This is, perhaps, for many small businesses or start ups the most popular way of entering the China market.
It is relatively simple and doesn't involve the cost, time or hassle of registration or government regulations.
It also has the advantage of allowing you to continue with your "Home based" or mother operation leaving your agent to
develop the China sibling.
Representatives of course, have local knowledge, experience, and most of all "relationships that make it far easier for them
than it would you.
However, it does carry certain risks.
In many cases the foreign company has not vetted their agent thoroughly, which in fairness, can be hard to do for a non local.
One would think that they would be easily identified from their track record, but in fact, they disappear and come back
under a different name, location and "team" so are, in reality, hard to keep track of, and it is just possible that the
agent who cheated you last year is exactly the same one you are dealing with now, just a different front person.
Problems then, arise with agents who are straight out dishonest, and have as their goal the aim of cheating the foreign company.
This includes the risk to sensitive business data, Intellectual Property, patents and copy rights.
The agent may also take short cuts resulting in unfavorable attention from the authorities or be a "Black Market" company
themselves with its own risks and complications.
Misunderstanding from language and "business culture" are also common, some agents have some English but lack any knowledge
of how foreign companies think or act. [and vice versa]
For most small business this is the starting point for China marketing entry, their ultimate aim is to take a more controlling
interest and develop as a separate entity.
The problem may then be your main competition is your agent who has enough information to start up his own copy-cat business and
run against you.
A quick look at the China "Brands" market will see this in every day life, some examples are BYD motors who use the BMW
symbol badge, Pizza Hut has to content with a local branded as Pizza Hot, the French supermarket giant "Carrefour" has
spawned Carretour, a travel company, Noxia produced a NOKIA look alike cell phone [but couldn't support it with technology]
and Lining has not only tried to cash in on the Chinese pronunciation of NIKE, but has also copied the NIKE logo, with
just tiny changes.
While Premier Hu and the top executives maybe serious and genuine about Intellectual Property protection in China, the
reality is it is just lip service.
China is a huge country, much still under developed and corruption is rife. Trying to bring civil suit against someone ripping
you off in China when the judge, jury, witnesses, executioner and possibly your own defense team is on your competitors pay
roll is a little difficult.
One either has to be big enough and have sufficient funds to treat them as irritants or parasites or have a very good marketing
and technological advantage so as to drive them out of business, as did Nokia.
8/ Native Chinese [see ABOUT ] and British owners with 10 years China
experience
If you do decide to work with a Chinese agent, we can support you by vetting your agent and act as your ongoing China based
supervisor, which leads to JV.
For more on WPBeijing China Marketing as your representative please jump HERE
Joint venture [JV]
This entry is based party on WPBeijing China Marketing's own first hand experience and party on a PPT presentation:
"Risks and Failures of a Joint Venture in China by Manfred Fuchs, June 1997
Please bear in mind that in the 13 years since Mr Fuchs made his PPT, the Chinese government has relaxed many regulations
and introduced a raft of others to help make doing business in China easier for foreign companies.
That being said, there is still a certain level of truth in some of his warnings, especially around the necessity for good,
no, excellent research and due diligence, a point which WPBeijing China Marketing can only stress and repeat.
It is reproduced HERE as one point of view from which WPBeijing China Marketing expects you
to draw your own conclusions.
While JV' s are also a popular way for small Business to enter the China market, WPBeijing China Marketing feels they
usually better suit larger companies or SME's with stronger financial backing or resources.
The advantages are that your Chinese side may have an established market, manufacturers / suppliers, plant, land, a trained
local work force and logistic and distribution channels.
In some ways it does carry similar risks to an agent in that you need to vet your JV partner thoroughly and perform extremely
good Due Diligence.
On the negative side, you need to ALWAYS bear in mind that as at 2009 at least, the government keeps a firm control over
joint ventures, [and foreign companies generally] and are usually, if not always part of the negotiating.
As the late Lady Dianna Spencer once said:
" There are 3 people in this marriage."
Each of you will have different aims and goals, to be expected, but your Chinese side will be heavily influenced by the
government, both central and local [relationships again]
China JV's have gained a reputation as being dangerous waters with a more than even chance of being cheated or losing your shirt.
This is undeniably true and international press are very quick to jump on and promote the risks and dangers, but what is,
in the opinion of WPBeijing China Marketing, also true yet rarely reported, is that in many cases the foreign side has been
the master of their own down fall by not doing their home work.
If they were playing a sports match, very few of them would even consider for a second, fronting up on crutches or heavy
bandages knowing full well the opposition would exploit their weakness, yet they enter into business ventures without a
second thought.Leaping in where Angels fear to tread, blinded by the 1.4 billion market.
This is China people and while they may, at the moment, lack depth and experience in intentional business management, the
Chinese are, and always have been, very, very good, sharp basic business people.
You need to be well prepared, you are playing away, on their home turf!
Lastly, in this brief round up, remember that not every business in China is authorised to enter into joint ventures, hire,
deal or negotiate with foreigners, but many do, so you need to ensure the people you are dealing with are indeed able to
legally sign an agreement.
If not, then the project will not proceed, if it does it will be risky, either way, the risk to you is greater than the Chinese
side as it is YOU who stand to lose your investment, both financially and in the way of plant and, what is of more value to
the Chinese, your IP.
In the past this has been the motive for pursuing a JV even though the Chinese side know it will not succeed, they stand to
gain from the other aspects so employ "delaying tactics" while at the same time urging / encouraging the foreign side to
present more, this could be a "fishing " expedition, possibly sanctioned by government.
Most JV's are arranged off shore and heavily involve government so WPBeijing China Marketing's support is limited to local
research of the China based JV.
If you decide to go it alone we can also advise on local ancillary professionals such as legal and accounting firms but we
strongly advise you to use a recognised home based company with a proven track record of China Due Diligence.
However as a China marketing company with a successful pedigree, we are in a very strong position to represent you as your
marketing consultancy, something we recommend even though the other side may already have an existing or in house team working
for them.
By engaging WPBEijing China Marketing we can continue to assure your interests are protected, your corporate guidelines are
adhered to and English documentation is accurate.
To summarise, JV's in China have had a bad rap, but not always fairly, they are a good way to enter into the China market if
properly prepared and planned for, but WPBeijing China Marketing tends to share the opinion of Mr Chris Devonshire-Ellis who
said:
". Small businesses are probably best left steering clear of JVs, unless they either have to utilize [sic] them due to regulatory
issues, or have the resources to conduct proper due diligence."
ref: http://www.china-briefing.com/news/2008/10/29/china-joint-ventures-rehabilitated-big-business-thinks-so.html
Wholly Foreign Owned Enterprise [WFOE]
This is one of the areas that has seen changes and new regulations issued so WPBeijing China Marketing strongly recommends
you do, or engage a China marketing studio to, thoroughly research this before hand.
A WFOE is, as the name implies, a business that is totally owned by you, the foreign investor, there is no need for a Chinese
partner, investor or JV.
The advantages are obvious, total control, less cultural and language difficulties, at least at senior management level, total
profit maximisation, and security of IP, patents and other sensitive data.
However, we again come back to "Relationships," that intangible asset that makes business [and life] in China less problematic
and helps things go smoothly.
Often a WOFE does not have the level of relationships needed to begin with so can struggle at the start.
Another minor headache may be government restrictions on what you can or can not do, registering a WFOE does not, as yet,
automatically give you the right to distribute in the Chinese domestic market and there maybe restrictions on " expansion."
It is currently not allowed to diversify beyond the "Scope" of your business as stated on your registration, or open a "branch
office" in another province under the same registration.
And of course, the capital and documentation requirements make WFOE more the league of bigger multi nationals with a decent
bank roll and an army of Staff [accountants, lawyers ] to prepare and work through the endless red tape.
WPbeijing China Marketing's input here is largely in research to support your Due Diligence and application, screening and
vetting of potential local middle managers and staff as well as vetting ancillary services such as lawyers, accountants and
real estate agents on your behalf.
As well as our research and analysis facilities we will prepare and implement a total marketing plan which, when weighing
our "Relationships" against yours, makes us a good partner.
Partnership
Other than the professional type [lawyers, doctors etc] partnerships in China are different from a JV in that, mostly either
partner is looking for someone with capital to help start, expand, or start a business off shore. A typical example is a
foreign company that wants a China base but is not necessarily wanting to start a permanent business there.
Of course the reverse applies, many Chinese companies are keen to find a "partner" overseas who will help expand their market.
Often the line here is blurred between partner and agent/ representative, but technically, a partner is working along side
you in the same business and shares the same goals and motivation as you, whereas an agent may have several "accounts" he or
she is servicing and is totally focussed on their own agenda, which may not necessarily be in your interests.
Partnerships, JV's and representatives are all fought with danger and problems unless you do your homework and check
everything, not once, not twice but over and over, as in your own country, partnerships should not be entered into lightly.
WPBeijing China Marketing audit and research services can vet potential partners and give you valuable feed back to help in
you decision making process.
Registered Chinese Company
Although not a popular option, it is perhaps half way between J/V and a Partnership
As many have stated, JV for small players should be avoided and a WOFE is usually in the league of big business.
A Chinese company is, however, an option for SME's who have a Chinese wife / husband or partner and made a life choice to be
in China long term and may have settled here.
It is then [relatively] easy to register a Chinese company in the name of ones spouse /partner, various options make it more
cost effective from both financial and time aspects.
WPBeijing China Marketing was formed this way back in 2004 so we are in a good position to be able to offer advice and practical
services.
Black Market Entry
As its name suggests, this is illegal trading, it is convenient, quick and easy, but comes with huge amounts of risk, if you
are caught.
Being honest, it is a popular way, many of today's successful companies began that way.
A lot of people seem to think it is easy to begin a Black Market because there are less laws or regulations in starting
a Black China business.
The truth is the opposite, the laws and regulations do not change, they are still a red tape nightmare, all you are doing
is side stepping them.
What is true and can make starting a Black China business easy is the enforcement of those rules can be quite relaxed.
However it comes with 2 major caveats or conditions:
There are several options open to those wishing to start a business In China. 
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