens a lot.
I hope my article about business in China solved some doubts of yours. What do you think about the future of doing business there? Will you consider to set up a company in China? If you have your question, please write it below, I would be glad to answer your questions or to introduce your project to my team at Astorts Group to be evaluated.
Alessandro Rocco Pietrocola is an entrepreneur and investor based in London and operating mainly in Europe, Asia and Oceania with main focus on UK, Baltic Countries, Russia, China, Hong Kong, Malaysia, Singapore, Middle East and New Zealand as area of interest! At the moment is the Ceo of Astorts Group. He is an UK FCA (Financial Conduct Authority) Approved Person and is has great experience as director of regulated companies. He uses to dedicate part of his life to inspire others and help them achieve the most out of their life. Since he was 20, he had successfully founded and managed several companies operating in the field of management consulting, wealth management and fintech. He loves travelling, he is a cigars lover, an amateur golfer and a dapper man.