Dezan Shira & Associates Present to NEOMA Business School EMBA Students on Doing Business in China
On May 8th,2018, Dezan Shira & Associates’ Head of French Desk, Senior Associate of International Business Advisory Service team, Thibaut Minot delivered a seminar about Doing Business in China to a group of EMBA students from NEOMA Business School. The speech covered China’s Macroeconomic Environment, the most popular Foreign Investment Vehicles in China, as well as common pitfalls faced by foreign-invested companies in this jurisdiction. The tremendous opportunities that await investors doing business in China were highlighted to the students, based on Thibaut’s experience assisting clients set up and grow companies in the Middle Kingdom.
During the speech, Thibaut first introduced China’s macroeconomic environment from general GDP analysis, government investment analysis, and global trade environment analysis. According to Thibaut, the mitigation of poverty and pollution will continue to receive tremendous government support and investment in 2018. On the other hand, government spending in property and infrastructure will fall as China tries to reduce its public debt. Regarding the so-called ‘trade war’ with the US, the issue for China is not about steel but rather technology and the export of tech products to the US market. Hot industries to look out for this year include electronic vehicles, pharmaceuticals, financial services, and e-sports.
In the second part of the seminar, Thibaut introduced the three main foreign investment vehicles, namely the Sino-Foreign Joint Venture (JV), the Representative Office (RO), and the Wholly Foreign-Owned Enterprise (WFOE) to the students in detail. “It is important to note that some foreign investors choose to do business in China on a cross-border basis, without setting up a formal presence in the country. However, many distributors and suppliers would refuse to do business with a foreign investor that lacks a presence onshore, and any company looking to employ staff in China will need a legal entity there to do it compliantly over the long term”, said Thibaut. Watch the below video to learn the three vehicles:
In the last section, Thibaut pointed out the key challenges foreign investors may come across when doing business in China to give students a full understanding of real China’s business environment. Setting up a formal presence in China involves a significant financial commitment and remains a decision that shouldn’t be taken lightly. It is costly to incorporate, operate, and liquidate a company in China. Meanwhile, the cost of labor, real estate, and natural resources is also increasing. Another challenge that foreign investors face in China is a relatively high risk of fraud, whether it is financial statement fraud, corruption, or asset misappropriation. Managing a workforce in China can also be challenging, and because Chinese labor law is highly protective of employees, a labor dispute can become very costly. IP infringement can take various forms in China, and is important for foreign companies to file for the formal protection of their IP locally as soon as possible. Most importantly, foreign companies should be willing to adapt, and potentially rethink, their business model if they want to succeed in China.
To learn more business opportunities in China and how to set up, please read our China Briefing magazine ‘China Industries Outlook 2018 ’and ‘New Considerations when Establishing a China WFOE in 2017’. To get access to the presentation video, please visit AisaPedia Page here.
For more assistance on doing business in China, please contact Thibaut Minot here.