Knowledge | Guide to Doing business in China 101 - China Operations

So many business executives and entrepreneurs said to us “I wish I had met you before I started doing business in China. It would have saved us from making so many mistakes!”

Based on the questions they asked us about different aspects of business operations, we have put together some really simple but practical tips so they can serve as quick guides for those new to doing business in China, but also a reminder for those having some experience but facing new challenges in business expansion in the Middle Kingdom. These cover sales and marketing, sourcing, HR, culture and language, commercial, IP protection, and more. In these practical guides you will also find readily available business services and solutions on our digital platform Crayfish.io.

SOURCING FROM CHINA 

What is the best way to source from China and Southeast Asia?  

There are quite a few large supplier matching portals like Alibaba.com, but if you are not already familiar with how Chinese suppliers work, you may get confused by the sheer number of choices on such portals. Some of those listed are not genuine suppliers but middlemen, and in the worst cases, information on an individual supplier’s profile is fake.

What you can do is combine a desk research for a raw list with phone calls to shortlist suppliers, to verify their ability to supply what you want, and to ensure that they have all the necessary certificates you require such as ISO14000 etc. 

Here is some advice on how to find the right supplier in China. 

Ideally, you should consider assessing feasibility for Asian manufacturing before going ahead with the sourcing process. Such assessment enables you to go through a set of technical and commercial evaluations and identify the best sustainable solution for getting your products made with optimal cost reduction and logistic efficiency.

Is it necessary for us to visit the factory and check the quality before the shipment?

Regardless of nice photos of factories or well-presented websites, it is still difficult to assess a particular factory's actual production capability. Factory Auditing is an essential step to build your supply chain as it enables you to understand the realities of the factory from production and quality control to management and operations. Once production schedules are agreed, a pre-shipment inspection and quality control is an effective way to assure quality and avoid supply chain disruptions further down the line.

SETTING UP IN CHINA

How do I go about setting up in China – what are the options? 

First you should be clear about the objective of your operation in China – is this for research, marketing & support, or manufacturing and sales?  If sales, will you be expected to receive payments locally in the Chinese currency? Finally, how many people do you envisage hiring in the next three years?  The answers to these will lead to different options, such as: wholly owned subsidiaries, representative offices, branches, joint ventures. 

They each have pros and cons with implications on what you can do and cannot do in China as well as on your future tax / HR considerations.  You need to first understand these, then choose the appropriate form to suit your business plan and scope in China. 

If you are ready to consider the service of Setting Up a Company in China or Setting Up a Representative Office in China, your service provider should include an initial consultation to help you decide the form. 

RECRUITING AND RETAINING TALENT IN CHINA

Where and how do I go to recruit staff in China? 

It is advisable to have local staff as soon as you start to do business in China.  The skilled bilingual labour market is competitive so you need to present a strong case to attract the talent you want, especially if you are an SME. You can also try recruiting in the UK among those who are returning to China. They understand more about British culture and are more likely to enjoy working for a UK firm. 

The starting point is to create a job description in Chinese as a suitable job title in Chinese will sound more relevant to potential candidates. A bilingual or Chinese JD can clarify the criteria to access applications without misunderstandings caused by language differences.

You may be swamped by the sheer number of job applicants if you advertise job vacancies in China, so it is highly recommended to consider getting a Candidates Screening Service to save you reading many many unqualified CVs.

On the other hand, being aware of hiring in smaller cities is quite different from Tier1 cities due to less supply of multilingual talent.  To read  more details of the differences and implications for your recruitment, here is Ting’s blog on Tackling the Talent Shortage Challenge in China. 

What are the best practices in retaining our talented employees in China?

To keep a competitive remuneration helps. Consider benchmarking Salary & Benefits with others in your industry and do this every few years. 

Employer brands, and a variety of personal development opportunities are sometimes more important when it comes to retaining talent at multinational companies.

Cultural differences also have an impact on employee satisfaction and retention. For example, the complex generational mix in the Chinese labour force underlines an employer’s need to understand exactly what their employees want.

But to retain senior local management requires more delegating, support and empowering, not just localising the team. 

More reading on this topic: Ting's Blog: Tackling the Key Issues of HR in China

How regulated is China’s labour market for employers?

Chinese labour news promote the government's vision of "social harmony". These cover labour contract, disputes and promotion and outlaw discrimination in the workplace.  In some cases the laws are more rigid than in Western countries. However, enforcement is different across different regions in China, with the less developed regions being less onerous. 

The new laws also allow a larger role for trade unions, which has led to a few high profile strikes at foreign manufacturing firms in China. Like many developed countries, the Chinese labour law is geared towards protecting employees’ rights more than those of the employers. 

When Drafting a China Employment Contract one must know the latest laws and regulations to avoid employment discontent and contract disputes later. However, if such disputes occur then a timely solution works best. Local expert help in Dealing with Employment-related Issues is available via Crayfish.io, which will be arranged for both parties in a discrete manner.