Managing a business in China

The challenges

Managing a business in China

Starting or expanding your business to China offers a wealth of opportunities. Cheap manufacturing costs and a huge potential market make the prospect enticing. Managing a business in China can be complex, however, with complications ranging from political to cultural.

Political challenges

It’s no secret that the Chinese government has strict regulations when it comes to doing business in China. As an international company entering China, the number of laws and regulations you have to comply with only increases.

‘How strictly regulations are enforced can also depend on whether your company is foreign, with local businesses tending to get a more lenient application of the law in comparison’, says Mike Smith of Atrium HR Consulting, a global human resources consultancy firm supporting companies across 180 countries.  

Inconsistent interpretation of the law

Businesses who abide by and stick to the ever-growing list of business regulations set down by the Chinese government may still find themselves on the wrong side of the law. 

Despite the introduction of laws relating to issues such as corporate income tax, there has been a lack of implementation guidelines issued to those who are responsible for enforcing them. This coupled with the fact that local authorities across China have the right to interpret existing laws means that having full confidence in your legal position is almost impossible.  

Brand protection

Despite constant improvements, intellectual property (IP) laws in China are not as robust in Western countries, making brand protection a major concern for any company entering the Chinese market.

The first step to prevent IP problems is to register your company’s brand name in both English and Chinese. This can help to prevent drawn-out litigation proceedings like Starbucks experienced against Xingbake .

Beyond that, a carefully laid out IP strategy  is key to managing a business in China.

Recruitment and employee management

The demand for trained and professional labour in China is far higher than supply, making finding a reliable workforce for your business in the country is very difficult. Even if you do get hold of talent, keeping them at your company is difficult, with salary increases of up to 30% often necessary to keep hold of the best employees .

One strategy to overcome this is to bring leaders and other employees with you from outside of China, rather than recruiting locally. This move can risk your company not having the necessary understanding of business operations in China however, with the potential to lead to complete failure, as was discovered by one European retailer expanding in China.

So how do you get the right people to make your company succeed in China? There are a few steps that need to be taken:

  • Hiring the right people
  • Continuous training in Chinese business relations
  • Ensuring the employees are happy in their role

Obviously, these goals are not easy to reach. Atrium HR Consulting  have launched what they call ‘the world’s first comprehensive and fully remote global HR service’, which could be one solution. They aim to take care of the entire employee lifecycle, from international recruitment, leadership coaching, and employee wellness and benefits. 

Having the right people on the ground, and keeping them there, are key to managing your business in China.

Local competition

It’s well know that China are strongly committed to improving the quality of national businesses. The companies themselves are also working hard to do so, with an aim to to competing overseas.

The government is often prone to giving preferential treatment to domestic businesses, whether it be by softer regulations or extra funding. 

Consumers also have a strong sense of loyalty to local brands, meaning adapting your business to blend in with Chinese values is vital to success.

Keys to success

To succeed in the valuable Chinese market, being able to overcome these challenges is very important. Protect your brand, get the right people on board, and adapt and appeal to the local market.

Further reading

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