FREQUENTLY ASKED QUESTIONS
On this page we have listed some of the most frequently asked questions we receive from companies that are considering to sell or manufacture in China. Don’t hesitate to contact us if you have more questions.
Do I need to have a WFOE or a JV to sell in China?
It is not essential to have a WFOE or a JV to sell in China. The majority of companies avoid the potentially costly and lengthy process of setting up their own entity in China by selling through Chinese distribution partners. However, even using distributors does not mean that you can have an entirely ‘hands-off’ approach.
Based on our experience it is crucial to have feet on the ground to gain the most out of the Chinese market. Take a look at our distribution solutions to learn how we can help you in this.
How do I recruit local staff in China?
One of the most challenging aspects of doing business in China is finding and retaining staff. Although China offers a large workforce, the majority of companies struggle to find talent and as a result many companies are competing for a small pool of talented candidates. It is therefore crucial to market your company well (employer branding) and offer competitive packages with sufficient growth opportunities that not only attract but also retain employees.
Here at LF88 we have our own in-house recruiters, however we also regularly work together with industry specific recruiters to find talented candidates for our clients.
How can I do business in China with no ‘guanxi’ or previous relationships?
Whilst traditional Chinese concepts like guanxi undoubtedly remain strong, they should not be overestimated. Ultimately your success will depend on your company, people and products – just like in any other market.
The importance of relationships will depend on your industry, and what you are attempting to do. That being said, using third parties with existing contacts is the most effective way to make up for your lack of them. Putting feet on the ground, specifically a Chinese business development manager gives you the best chance to start building up your own local network.
Is it a good idea to use contractors to assist in certain processes?
Yes, absolutely. Due to a lack of transparency, specialized contractors play an important role in doing business in China. Whether it’s an industry-specific law office, a product registration consultancy or a recruitment agency, all can be useful.
Using contractors can significantly speed up processes and ensure avoidance of common problems.
Here at Launch Factory 88 we believe you cannot be good at everything. That’s why we work with a strong network of local service providers that are each specialized in their own niche industries.
Can I sell from Hong Kong to China?
Yes, you can sell to China from Hong Kong. But the question you should ask yourself is: will I be able to reach my sales potential in China if we are based from Hong Kong? The simple answer is no.
There are multiple disadvantages involved with selling from Hong Kong to China. Amongst which is that you will not be able to provide your distributors with a Chinese “fapiao” that enables them to receive their VAT return. In addition you will not be able to benefit from a Mandarin-speaking workforce and merely having a Hong Kong presence does not signal a long-term commitment to China towards your stakeholders.
Although Hong Kong has traditionally been the gateway into China, nowadays it has been become relatively easy for foreign companies to directly develop their operations in Mainland China. This has abolished the need to create a HK entity except for specific tax purposes.
What are some common problems that foreign companies run into in China?
Common problems of doing business in China that spring to most peoples minds are the language barrier, potential intellectual property infringement, and cultural differences.
However, from our experience, the most common problem foreign companies run into is being confined to mediocre sales in China. Many overseas companies come to China using distributors, but subsequently fail to manage and support their distributors effectively. Having a presence in China with a manager that understands the particulars of the local market, gives your company the opportunity to reach its full potential.
Should I attend trade fairs in China before entering the market?
Attending trade fairs can be very useful. Not only can it allow you to gain a better understanding of the local commercial environment, but also allows an opportunity to get in touch with potential partners in China. There is now an extensive selection of trade fairs for most industries in China, so be sure to choose the one best for your company. However, before you attend a trade fair, ensure to protect your IPR first and have on-site translator.
How do I go about getting my product approved for sale in the Chinese market?
This depends entirely on the industry you are operating in. Many products require special registration in China before getting approval for selling, and this varies in degrees of difficulty. It is common for foreign companies to utilise a contractor to assist in these processes, and these parties can significantly speed up the process and help to avoid common difficulties encountered.
Send us an email to learn more about how to register your specific products in China.
Distribution & Sales
How much does a business development manager cost in China?
This is very much dependent on your industry in China, and the specific profile you are looking to fill. Levels of seniority, technical experience, and English all vary the level of reimbursement you can expect to pay.
Generally, salary levels have increased rapidly over the past two decades and in more niche industries are reaching heights similar to that of Western Europe.
Send us an email with your job description to gain a better idea of the salary range a business development manager in your industry in China would demand.
Should I ask my distributor to register my products in China?
We strongly recommend you not to ask your distributor to register your products in China. We have encountered many companies that suffered problems because they provided their distributors with their products’ rights in China. This transfers too much power into the hands of your distribution partner, and if your relationship worsens it is common for them to use this position against your interests.
How does using distributors in China differ from other countries?
Managing your distributors in China requires a different approach from most other markets. Chinese distributors tend to lack sophisticated management systems and are used to selling on price alone whilst neglecting other selling points. Distribution companies in China may also lack sophisticated inventory and CRM systems, and can suffer from high employee turnover rates. In addition, due to China’s vast size most distributors are strong only in their home regions. Having a local presence can help to overcome many of the problems specifically associated with using distributors in China. On the ground-support and training is crucial to create long-lasting relationships with your Chinese distributors and to keep control over your brand and client base.
How do I manage my distributors effectively from abroad?
Having a local presence in China is the best way to manage your distributors effectively from abroad. This ensures constant lines of communication, and enables you to manage your operations in China. Using a distribution management platform like we offer at Launch Factory 88, with your own dedicated business development manager, is a good way to have feet on the ground in China without having to set up your own presence in the country.
What advantages does having a local presence in China offer me?
Having a local presence in China is crucial in order to fully realise your potential in the country. The ultimate goal of putting feet on the ground here is to generate more sales, control your brand better and manage your IPR effectively. This is done through providing better training and support to your distributors and key clients.
Specifically, using a distribution support platform like that which we offer at Launch Factory 88 means you can shorten your learning curve considerably by feeding off our 17 years of industry-specific experience doing business in China.
How do I choose my distributors wisely?
Two words: due diligence. It is absolutely essential to conduct due diligence on all of your potential partners in China. Without it, selecting your distributors is too much of a lottery. Using a specialist due diligence agency to thoroughly vet these parties is the best way to avoid problems occurring in the future.
You can find distributors by attending trade fairs, doing your own research or by working with a specialized partner experienced in finding distributors.
Should I use one exclusive distributor, or a network of distributors?
We recommend using a network of distributors in China. Why? China is a huge country with vast regional differences, and although some distributors may claim to be strong nationwide it is probably not the case. Most distributors are most well rooted in their respective home regions. Using multiple distributors also avoids transferring too much power and leverage to one party.
Manufacturing & IPR
Should I localize my manufacturing and/or assembly?
We are strong advocates of localizing (part of) your manufacturing and assembly processes in order to become more competitive in the market.
Localization of manufacturing and/or assembly in China can cut down your total cost of ownership, offering your company global cost advantages. Of course, any cost-savings that may be achieved depend on your product and how labour-intensive the manufacturing and assembly processes are.
Localizing your manufacturing processes in China also enables you to adapt your product to local market conditions and benefit from faster lead times.
The ultimate aims in localizing your manufacturing or assembly processes is to create a better product-market fit, cut down your costs and increase your sales.
Learn more about our manufacturing and assembly services.
How can I protect my product from IPR infringements?
Foreign companies interested in entering China are often concerned about the protection of their intellectual property.
Whereas in the past this was a legitimate concern, in present-day China you will be able to manage your IPR effectively if you take the right precautions.
We recommend working with a local law firm with specialization in your industry. Ensure to manage your IPR fully before coming to China in any capacity, even if merely to visit a trade fair.
If you are manufacturing in China we strongly recommend you to work with a reliable manufacturing partner that offers secured assembly facilities.
Does the Madrid Protocol afford enough protection?
The Madrid Protocol is not enough protection for your IPR in China. We have encountered many foreign companies who were under the impression that it was. The biggest source of IPR infringement in China is negligence on behalf of foreign companies themselves.
We strongly recommend filing your application on a national level with the Chinese Trademark Office (CTMO). This will ensure a stronger standing than the more general, and often irrelevant in China, Madrid Protocol.
I plan to manage my IPR from my home country, is this a good idea?
Handle your IPR for China, in China. We strongly recommend working with a specialized local law firm to manage your intellectual property. As often applies, a localized approach is crucial for succeeding in China, and IPR is no exception. If your IPR is managed from abroad, you may lack a legal standing in the event of any misfortune.
Strategy & Branding
Why do Chinese consumers prefer foreign brands to domestic brands?
In most industries, consumers that can afford to will buy the foreign option if available. The reason for this is a low level of consumer trust in China and the many scandals local companies have been involved in. As a result foreign companies enjoy a strong advantage over local brands and tend to be the go-to choice in the upper-medium and high-segment markets. At this time, foreign brands are almost without exception perceived to be of higher quality and better reliability.
How do I brand my foreign product in China?
Branding your foreign product in China is primarily about emphasising the very fact that it is foreign. Chinese consumers lack trust in domestic products, and are thus willing to pay significant price premiums for foreign brands. Differentiating your product as far as possible from Chinese brands is crucially important.
How do I control my brand effectively?
In particular, not properly managing your distributors in China can put control of your brand at risk. Without local IPR management and appropriate precautions, your distributors may gain too much power and take control of your brand completely. More commonly, their inability to sell your products on their real merits will derail your brand image. Overcoming these problems is best done through having a local presence in China, to constantly supervise your brand and operations in the country.
Does my product require adjustment for the local market?
This is of course purely dependent on the type of product you are selling. Sometimes the nature of the market, or the purpose of the product, will be different in China when compared to other markets.Therefore some slight adjustment may be needed.
The same principles can be applied to different regions within China. Usually, the only adjustment choice that needs to be made is some simplification or watering down of your product. This can easily be achieved through localizing part or all of your manufacturing in China.
Check out our manufacturing solutions to learn how we can help you adjust your products to fit with local market requirements.