Business Asia

Mistakes to Avoid When Opening a Business in China

The idea of doing business in China is the best thing that can ever happen to your enterprise. As one of the fastest-growing business hubs and markets, China is overflowing with unexploited potential.

This is the reason why big smartphone companies, telecoms, and manufacturing giants have some presence in China.

While you anticipate growth and success after registering a company in China, it is important to take a pause and look at the mistakes that others have done so that you can avoid them. Here are some of the fatal mistakes that you must avoid at all costs when registering and operating a business in China.

Starting with Insufficient Resources 

While reports of startups that got funding from the Chinese administration occasionally hits the headlines, taking your venture there with insufficient resources will be a bad idea.

Often, the startup phase of companies requires you to meet most of the expenses before the business can break even and start running sustainably.

If you lack ample resources, there is a risk of getting stuck midway and even closing down. Indeed, even many banks will not be willing to lend funds to new ventures because they are considered high-risk entities.

To avoid this mistake, it is advisable to have ample resources that can support the business for up to one year. Even at that point, you should have a good system for resources mobilization to support the venture (representative office in China). From UAE to China, the options for jurisdictions with huge potential are e.

Ignoring Competition 

Whether you are running a wholly-owned foreign enterprise WFOE in China or a joint venture, it is important to appreciate that the competition is very stiff in the Chinese market.

Therefore, if you fail to be aggressive, there is a danger of losing out to competitors. To outdo competitors, you need to innovate and improve your product progressively.

Hiring the Wrong People 

Like other businesses, your Chinese business requires the right staff to succeed. The employees you hire determine how effective the company will be in achieving its mandate.

If you select the wrong staff, the chances are that the productivity of the business will go low, and the risk of incurring losses will be very high. So how do you select the right staff in China?

  • Work with a qualified consultancy to  identify the most qualified staff
  • When hiring employees, do not just focus on education skills.  Instead, make sure to also focus on the experience of staff

Trying to Register a Business on Your Own 

We must indicate at this point that setting up a business in China is a complex undertaking. From preparing the required documents to ensuring you stick within the legal framework, you are likely to get exhausted midway.

The best option for addressing the challenge is working with a consultancy that has experience in business registration. Indeed, the agency will come in handy to also help you with the following:

  • Selecting the right business formation. For example, should you select a wholly-owned foreign enterprise (WFOE) or a representative office?
  • The consultancy can help to make starting your enterprise frictionless

The moment you make a decision on doing business in China, it is important to get everything right. From registration to marketing, you have to avoid the above four mistakes at all costs.