Some of the criteria and items on our checking list

Initial goal & strategy of the client?

Seems obvious - but many companies never had a pragmatic look at the reason why they wanted to come to China - other than "everybody comes, there are so many potential customers, manufacturing is cheap here". Really? How much turnover/sales/export is being looked at in US$ or ¤ per year? Once this is clear, we can look at what China can offer. The final goal and strategy will probably be dapated to the specifics of the market. Even after ten years of operation in China it can be rewarding to review why the company came here in the first place.

How to set up, which structure?

Typically, companies assume, the first step is the "Representative Office," staffed with an expatriate. And most probably, in order to prepare the set up of a JV (Joint Venture). There is no general rule - all depends on the company and its goals. Many alternatives exist to enter the market of change existing operations. All depends on a case by case review: Rep Office with expatriate Rep Office with a local Chief Rep Use of agent or distributor or serviced office or ... JV (majority? or minority?) WOFE (Wholly Owned Foreign Enterprise) (including for services) The wrong choice can lead to excessive costs, high taxes, poor performance, lack of flexibility and management control or simply to total failure. Another key point is to find innovative ways to enter the market, ahead of competition. China is constantly changing and adapting. Rules on paper, even with a "WTO color," are never completely "cast in iron."

Everything in China is cheap"

A reality check is a must. Anyone ever checked prices of housing, schooling, transport for expats? Ever checked real salary levels for good white-collar staff? Ever shopped around for office space in Beijing or bothered to check company taxes and income tax issues (Yes, it exists, like it or not). Some may be in for a culture shock.

Do you need a partner?

Until recently, a Chinese partner seemed the obvious: he understands China, will open the market, has all necessary business and government contacts ("guanxi"), has land and a factory, etc. Unfortunately, many foreign investors and businessmen found out: he does not fully understand China and even less international business he has no clue about marketing and sales in China his "guanxi" is mostly to protect himself against disputes with the foreign partner he has no right over the land and the land cannot be used for the intended purpose and much more ... All the above despite many "official" papers from the "authorities" claiming the contrary.  There is now a rush towards WOFE, often for obvious reasons.  On the other hand, a good partner could be an element of succes, if there is an obligation to have a partner or simply for more pragmatic reasons: to reduce the overall foreign investment to speed up the setup (use existing factory and staff) to have better market access (really!) to have the support of the authorities

A WOFE has indeed advantages but the traditional JV cannot be ignored.

Do you need to set up manufacturing?

It is often assumed: to sell in China you need to manufacture locally or to export from China you need your own factory. The specific situation of each foreign company and the ever-changing environment in China (WTO and other...) can alter that perspective in both ways. As an example, it could be more profitable and more competitive (quality, price) to import the products with a good local presence for marketing, sales, distribution, packaging and after sales. China is not per definition always "cheap".

Where to set up?

Where to set up our Rep Office? Where to build our factory? Depending on the type of services or products, ideal locations can greatly differ.

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