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How To Enter The Chinese Market

China Business
Photo by Mimi Thian/ Unsplash

by Contributing Author

China’s economy is the second-largest in the world and the fastest-growing. Its population is growing fast and will soon be the largest in the world. China’s middle class is growing quickly and is expected to continue growing. With rising incomes (China is the world’s second-largest consumer market) and growing wealth, about 24 million Chinese are now in the upper-middle class.

China has become one of the largest and fastest-growing marketplaces in the world and is open to international trade. The vast market of 1.4 billion people means businesses can find themselves very profitable in the Middle Kingdom. But, any business that wants to enter the Chinese market will need to take a few steps. Prepare a business plan, prepare legal documents, and choose an appropriate trade partner in China. Chinese is the largest language on the internet. Chinese translation, therefore, is a crucial part of your business. If you want to translate Chinese to English more accurately, please click here.

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MARKET ENTRY VIA A HONG KONG DISTRIBUTOR

The business world has become very global, and it’s common for business people to look for business opportunities across borders. However, foreign companies must identify a Hong Kong distributor to enter the Chinese market.

Background – It is estimated that approximately 1.4 billion people live in China, and 10% of these people are under 30. Chinese businesses have become highly successful in the global market, and in 2015, some Chinese companies reported over $1 trillion in revenue.

Market Analysis – Foreign companies, need a Hong Kong distributor to do business in China. An overwhelming number of Chinese companies are seeking to do business abroad, so selecting a distributor is crucial.

MARKET ENTRY VIA DIRECT CHANNELS IN CHINA

Direct distribution channels are the most basic and simplest channel to enter the Chinese market. In direct channels, distributors are directly contacting local buyers such as retailers, retailers, distributors, wholesalers, and chain stores or forming their own direct sales networks. Direct channels are efficient, cheap, and limit intervention by foreign enterprises. The main direct channels are direct sales network, agent, and distributor.

1. Foreign Trading Corporations (FTCs)

Foreign Trading Corporations (FTCs) are companies registered in China with foreign investments. They are regulated by the China Securities Regulatory Commission (CSRC), responsible for granting and renewing foreign-invested company licenses.

2. Industrial Trading Companies (ITCs)

ITCs are associated with foreign capital but are subject to relatively loose supervision by local authorities. The scale of ITCs has expanded rapidly, and ITCs have increasingly taken the role of intermediary in the wholesale market.

3. Independent Trading Companies

China’s Independent Trading Companies (ITC) have an important role to play in China’s policy toward opening and reform. ITCs typically serve as a bridge between China’s exporters and importers, facilitating import-export trade. While ITCs have emerged and evolved in many sectors, the automotive sector is one area where there has been a notable expansion of ITCs in recent years.

4. Direct End-User Sales

China Direct End-User Sales (DEU) is a sales channel and marketing tool for the exports of electronic products. This channel is available only to Chinese enterprises with direct sales relationships with their end customers and aims to foster the development of the “Internet +” strategy.

5. Direct Sales to Domestic Chinese Distributors

Chinese distributors are expanding the range of channels they rely on to bring new products into China. They are increasingly using direct sales channels as a means of doing business.

6. Market Entry via Direct Channels Versus use of a Hong Kong Distributor

Market entry through direct channels (e.g., via a Hong Kong distributor) vs. using a Hong Kong distributor is a trend that has been witnessed in China’s consumer goods market. The shift of market entry methods in China’s consumer goods market has accompanied the process that the consumer goods market has undergone in the past few years.

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FOREIGN INVESTMENT ENTERPRISES (FIES)

Foreign Investment Enterprises (FIES) are investment companies registered under the Companies Act, 1956 and regulated by SEBI. FIES, popularly known as FIPB, is India’s primary regulatory body dealing with FDI. FIPB sets the limit on FDI through FIES. The FDI policy in India provides high levels of foreign investment for sectors such as pharmaceuticals, retail, and services.

Foreign Investment Enterprises are (FIE) a subsidiary of foreign companies. An FIE is a foreign-owned company that has been legally incorporated as a legal entity. In this way, Foreign Investment Enterprises function like domestic corporations. However, FIEs are legal entities that are wholly owned by foreign companies and at least one foreign investor.

CONTRACTUAL JOINT VENTURES

A contractual joint venture (CJV) is a type of joint business operation typically established with a partner or partners based abroad. It is most commonly used by multinational companies that wish to expand their business into China but may also be used by Chinese firms looking to expand abroad or foreign companies investing in the country.

Contractual joint ventures (CJVs) are an important business development strategy for Chinese companies that are seeking to enter foreign markets. However, there are significant legal, administrative, tax, accounting, and strategic issues involved in planning and implementing CJVs.

OTHER BUSINESS ISSUES

The Chinese market changes a lot, and for Chinese entrepreneurs, it is hard to predict the future. For business now are changing from quantity to quality. Therefore, they not only need to create high-quality and new products, but also they need to create high-quality channels and bring their products to worldwide customers through their website.

Domestic Distribution

China’s domestic market is facing significant challenges. How international organizations and companies should examine whether they are capable of meeting these challenges?

1. The emerging technologies

2. The new industrial structure

3. The side hustle economy

4. The new consumption patterns

Foreign Exchange Issues

The Chinese market foreign exchange issues are one of the most sensitive topics these days. The uncertainty is still about to be clarified. According to yesterday’s market report that was issued, the Foreign Exchange Industrialization Project has been approved by the State Council, which speeds up the further opening of the capital account, and in the future, the foreign exchange market will open gradually, and there will be no restrictions on direct investment by foreign enterprises.

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