9 Steps to Setting up a Business in China

First step is to understand China and that it is not just one market. Learn about China, but don’t think a book about “how to do business in China” will ever be enough. China is the country of contrasts where almost any answer can be as correct as its opposite

Buy a market report or hire a consulting company. Although if done in large enough extent this can offer good insights, it is often extremely expensive and the answers still very theoretical. To save both money and time, it is recommended to jump to step 3 directly.

Start up a company in HK and get a virtual office in China (phone number and address). Companies like Regus or Servcorp offer this, and new companies like iQubator complement these services with virtual assistant services depending on your needs.

Move to China, send a representative over or hire someone local in China to do the required research. This is often much cheaper than doing it from overseas because of the cost of living and salaries and it also offers a much better insight. This can be done either the traditional way  through local consulting companies and serviced offices, or through one-stop-shops companies that offer you toolboxes to do it yourself. An example is the HK and Shanghai based iQubator that offers an incubation-like service.

Build your guanxi (business network) in China and get a deeper understanding. These things are recommended to be done before starting up a company. IQubator offers all tools needed for this from office solutions, virtual offices, virtual assistants to recruitment, hiring, visa services, HR, accounting and local invoicing. Basically everything you need to start up directly.

Since 2010 it is possible to receive payments online through cross-border payment systems such as Alipay, Tenpay, 99bill and others. iQubator can help translating the website, adapt it to the market and integrate the payment systems in it. Together with the local representative you have a fully operational business in China that you can use to try out the market and further develop your network.

After about 3-6 months of research, network development and trials it is time to incorporate the company. Many people think a Representative Office so called Rep Office or RO is the first step. Actually, through tool-box companies, or Business Support Offices, you get much more than a RO can offer at lower cost and low risk, since you can cancel the contract at any time. The best way to go is a WFOE, Wholly Foreign Owned Enterprise.

Choose your registration agent. This can either be the company that you have conducted theresearch and trials with, or hire more people through the company to assist you. Normal cost for a WFOE registration ranges from 5,000 Euro for a consulting company to 15,000 Euro for a manufacturing company. The minimum investment needed also varies between 50,000 Euro to 1 Million Euro, both depending on the type of business license but also depending on what other licenses you would like to apply for later on. You just need to pay in 20% of the capital during the registration, you get up to 2 years to pay in the rest. An important thing to keep in mind is that it takes 3-6 months to register a company (compared to 1-7 days in HK) and it takes even longer to close it down. Be therefore sure before starting such a venture and rather stay longer in the incubator than taking unnecessary risks.

Once your company is registered and you have your own offices, you should be counting on having at least 3-5 employees, but you can still outsource the operational services such as HR and Accounting for a monthly fee. When you receive your business license you can officially begin business in China in your own name. You do though still need to wait a while for your tax license and special accounting computer and invoice machine from the government before you can issue Fapiao (tax invoice). The fapiao is often the main reason to choose a business support office that also can help you with these kind of issues, since most local businesses will not wish to do business with you unless you can offer fapiao.

E-commerce is booming in China

China will never stop amazing the world with its numbers.

At the beginning of 2012, China Internet Network Information Center (CNNIC) issued a report claiming that in 2011, the user scale in China for online shopping increased to 194,000,000 in total, which is only 10% of the population of China, but nearly equal to the sum population of France, German and the United Kingdom. By the end of 2012 there were over 300 Million shoppers, 146 million mobile shoppers and 500 million social media users. 66% out of these 500 million users were in average following 8 brands each! The market size is expected to reach over 250 BILLION USD by end of 2013 or beginning of 2014. And the fashion market is already over closing up to 500 BILLION.

Luxury fashion brands doing ecommerce in China

China’s online sales of clothing were worth $50 billion in 2012, but only 41 percent of luxury fashion brands have any e-commerce offerings of their own. Furthermore, there’s an overall lack of commitment and direct involvement with a mere seven global couture brands selling directly to Chinese consumers from their own sites. That’s the stark summary presented in the new L2 Digital IQ Index: Fashion Supplement.

Digging deeper into the report, it shows some interesting e-commerce trends in China, as well as other ways in which luxury fashion brands are failing to reach out to Chinese e-shoppers.

The most interesting trend is a shift away from consumer-to-consumer shopping when it comes to clothing. In 2011, 80 percent of China’s fashion sales came from amateur shopkeepers on Taobao, China’s biggest C2C site. But, in 2012, there’s a clear leap towards more official sources, such as brands’ virtual storefronts on sites like Tmall, or from flash sales sites like VIPshop or GlamourSales:

The truth is that with the fast development and popularization of Internet, China is expected to overtake the United States as the world’s largest e-Business market by 2014. The more and more affordable and widely available Internet across the country, the continuously rapid growth in the number of Chinese consumers shopping online, and the relatively low cost of logistics are all driving the expansion of e-Business, this booming industry in China.Luxury fashion brands doing ecommerce in China

You no longer need a company in China to start up your business, you can get paid directly through your website by integrating the Chinese cross-border payment systems such as Alipay or Tenpay. With a Chinese site placed just outside of the mainland, with payments in place and with office and representatives on the mainland in a matter of days, business in China is something for everyone and E-Commerce is the way to enter it!