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China has become an irresistible business and manufacturing hub for investors. The ongoing economic reforms are finally paying off, as evidenced by the country’s numbers. China’s GDP in 2021 grew by 8% to reach USD 18 trillion, cementing the country’s economy as the second-largest on the globe. But hold on, this position appears “transitional” because the country is poised to become the largest economy by 2030, according to the World Bank.
These numbers point at a jurisdiction that is in a race and not showing any sign of tiring until it becomes the best. COVID-19 created some disruptions, but the resurgence has been amazing. China is the perfect place for entrepreneurs to start a business right away. The country’s pro-business regime, large market, and easy reach to the rest of Asia-Pacific make it even more suitable for you. So, are you ready to get into this incredible market? You need one thing: the right market entry strategy.
This post takes a closer look at China as an investment destination to help you answer the biggest question, “what is the best market entry strategy? We will also tell you why you need to work with an expert for China market entry.
Consider Using a Regional China Market Entry Strategy
China is a huge marketplace, but you need to appreciate that it is not homogenous. Indeed, the country’s different regions have populations with very diverse demographics. Therefore, you should consider breaking down the country into separate geo segments, target the one with high potential and then plan to expand.
The first-tier cities, such as Guangzhou and Beijing, are the primary targets for most investors because they have more attractive demographics for business. For manufacturers, free trade areas that focus more on the products they are targeting will be a better option. It will be a good idea to carry out further market research and due diligence to determine the potency of basing your business in a specific place.
Comprehensively Evaluate Your Partners
If you are opening a joint venture (JV) in China, be extra careful because the partner will be part of the main decision-making organ. Indeed, the China joint venture law requires that the Chinese partner must have a controlling shareholding. Even when opening a different business vehicle, such as the common wholly foreign-owned enterprise (WFOE), you will still need partners during entry and business operations.
Partners may include distributors, vendors, raw material suppliers, or any other entity that is important to the business. Your China market entry strategy should include due diligence on every party to be sure they can commit and deliver their part of the deal. For example, can the selected supplier handle all the supplies you need?
Protect Your Intellectual Property Rights
The efforts and resources you put forth to create products or designs should be rewarded appropriately. This is only possible if your China market entry strategy factors in intellectual property rights. Therefore, start by understanding the intellectual property rights according to Chinese laws and patent every invention under your brand. This means that if other companies want to use your inventions, they have to pay for them, which will create another revenue stream for your brand.
China market entry can be exciting because you are stepping into a new and huge market, but it needs to be executed professionally. We have to say that a lot of companies that could have excelled ended up stalling or dropping off for using the wrong strategy. This is why you should act smart by working with an agency of professionals for China consulting and market entry strategy. The experts can help you to not only understand the market but will also run due diligence and ensure your brand becomes successful. If you bring them early enough, they can also help with company registration and other executive functions.