Practical Methods for Foreign Businesses to enter the China Market

Practical Methods for Foreign Businesses to enter the Local Market

It is our opinion that foreign businesses should not set up their factories in China at present, because of the large number of obstacles put in place by the government which at present result in lower returns. However, we do recommend businesses to build their factories in other countries such as Vietnam. Even factories of China at present are moving their operations in such countries.

Second, foreign business must form a smart advertising strategy to appeal to the mass public in China. When one thinks of advertising in general, the means which usually come to mind are Television, Radio, Magazines, Newspapers etc. But, in the modern age, businesses should realize the way advertising should be done has drastically changed. This has mostly been in a positive manner since the internet now makes it possible to appeal to a wider market such as a local and international market with lower costs.

Advertising through the internet usually involves advertising your business through social media sites such as Facebook, Youtube, Google etc. where money can be saved smartly and a wider market reached.

Options for Advertising your Business 

Google – Search Engine

Google is an internationally used search engine in which users enter a keyword or a sentence and the results show up. Suppose your business sells baby powder. Now, when you search baby powder, the first result that shows up is say Johnson’s baby powder, implying Johnson’s baby powder has advertised its business in such a way on the internet that when any one searches baby powder, their business shows up at the top and thus the product is advertised. The method by which Johnson’s baby powder made it possible for its business to be at the top of the search results requires a large investment and the proper know-how of how Google works. So, a smart businessman should ask himself/herself how they can advertise their product or services on Google in such a way that anyone searching anything related to it will see their advertisements on the top? The answer is use of Google Ad-word.

Google Ad-word is Google’s advertising service where businesses can pay money to have their product or services advertised on its homepage. The amount paid determines how far up the search results your website will be. A sign showing ‘[Ad]’ donates that the content is being advertised by the business. Usually, the price per click is USD 13.

Facebook – Social Media Network

Facebook acts as a social media site where any person who has used your product or services can leave reviews and the feedback is shared upon a certain network of people using Facebook. Due to a large number of people using Facebook, the audience that views this feedback and can thus decide to use your product or service is extremely large.

Facebook also gives businesses the option to advertise their products and the amount paid determines how large a number of people the advertisement will reach. Businesses are also given the option to advertise according to location and likings of the people based on their search history.

YouTube – Video Sharing Network

YouTube gives users the option to advertise their product through a video which can be more engaging and result in a higher probability that the viewer will click on the link. YouTube gives advertisers the option to have their ad play before a video that the user wishes to see. The amount paid to YouTube determines the number of people that will view your ad.

eBay – Online Shopping Network

Websites where users go to shop such as eBay can serve as means to advertise your product or service. People will see your ad as they are going through the site to buy any product. The amount paid determines the probability of your product showing up in front of the user.

Preferences of Chinese Locals for Foreign Products as compared to Local Products

Due to incidents that have occurred over the past few years, the people of China have become more untrustworthy of Chinese goods and trust imported products more than local ones. One such example of this is a famous scandal in 2008 where local Chinese company that sold infant formula was found to cause serious illnesses in around 300,000 people where 6 babies passed away as a result of kidney damaged, and almost 50,000 had to be hospitalized. Another case involved milk that had been mixed with water, also cause the death of several infants.

Other than such incidents, most of the products being sold in China are fake and almost a duplicate of anything can be found. So, the locals are weary of local goods and trust foreign products more.

How to make money from an effective business in China?

  • You can buy a product in China and sell it at a higher price overseas. Or, you can also buy a bulk quantity, thus with a reduced price and then sell it overseas at a margin. You can also form retail outlets or wholesale networks overseas where the product being sold is purchased in bulk from Chinese factories.
  • You can also manufacture a product overseas and sell it in China. You can book orders from Chinese clients and then order the product from overseas, selling it at a margin.

How to Maximize Benefit from Online Marketing in China?

First, people should be aware of the fact that internet services like Facebook, Twitter, Google, YouTube and others similar are banned in China. However, alternatives of all of these sites do exist. So, any foreign business planning to advertise should be aware of each alternative to properly advertise. We have listed the alternatives for each site as:

  • Google/Google Adwords à   Baidu/Baidu Adwords
  • Facebook                    à    RenRen and Douban
  • Facebook advertisements   à   ReRen advertisements
  • Youtube                     à   YouKu Tudou
  • eBay                           à   Taobao and Tmall
  • Twitter                       à   Weibo
  • Yellow Page                       à   DianPing
  • Skype and WhatsApp                à   Wechat and QQ

So, businesses looking to set up their companies in China can contact us for any help related to setting up the business or getting it registered. Our firm can also help businesses set up bank accounts and expand their business in China. Contact us for any other help.

Why choose Stephen MS Lai & Co CPA Ltd?

Our firm has been providing its services even before China entered World Trade Organization, thus giving it the advantage of having already developed well established networks to help our clients register their companies, acquire business licenses, open bank accounts, settle business disputes in addition to various other services related.

Stephen Lai is a practicing accountant, registered with the Association of Chartered Certified Accountants since the year 2007 and has been extending his services to help companies register in China and Hong Kong, along with providing business related advice to foreign businesses wishing to operate in the country. We have recently also opened an office in the UK to help foreign companies get their businesses registered in China and Hong Kong. Additionally, our services also extend to providing legal advice and information related to company taxes.

Furthermore, we do not recommend foreign companies choose a registration service by searching from Google, as trusting a company over the internet that has no record can prove disadvantageous and harmful. We have seen cases in the past of businesses trusting such illegitimate companies and having their money stolen or business copied.

Our Marketing Services 

Only Chinese nationals have the authority to register on Chinese internet sites such as Baidu, RenRen, YouKu Tudou, DianPing, Taobao and others similar. Thus, the only way around this is to pay a Chinese national to make an account on such sites on your behalf. To make payments on these sites for advertisements, a China-based bank account must also be opened under the name of the person making the account on your behalf. This means that on paper, you are the director or owner of your business and a Chinese person doing your work on your behalf has all legal authority. This can prove troublesome if the person decides to take over your business or in some form of falling out over the business, and the person does not pay you. In this case, the foreign company will have no legal authority to file a case against that person since China does not have any trust laws.

If you work with us, we shall give our clients a trust agreement that legally binds us to state that we are acting on your behalf to do the work that we are doing; along with a power of attorney document that states you hold the authority of the director entitling you to all profits earned, and to sign any contractual agreements on behalf of the company.

As no trust laws exist in China, once a business pays money to a company to handle its marketing, it runs the risk of having it being stolen. This happens by the marketing company first handling the client’s marketing efforts, and when it sees the business taking off, it simply claims it as its own in China. Now, the foreign business that paid money cannot legally claim it as its own because there was no legally binding contract signed which stated that the marketing company was acting on behalf of someone else. So, having personally seen such cases in the past, we would recommend businesses to go into business in China with companies which act according to legally binding agreements. This is also one reason why our company has opened its services in the UK, to help foreign businesses make informed decisions before making any such steps while going into business in China. We certainly do not imply that most of the Chinese companies are untrustworthy, but these incidents do occur so it’s better to make smart decisions especially when you’re running a business.

Normally fake businesses fool clients by taking sums of money over a certain period of time. The marketing company first agrees to advertise your business on your behalf. It will then ask you to pay a certain fee to get your business registered in China along with opening a bank account on your behalf. They will then start to charge you a fee periodically to manage your online marketing. Then, other bills will start showing up such as annual auditing fees, monthly accounting fees, annual tax filings along with similar other fees that they’ll charge from your bank account. Now, you’ll be in a position where all the profits (if earned) will keep getting deposited into the China bank account which you are not allowed to move outside at once because the bank will not authorize this. So, better to make an informed decision before getting yourself stuck in a mess.

Important Factors Foreign Businesses should know before entering China Market

  • The Chinese people prefer foreign products more than they prefer local ones.
  • Businesses operating in China should opt for advertisement strategies that are based online rather than conventional methods to advertise.
  • People in China on average spend around two to three hours in online searches.
  • Companies focusing on SEO for their products or services should use Chinese based keywords and Chinese based SEO.
  • Companies should keep in mind that most internet websites and services that are internationally used such as Facebook, Twitter, Youtube, Whatsapp are banned in China, and Chinese versions like Wechat, RenRen, Douban are instead used.
  • Your website made to function in China should have a Chinese translation instead of foreign language to appeal to the mass public. We can help businesses through our translators to translate content into Chinese for websites.
  • 75% of people in China use Baidu as their default search engine.
  • Just as Whatsapp and Skype are used internationally, the Chinese alternative to communicate with clients is Wechat and QQ.
  • SEO keywords should be based off of the most searched words on Baidu, and should be in Chinese.
  • Business should have all of their contact details such as email, contact number, fax number, Wechat I.D. and other such information on their website.
  • Foreign business should have prepared translations of commonly asked questions in Chinese language beforehand to avoid any inconvenience. One can simply use Google translate for their purpose to help them with translations of simple sentences.

Our company can help foreign businesses with their online marketing strategy by moving their site up to the top page within 3 months of opting in for our services. This is because of our experience in the workings of SEO in China and what makes for a good marketing strategy in the online marketplace.

It should be known that even a top level professional in the field of SEO will charge clients huge sums of money to move the site up on Google’s homepage, and even that will take a lot of time. Normally, with the right strategy, it can still take up to 2 years to reach the first page on Google. We have personally worked in the field of SEO as professionals and it took us around 5 years to get our business website to reach the first page. And even then, it took us huge sums of money and a lot of effort going into the marketing strategy. So one might wonder how are we promising a time of 3 months to reach this goal if it took us that long? Well, our website was on Google while it should be noted that China uses a different form of internet as compared to the rest of the world. The websites registered in China cannot be accessed by the rest of the world, but people in China can up to an extent view websites from the rest of world given they are not banned. To register a website in China, a certain procedure has to be followed that involves first registering as a Chinese Domain Name and only a Chinese national can register a website in China. In addition, the business making the website must also have a real working office with having a bank account open. So, businesses should take note of this procedure rather than trying to use a site that it uses for the rest of the world and expect it to be also be successful in China. By opting for the strategy of using a Chinese site, even small business can benefit because of wider access to the Chinese public.

If foreign businesses who wish to enter the local market need help with the process, our services extend to providing them all necessary information such as translation services, legal consultation, tax consultancy, business registration, help regarding human resources, setting up bank accounts, developing marketing strategies for market entry, setting up a WFOE in China and other related services.

We guarantee our clients that they shall be in total control of their funds and give them with a legal contract to assure them that we only act on their behalf and interests. We will handle everything to filing to have your company registered, managing all tax related matters including matters related to tax exemptions from Hong Kong, annual audits, VAT filings and moving their money out of China into the foreign business’s overseas bank account. China provides both small and large businesses a terrific opportunity for business and we’d be happy to help businesses in any queries in this regard. Feel free to contact us!