How to: Do business in China: Entering the dragon economy
Christopher Price
January 09, 2005
YOU have read the headlines and heard the spiel — so is 2005 the year for your business to head for China? The country already has a reputation for being able to mass produce goods at short notice and low cost. Witness the likes of B&Q, Wal-Mart and Tesco, which now source most of their homewares from the region.
And it’s not just large companies that are taking advantage. The proliferation of factories of various sizes, in the southern Pearl River delta and around Shanghai in particular, means that smaller firms can also benefit.
But now there is another reason to consider China: the country is emerging as one of the fastest-growing and biggest consumer markets in the world.
The sixth-largest economy is expected to reach second spot in the next 10 years, and with the move to a more liberalised society and a burgeoning middle class, analysts believe that China will be fertile ground for foreign firms.
There is plenty of help for firms that want to break into China. Several British organisations can assist, and a support network has been established by the Beijing authorities. British companies also have the advantage of Hong Kong, a well-established commercial hub (and English-speaking) that can be used as a bridgehead into the mainland.
Which route you take will depend on what you want to do. For example, does your business want to establish a trading link with a Chinese firm for import and export services? Is your ambition to set up a jointly owned subsidiary in China? Or do you envisage moving your entire business to take advantage of China’s low costs and enormous market potential? For many firms that want to move into China, an ideal first port of call is one of the British Chambers of Commerce. They have a wealth of information available, including case studies, consultants and advice on grants.
UK Trade and Investment, a government promotional agency, has grants available through the chambers for companies that are trying to open up new export markets. These can cover up to half the cost of researching a move. The grants have some limitations but are specifically aimed at small and medium-sized businesses.
The Chambers of Commerce’s website has links with overseas organisations. The British chamber in Hong Kong is one of the biggest outside Britain, with more than 1,000 members. Such is its importance in the local business world that about 10% of its members are non-UK.
Christopher Hammerbeck, chief executive, said the present wave of British firms entering Hong Kong was service- orientated — they are architects, designers and lawyers. For many it is a safe middle ground for doing business on the mainland. “They use Hong Kong as a risk manager for going into China.”
Another attraction is the low rate of corporation tax — 17% — and personal tax of 16.5%.
Hammerbeck said that joint ventures were the best way to tackle the enormous and often complex Chinese market. “You need the right people here on the ground and to be properly resourced.”
Last year the chamber introduced about 30 British businesses to local partners. It hosts many professional and social events to bring businessmen, financiers and government officials together.
The mainland, too, boasts British chambers, but these tend to reflect the smaller size of the British business community. In bustling Guangdong city, for example, two hours from Hong Kong by train, the chamber has about 100 members — something worth noting when considering relocation and the amount of support a business may need.
The arrival of British professional firms in Shanghai and Hong Kong will give incoming businesses a boost. In Britain, accountants, bankers, lawyers and financial advisers play an important role in the fabric of commercial life — and this is being replicated in the two big Chinese business centres.
“Being on the ground here counts for a lot,” said Nick Allen, a partner in the Hong Kong practice of Price Waterhouse Coopers, the accountancy giant. “It is difficult to start up from scratch. Professional advisers can bridge the divide.”
Advice is never far away in Hong Kong. The business-first culture, endorsed in recent years by Beijing, has spawned a multitude of networking clubs. Elaine Pickering, a Briton with 14 years of business experience in the former colony, is part of the Vision 2047 Foundation, a forum where self-employed business people can discuss problems that affect their companies. “It’s very much a Hong Kong thing,” she said.
Beijing has also poured a lot of money and effort into developing Hong Kong and its south China hinterland into a key component of its policy of opening up the country to the West. Two years ago, it liberalised many industries and scrapped the punitive tariffs for those foreign companies establishing a presence in Hong Kong.
Several government-backed organisations can help British businesses. Invest HK and the Hong Kong Development Council are probably the most prominent and provide a comprehensive service.
Invest HK helped 99 foreign companies in 2001 to open there. Three of them were from Britain. Last year, the figures were 210 and 20, respectively.
“We can make all the introductions,” said Mike Rowse, Invest HK’s director-general. “From government officials, to financiers, through to the headmasters of all the international schools, we know them all.”
timesonline.co.uk |
