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Pros & Cons of establishing a business in China

Akash Kumar 
on 25 July 2019

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China has however successfully influenced the global market. More and more businessmen are heading towards settling their business in China. Due to which China is leading in the list of countries where people want to expand and invest their business.

But when you are moving into some other country's market it becomes very important to evaluate the pros and cons of doing business in that country. Knowing well about the circumstances of that market, it will be easy for you and your company to plan strategies to establish and gain success in that country.

To make it easy for you we have listed out the pros and cons of establishing the business in China. Keep following to gather some great knowledge regarding it.

Cons of Establishing Business in China:

High business cost:

Doing business in China has become quite costlier than before. Cost increase has become a universal concern for all foreign companies who are wishing or are operating in China. Labour cost in china has increased to a great level. China has increased minimum wages and working standards of the labour due to which it is no more place for cheap labour.

Besides the labour cost, the Tax cost of a company has also risen than before, which has purely affected the foreign business traders and adds on an additional freight in profitability costs of the new establishers. Office rents are also high and demand all the payments in advance. Other support services like security, drivers and office maintenance are growing day by day.

Lack of legal enforcement:

It is challenging for every established to protect intellectual property rights in foreign countries. In a country like China that has weak legal enforcement, the issue of protecting intellectual property rights becomes the biggest hurdle for most companies to overcome when they are thinking to enter the China market.

The effects of IP leakage in China can be seen everywhere including counterfeited items like toys, automotive, luxury goods, high tech products and other pharmaceuticals. Therefore, IP leakage is becoming the main barrier for various multinational corporations to start their business in the Chinese market.

Vicious market competition:

As mentioned above china has become an attraction point for various foreign traders to establish their business that has resulted in vicious market competition. Breaking and rooting into the china market can be very challenging for the small and medium scale companies that lack global brand recognition. The Chinese government has also given preference to the domestic firms, and state-owned enterprises to control most of china's retail market.

Pros of establishing a business in China:

Availability of talented and skilled professionals:

Though the labour cost is high in China, most of the people are highly skilled and are provided with professional training to work efficiently in every field. There is no doubt how efficiently skilled employees and labours can create, manufacture, and provide goods and services that can take your business to great heights in the global market.

The potential trade market for foreign goods and services:

With more than 1.3 billion population, china represents a great landmass and a huge market for foreign goods and services. Despite higher trading costs, the profit margins are still higher in china as compared to other countries in the world. It is no longer the older china; they are emerging each and every day.

Better and advance policies:

As per the request of the market economy, the Chinese government has revised its law and regulations and policy documents for the betterment of the traders and new establishers in an open market.

The Chinese government had set up a series of investment policies, ranging from taxation to land-using in order to develop the economy of the inland regions of China. Other than that they have made adjustments in the tariff policies on imported products which had been proven beneficial for foreign companies to sell their products into the Chinese market.

Conclusion: Despite some negative points, China is still the second-largest economy with the availability of skilled and talented professionals and better and advanced policies. Though the labour cost is high in china all the labourers are well skilled and proficient in their fields. With such great opportunities and benefits, China can still be a profitable growth opportunity for various foreign businesses traders looking ahead to grow their business in foreign countries.


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Category Corporate Law
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