How to open your own production in China and not go broke

February 20, 2020 10126 SCS Group

Image: Reuters

China remains the world's largest supplier of industrial and consumer goods. And if previously competitive advantage was based on the principle of “a lot and cheap”, now technology and innovation are becoming a new vector of economic development. How to find a manufacturer in China? Where to look and where to start? We suggest considering several search methods.

Chinese manufacturers

In 2020, a Chinese construction company built a 57-story skyscraper in 19 days.
Article navigation

• Search for manufacturers in China
• Production of goods in China
• Plants and factories in the Guangzhou region
• Advantages of organizing production in China
• How to order production of goods in China
• Contract manufacturing in China
• Chinese Manufacturers Database
• What is produced in China
• Which famous manufacturers have factories in China?
• Why is production cheap in China?
• Conclusion

370 thousand new businesses over the past 50 years. First place among all countries in the number of plants and factories. Production of components for Apple, Dell, HP . This is China - a country with a billion people and an economic center on a planetary scale.

Yangtze River Delta (YRD)

East of China

Surrounding the Shanghai
, the Yangtze River Delta, home to more than 105 million people, is famous for its cluster of industrial enterprises that produce products for the Chinese domestic market.
Production at YRD has traditionally focused on low-cost, high-volume products. The competition here is quite fierce, which keeps prices low. It is necessary to understand that due to low margins, enterprises sometimes sacrifice product quality and cut production costs by using cheap raw materials. Service in YRD is at a lower level compared to PRD. And although it is much more difficult to organize the purchase of goods in this region, you should not refuse this option. With careful control, factories in YRD can produce high quality products at low prices. It is worth noting that the overall quality of products in the region (which is the second largest export center in China) is gradually increasing as local enterprises enter the international market. The main industrial cities in the region are
Suzhou, Ningbo, Shanghai, Nanjing and Hangzhou.
What products does the Yangtze River Delta region specialize in:
General consumer goods, textiles, metal and glass products, automobile engines, bicycles, electronics, household appliances, building materials, paper products, etc.
Advantages of the region:
The production costs of many products are lower than in the Pearl River Delta.
Otherwise, the region has the same advantages as PRD (well-developed infrastructure and access to raw materials). Disadvantages:
For most enterprises in the region, the price of goods is more important than quality. Many plants and factories are in debt. Counterfeits of copyrighted goods are often produced here, so we recommend taking care of protecting your intellectual property.

Search for manufacturers in China

The influence of Chinese industry affects all sectors of the Russian economy without exception. And the business of reselling goods from China is one of the most popular startups among aspiring entrepreneurs. Having access to the Internet, anyone can easily contact Chinese manufacturers.

If you decide to open a business with China, you are right. Despite the high competition among Russian sellers, there was, is and will be a demand for Chinese goods. This is guaranteed by the low price of the product. To take advantage of this advantage, the primary task of a new businessman is to independently find manufacturers in China. How to do this, bypassing all the intermediaries and scammers? Easily.

Popular methods of searching for a manufacturer from China:

1. A personal meeting. Perhaps the most effective way to arrange the supply of goods. Assessing production capacities and technologies with your own eyes, meeting potential partners and demonstrating your intentions will have an extremely positive impact on the negotiation process. A significant disadvantage is time and money costs. For an entrepreneur starting a business with small investments, this option is completely unacceptable.
2. Visiting exhibitions and presentations of manufacturers in the Republic of China. It is not necessary to go to the territory of the People's Republic of China. Fairs and exhibitions of Chinese manufacturers are held annually in Russia. This is a great way to get acquainted with the finished product and price list, get all the necessary advice and sign a contract. But please note that it is advisable to purchase the first batch of goods in small quantities. The samples presented at the exhibition may not always correspond to the product received.
3. Chinese trading platforms. The most popular and accessible search method. A couple of mouse clicks and the entire Chinese light industry opens up to the buyer. You can buy anything - from threads and needles to car components. Finding food, jewelry and electronics is not a problem. Well-known trading platforms for searching are Alibaba, TaoBao, Aliexpress. But when using such services, your vigilance should be at full capacity. Don't be tempted by obscenely low price tags. Remember - a quality product costs real money. If you buy at a reduced price, you risk being left without money or getting a crude fake.
4. Intermediaries. Finding suppliers and manufacturers through intermediaries in China will free a businessman from routine. Finding a factory or factory, communicating with its representatives, solving payment and delivery problems... all this will fall on someone else’s shoulders. Naturally, not for free. And this is the main disadvantage. The main thing in this approach is to find a responsible and trusted partner.

Exhibitions

Visiting thematic exhibitions gives you the opportunity to see samples of products, personally meet a representative of a factory or plant, ask questions and discuss the terms of cooperation.

China hosts hundreds of major trade events, highly specialized and multi-disciplinary exhibitions with astonishing frequency.

The largest event is the Import and Export Exhibition, or Canton Fair, which is held in Guangzhou twice a year, attracting about 25,500 exhibitors and nearly 200,000 buyers from around the world. Each exhibition session is divided into three stages dedicated to specific product groups. In the first week, machines, equipment, special equipment, transport and spare parts, electronics, chemistry, building materials and light are presented. The second stage is consumer goods, decor, furniture, toys, gifts and souvenirs. The final week is dedicated to clothing, shoes, textiles, bags and suitcases, sporting goods, medical goods and food.

How to get to the Canton Fair? You can easily do this yourself - just go through a simple pre-registration procedure on the official website of the exhibition and receive a buyer badge on the spot. The website provides instructions, including in Russian. If you wish, you can order support and translation services - find a translator in specialized communities, focusing on positive reviews, or contact a company that provides such services. In the first case, there remains the risk of receiving poor quality service; in the second case, the company’s reputation is the guarantor of quality work.

We recommend that you pay attention to exhibitions with a narrow theme that suits your business. The most interesting of them take place mainly in Shanghai, Guangzhou, Hong Kong, Beijing and Shenzhen.

It should be taken into account that a trip to an exhibition in China requires additional time and financial costs, including visas, flights, accommodation, meals, transportation costs within the country, and translation services. What's the alternative?

Many Chinese manufacturers interested in expanding their sales market actively take part in foreign exhibitions, including in Russia and the CIS countries. Therefore, you can start your search at domestic exhibitions, where the Chinese themselves come. As a rule, on the event website you can familiarize yourself with the list of foreign exhibitors in advance and “Google” the names of participating companies to find out more about them.

Production of goods in China

Reselling Chinese-made goods is a profitable activity. But if a businessman’s appetites are measured in millions, this idea should be abandoned. In this case, it is necessary to consider organizing production in China itself.

Many brands whose products are known all over the world have moved their product production to China. Opening a clothing factory or a high-tech smartphone manufacturing company is equally easy. For this purpose, the territory of China is conventionally divided into economic zones, which provide excellent conditions for each industry. For example:

• In the regions of Zhuhai, Guangzhou and Shenzhen, Chinese manufacturing plants and auxiliary companies are concentrated, which provide comfortable conditions for cheap and high-quality production of clothing, electronics, and furniture.
• Liaoning, Ningbo, Shanghai and Hangzhou are the “heavyweights” of the Chinese economy. Capacities for metallurgy, machine and shipbuilding, and the chemical industry are concentrated here.
• Tianjin and Beijing are the center of the Chinese textile industry.

Northeast China

Historically, the northeastern region has been the center of China's heavy industry due to its abundance of coal and oil.
Industry here is largely focused on the production of iron, steel, petroleum, petrochemicals, machine tools, as well as ships, aircraft and automobiles. In recent years, the government has decided to reduce the share of heavy industry in the region in order to make the region a center for modern manufacturing. However, at the moment the reform has not yet borne fruit. The region faces a number of challenges, including enterprise overcapacity, insufficient investment and the dominance of state-owned enterprises. Main industrial cities in the region:

Shenyang, Dalian, Harbin, Changchun and Anshan.
What products does Northeast China specialize in:
Heavy industry, iron, steel, oil, petrochemicals, shipbuilding, machine tools, aviation and automotive.
Advantages of the region:
The main advantage is that the region is located in close proximity to Russia, which reduces the cost of delivering goods to the Russian Federation.
Here you can find enterprises specializing in heavy industry that produce goods at very competitive prices. Disadvantages:
Manufacturing in the region can present a number of problems. Manufacturing requires close attention to many aspects, including project management, intellectual property protection and quality control.

Plants and factories in the Guangzhou region

A bright representative of the Chinese economy is Guangzhou, the third largest city in the republic. Population – 10 million people (more than the population of the entire Belarus). The region is extremely popular among foreign investors and businessmen. Light industry and electronics are highly developed here.

Factories and factories in Guangzhou mostly specialize in the production of products made from silk, cotton, jute and artificial fibers.

Interestingly, Yekaterinburg has been one of Guangzhou’s sister cities since 2002.

Article on the website vchae.com “Cases: Kirill Maluka on locating production in China” (July 15, 2020)

In continuation of the previous article. Squeeze:

1. Many people talk about bad Chinese products, but we know that today almost all major international players produce in China. That is, China is different from China.
2. We work in the field of electronics, and accordingly, the technologies used in its production are cost-effective only when producing millions of pieces. Therefore, it is more profitable to produce where such volumes are produced.
3. The first thing you need to do is decide for yourself what segment you work in, what level of production and quality of the product you want to see. The choice of manufacturer depends on this.
4. The Chinese had to adapt to us in procedural matters.
5. By mentality, the Chinese are single-taskers. If they are given 3 tasks in a row that are interconnected, they become overwhelmed.
6. The Chinese periodically “turn on the Chinese,” that is, as we say, “turn on the fool.”
7. When working with a high-tech product, you must be aware that sooner or later it will be stolen from you. It’s best to make technological changes every year so that they simply don’t have time to copy you.

Advantages of organizing production in China

From an economic point of view, the benefits of manufacturing in China are due to the following aspects:

1. The economic laws developed by the government are clear and effective. The entrepreneur clearly knows his rights and obligations.
2. Cheap labor is a fact that is known all over the world.
3. Transparent tax system.
4. Various benefits for new and young small businesses.
5. Prices for energy resources and raw materials are among the lowest on the mainland.
6. Tough and effective fight against corruption.
7. High business activity of a large number of the population.
8. Small and medium-sized businesses are not susceptible to external interference from officials.

Delivery of the final product

Consumer end products are becoming more popular than ever in China. Now a consumer boom of foreign products has begun in the Middle Kingdom: it is considered “cool” to wear a T-shirt with a European brand, eat foreign products, buy a French baguette, a Swiss chocolate bar and wine from Australia or Chile. The destination country is not very important for the Chinese - the fact of import itself is important for them. The middle class is willing to pay more for foreign products than for Chinese ones, provided they are of adequate quality.

If a product is not available in China, and you predict an increase in demand for it, then feel free to start supplying it.

In the mid-2000s, the “foreign development” of the alcohol market began in China, and in the early 2010s, the expansion of dairy producers began. Small and medium-sized businesses can go into more niche goods and products (chocolate, mineral water, honey, etc.). With good promotion, the Chinese can consume these products in huge quantities. It’s more difficult, but still realistic, to enter the B2B sphere. To work here you need resources, knowledge, and technology. True, technology in China is very difficult to protect, so I would recommend using the advantages of the final product market. But the technology market is becoming more understandable and secure year after year.

How to order production of goods in China

Resale of Chinese goods is the most accessible business with China. Opening your own production facilities requires serious investments. If both options do not fit your business model, there is a middle ground - ordering production in China.

The point is this. For example, you decide to sell copies of Nike sneakers. To do this, you need to send a sample (original) of the shoes to the factory. Specify the desired scope of delivery and find out the cost. The Chinese produce goods at a price below the market price, you sell at your own markup.

Also, cooperation with Chinese manufacturers can be used to release your own brand or modernize products already available on the market. How to do this?

1. You need to find an intermediary in China. There are many similar advertisements on the Internet. The main thing is to carefully analyze information about your future partner.
2. Inform the intermediary in detail about your goals and requirements. Show product samples.
3. From the factories selected by the intermediary, choose the one you like and order an inspection. It includes: provision of all documents, photo report, performance assessment, production of samples for review.
4. You sign a contract and pay for the first trial batch of goods. Often the minimum order is $1000, which is not much for making your own.

How to set up your own production: a step-by-step guide

To ensure that starting a business doesn't cause too much anxiety, it's a good idea to create an action plan.

Resource Analysis

Depending on the capital available, the production option should be selected. If there are opportunities to invest money, the entrepreneur has the opportunity to immediately reach a high level of sales. In this case, creating and promoting an online store does not take more than 1–2 months.

Choosing a Niche

If you don’t have your own ideas or preferences for choosing a product, you can use the Yandex. Wordstat". With its help, statistics of requests for products are analyzed. But even when choosing the most in-demand position, you should pay attention to the competition. If it is very large, it will be difficult to make a profit. Subsequently, you must always monitor the quality of the items sold, analyze the ever-changing market trends and attract new customers through advertising.

An unfamiliar product cannot be purchased in large quantities at once. First you should order a small kit and try to sell it.

Communication with suppliers

When purchasing in bulk, you need to place an order directly from the manufacturer, without using the services of intermediaries. Otherwise, the purchase will cost much more. At the initial stage, you can use sites similar to AliExpress; they are also suitable for small retail.

If possible, it is recommended to independently search for a supplier in China. To do this, every year exhibitions are held throughout the country where you can find a business partner. You can delegate the search for a supplier to specialized companies that will not only control the process, but also help with store promotion.

Supplier verification

Before concluding a contract, you should make sure of the reliability of the chosen supplier: check the documentation, availability of a license, find real reviews about their work. It is best to communicate with a potential partner in person and pay attention to discussing the system of fines for failure to fulfill obligations.

Delivery organization

Although all online resources for selling Chinese goods indicate certain deadlines, there is always a chance to improve the terms of cooperation and reach a compromise. Therefore, you should personally communicate with a potential supplier and choose the most convenient option for yourself.

Advertising and customer search

Promotion of your store depends entirely on the resources of the entrepreneur. Without investment, finding clients will take a lot of time and also require effort and energy. Paid advertising allows you to quickly find clients.

To promote your store yourself, it is recommended to use various social networks, thematic communities and message boards.

Definition of profitability

Before you seriously engage in trading, you should evaluate the chances of making a profit. You need to make a simple calculation: if after selling the product the profit is from 50 to 300% of the cost, then the idea is a good one. Otherwise, you need to decide how to optimize the work to get a larger amount.

Testing

You cannot rely solely on the manufacturer's words. It is important to obtain samples and independently check them for compliance with the specified characteristics.

Contract manufacturing in China

Another way to cooperate with Chinese factories is contract (or OEM) manufacturing. The bottom line is that the customer has the opportunity to manufacture goods in the Middle Kingdom under his own brand, of which he is guaranteed to be the copyright holder. The low cost of the goods received and small initial investments make such cooperation beneficial for the entrepreneur.

The main benefits of contractual cooperation:

• High quality goods at low contract costs.
• There is no need to purchase and modernize production equipment - the manufacturer will take care of all the worries.
• Easy start. A budding businessman can start producing his own products without huge investments.

All news

03 August 2020, 10:42

Artem Lylyk, CEO of Asia Import Group

Starting a business is a complex process that is always associated with certain risks. In search of the most comfortable and profitable conditions for business development, many companies open representative offices abroad. The PRC has rightfully occupied the first place on the list of the most attractive countries for cooperation for a long time. This country is developing at an amazingly fast pace, with new construction taking place and the world's largest production of automobiles and renewable energy sources. The combination of a wide range, low cost and high quality of goods has made it possible to destroy the idea of ​​Chinese products as low-quality.

In modern China there are many cities that are not just developed, but at the forefront of modern urbanism, such as Beijing, Shanghai, Guangzhou... Residents of these agglomerations have good income, which allows China to occupy second place in the ranking of countries in terms of the number of dollar millionaires, second only to the United States .

Organizing a business with China has many advantages, but at the same time, one should not lose sight of the peculiarities of this country and the potential dangers that await inexperienced businessmen at all stages of organizing production in China.

Unfortunately, after visiting China, many aspiring entrepreneurs get the impression that a profitable business with this country can be built independently and without major investments. This kind of theory has very shaky foundations, since even in the case of dropshipping, funds will be needed at least for advertising and sales organization. In addition, you will definitely need a good translator to be able to check all the documentation and not find yourself in an unpleasant situation after signing the contract. You can rest assured: knowledge of English alone will not be enough when interacting with the Chinese side.

To be able to fully concentrate on sales and increasing the profitability of the enterprise, we recommend outsourcing organizational, technical and administrative functions to a contractor. It is best if it is a company that provides a full range of services under one contract, such as Asia Import Group. Firstly, it will help save up to 30% of funds at each stage of organizing a business. Secondly, you will have one contact person responsible for the entire process, and in case of controversial issues you will not have to deal with several contractors passing the blame on each other.

However, if you still intend to build a business with China on your own, be prepared to solve the following problems.

1. Decide on the product and choose a supplier. The best way to solve this problem would be to travel to China for a major exhibition. There you can explore the range of products, ask the price, communicate with potential partners, and also visit the production. If there is no opportunity to visit the Celestial Empire, and deadlines are running out, then we recommend starting with an analysis of Chinese Internet sites, for example, Alibaba, Taobao, Tmart and others. Each of them has its own characteristics, which you will be able to understand after some time. For example, many items on Alibaba are often sold at significantly lower prices than on other sites. However, about 80% of such goods are sold by intermediaries, not manufacturers.

2. Check product quality. It happens that, when signing a contract with us, clients complain about their previous experience of cooperation with “bad” suppliers. In fact, there are practically no such people in China, with the possible exception of outright scammers. The main problem why the customer receives a product that does not meet expectations is the illiterate drafting of the contract. A special feature of working with the Chinese side is the need to describe in great detail all the requirements for both the technological process and the final result. Otherwise, the resourceful Chinese will do everything in his own way, without even thinking about informing the client about it. Therefore, it is important to first assess all the “weak” points of the product (weight of the product, type of packaging, thickness, density, material, etc.) and fix them in the contract with the supplier. Also, checking products for quality and inspecting the factory with a visit to production will prevent you from getting a “pig in a poke.”

3. Make payment. In order to make an official transfer of funds to the supplier, you need to open a foreign currency account in a bank, issue a transaction passport, buy the currency itself and transfer it to China. Next, you will need to provide the bank with closing documents, otherwise you will be fined.

4. Arrange delivery. The next step is for the entrepreneur to connect the supplier and the transport company, and also think over the optimal logistics route.

5. Resolve customs clearance issues. To avoid troubles at customs, you need to thoroughly study all the rules for importing various types of goods. There are a lot of nuances here.

It is necessary to prepare export and import documentation, determine the HS code, draw up declarations for goods for submission to the customs authorities, calculate and pay customs duties, etc.

Customs authorities are strict about errors and inaccuracies when processing imported goods. All this is considered as providing false information, which is punishable by hefty fines, and in some cases, re-export of goods, confiscation and other penalties. For example, one of the most common violations - entering an incorrect HS code - is equated to an attempt to smuggle goods, and this is punishable by administrative and even criminal liability. Accordingly, the entire budget for the purchase of goods will simply be “frozen”.

The situation is complicated by the fact that some cargoes do not have an unambiguous classification. Companies and entrepreneurs without sufficient experience and knowledge of customs legislation are 99% likely to make a mistake and be classified as smugglers. The reason for this is the desire to save money on the services of professional declarants.

In addition, when going through customs inspection, entrepreneurs may face completely unpredictable surprises in the form of undeclared cargo. If you find children's toys, a set of dishes, or a pack of tea in your container that at first glance may seem like something else, don't worry - it's a gift from the Middle Kingdom. Chinese merchants love to please their partners with various souvenirs, but they do not really care about how these gifts will pass through customs. To avoid getting into debates with border guards, we recommend checking each container in advance: the Chinese usually place gifts in the most visible place.

Source:

Chinese Manufacturers Database

If it is expensive to search for a manufacturer using an intermediary, you can try using the online catalog of Chinese manufacturers.

To search, we recommend using well-known, time-tested resources:

• Alibaba. The most popular Chinese trading platform. Easy search, huge range of products. The main drawback is the lack of Russian language on the site.
• Global Sources. Well-known and authoritative online directory. A regular participant in exhibitions in China, the USA, India, the United Arab Emirates and many other countries. In the online catalog it is easy to find the websites of large Chinese manufacturers.
• HKTDC. An excellent online catalog with offices in 40 cities around the world. It represents major Hong Kong manufacturers. The information is constantly updated; the customer has the opportunity to submit a purchase advertisement.
• DHgate. An online catalog with which you can purchase goods at wholesale prices in small quantities. The site presents 650 thousand manufacturers and intermediaries, which gives more than 20 million product names.
• TaoBao. Another well-known resource in Russia. The site is similar in functionality and design to a traditional online store. There are hundreds of thousands of manufacturers and stores with a wide range of products - both new and used. Small and large wholesale possible.

Advantages of doing business with China

Business with China has a huge number of advantages. By starting to cooperate with the Celestial Empire, an entrepreneur gets a business that has the following advantages:

1. Low purchase prices. When buying goods directly from China, you can put a markup of 100, 200, or even 300%. Such a boost will allow you to offset the costs of a trip to the Far Eastern country and make a good profit.
2. Wide choose. It is difficult to say whether there is such a position on the market that cannot be purchased in China. The market of this country is literally overflowing with a wide variety of products, ranging from threads to cars. A huge assortment list often plunges the wholesale buyer into a stupor. On the shelves of the Celestial Empire there are goods that the Russian market has never seen. At the same time, every day the inventive Chinese come up with something else.
3. Quality of goods. As strange as it may sound, Chinese products are no longer synonymous with low-quality products. Of course, you should choose a supplier carefully; not all of them are conscientious about the manufacture of goods, but in general, goods have begun to meet the requirements of the European market. The EU and the USA set quite strict limits for manufacturers, which has seriously improved the quality of production.
4. Work directly with the supplier. The ability to remove intermediaries from the sales chain seriously reduces the purchasing cost of products and increases profits. Chinese suppliers work not only with large buyers, but also with smaller ones who purchase small quantities.
5. Possibility of purchasing expensive analogues. China duplicates all famous brands. In its vastness you can find high-quality replicas that differ from the original only in price.

Attention! Chinese suppliers are very flexible in establishing trade relations. Working with China on an ongoing basis, you can take advantage of individual bonus programs and discounts.

What is produced in China

Almost every fifth thing in the world is made in China. In many industries, China holds the lead in production volumes. Here is a list of products that the Chinese produce more than any other country.

Which famous manufacturers have factories in China?

Despite the lion's share of global exports, most Chinese brands are unknown to Russian and European buyers. This is due to the fact that most of them are focused on the domestic or Asian market. But there are also companies that have made a name for themselves throughout the world.

Here are the most famous and largest factories in China.

• Lenovo. Leader of the high-tech industry of the People's Republic of China. Due to the optimal price-quality ratio, the company's products are popular in many CIS countries and abroad. The company's technologies were developed with the help of another world giant - the American IBM.
• Huawei. World-famous manufacturer of various types of telecommunications products and phones. The company has more than once been involved in scandals related to industrial espionage and theft of other people's developments (which is typical for many Chinese companies).
• Haier. One of the flagships in the production of high-tech household appliances. Thanks to its own ideas and developments, the company's products are highly valued in many countries, including the USA.
• Gree. A rapidly growing air conditioning company. It has factories not only in China, but also abroad.
• BBK. A popular brand known for high-quality household appliances and electronics. BBK DVD players are known all over the world for their ability to read any disc, even damaged ones.
• Chery, Geely are popular car manufacturers in the CIS and Europe. But if Chery became famous for cloning popular models in the world, Geely has always relied on its own developments, which has borne fruit - the company recently acquired the famous automobile brand Volvo.

Entertainment and events

Another trend in China is design, creativity and projects aimed at improving the current standard of living. The Chinese are tired of living in an unfurnished “cave”. They themselves call their current policy “The dragon is setting up a cave.” The Chinese began to pay attention to various “tricks” - the markets for marketing, design, and entertainment are blossoming.

But at the same time, the number of organizers of various concerts, theaters, and performances in China is an order of magnitude less than in Europe, and several orders of magnitude less than in Moscow. In Moscow, for example, you can have fun as you please: the capital's market is oversaturated, and many people do not have enough space there. But Vitas, who was once very popular in Russia, has already made a dizzying career in China. He packs stadiums, lives in an elite quarter of Shanghai and is doing well. People specially come to him with jars of water to charge the water with his magical singing.

Of course, not everyone can become famous singers, but there are several event agencies in Russia for which it’s time to think about entering the Chinese market. I think several new billionaires will appear in this market in the near future.

In 2018-2020, China's consumption market is expected to overtake the United States to become the world's number one market. China is already in first place in terms of imports and exports.

There really are a lot of opportunities in the Middle Kingdom, but we must take into account that the Chinese market is larger and more complex than the Russian one. You need to be prepared for competition: if in Russia your idea will have 2-3 competitors, then in China there will be 20-30 of them.

The second important question that faces all entrepreneurs conquering the Chinese market is how to enter it correctly? There are five ways to do this.

Option 1. No legal entity

Today, the most popular way to enter China among Russian small and medium-sized businessmen is the absence of any legal entity on the territory of the Middle Kingdom. At the same time, entrepreneurs, most often engaged in the field of import-export of products, fly to China on their own or have their own person on site. This legal “lack of representation” has its advantages, the main one of which is savings on lawyers and salaries for employees of the Chinese representative office. But the risks are great: resolving any controversial issues results in a huge problem. If the Chinese decide to unilaterally violate their obligations, then it will be impossible to find ends, and in world arbitration you will also be of no interest to anyone. And, naturally, “private owners” without a legal entity are treated completely differently in China.

Option 2. Opening a representative office in China

Formally, the representative office does not conduct economic activities (it simply does not have the right to do so), but only monitors the process and, possibly, engages in consulting or marketing. But in fact, people working in representative offices are engaged in economic activity - for example, they enter into contracts. Russian businessmen rarely decide to open representative offices in China, but this is a good option, for example, for obtaining a work visa to travel to China.

Option 3. Partnership

You can work in China through a partner of either a Chinese or any other foreign company.

Option 4. Company with 100% foreign participation

In my opinion, in the long term, this option is one of the most correct development paths. In most cases, we are talking about opening a trading company. For example, if you import goods from China, then the biggest benefit for you is a VAT refund. True, the VAT refund process does not always go smoothly. In China, as in Russia, there are several taxation systems, including a simplified one. Firms operating on a simplified basis most often do not have the right to sell their goods abroad. If you, without knowing this, exported goods from China, you will have problems with the return: not only will you not receive a refund of VAT, but they will also charge you additional taxes. If, on the contrary, you supply goods to China, then opening a company with 100% foreign participation will allow you to protect yourself and control the entire chain.

Despite the effectiveness of the method, opening a company with 100% foreign capital also has its disadvantages - a long and labor-intensive process. It takes up to six months from submitting documents to issuing all necessary licenses. The authorized capital varies depending on the province of China: for example, in Shanghai it starts from $150,000 (implying the ability to conduct more than 10 types of activities). If you do not deposit the authorized capital into the company's account on time, you can receive fines and be subject to sanctions. At the same time, some tax inspectors do not approve of the use of authorized capital for the purchase of goods.

Option 5. Joint venture

If you understand that your business in China will last for a long time, then you can organize a joint venture. But there are some restrictions: in a number of industries (automotive industry, for example), foreigners are prohibited from owning more than 50% of the authorized capital of a joint venture. And all the large companies that were part of China, for example, Volkswagen, which has a plant near Shanghai, or Hyundai, which has a plant near Beijing, own no more than half of their own enterprise.

But there are other examples: industries where the share of foreign participation can be 99% of the authorized capital (for example, in the field of consumer goods). The list of these industries is freely available and can be found on the Internet at baidu.com. Having a Chinese among the company’s shareholders can be an effective solution, because it will always be easier for him to come to an agreement with local entrepreneurs and authorities. The opening of a joint venture and a company with 100% capital immediately indicates that people want to work in the market seriously.

Why is production cheap in China?

The primacy of the People's Republic of China in many industries is ensured by many factors. We will consider the main ones in detail.

Cheap labor. Chinese villages are the main source of labor for the entire country. More often, workers from the villages are used in low-skilled and low-productivity professions. At the same time, wages are mere pennies on a metropolitan scale. About 120 million Chinese live below the poverty line .

The highest salaries are in Beijing and Shanghai. A simple factory worker has an average salary of $500. In the provinces, you can expect a maximum of $250 for a similar position.

Interesting fact: one of the highest paid professions in China is modeling. Girls with European appearance can expect a salary from 300 to 770 US dollars per day!

Another factor that influenced the sharp growth of the economy is the development of the southeastern part of the country. Mass production, high concentration of specialists and money in this region contributed to billions of dollars in influx of foreign investment. Economic and political centers are located here - Shanghai, Beijing, Guangzhou, Ningbo and many others. Around these cities there are a huge number of auxiliary plants and factories. Thanks to this, enterprises have every opportunity for low-cost production and logistics.

The main role in the growth of the country's economy is played by the internal policy of the state. Tax breaks for businessmen, transparent laws and the fight against corruption are bearing fruit. The attitude towards entrepreneurs in China is completely different than in Russia. The Chinese businessman is seen as the driving force behind the country's entire economy. The most comfortable conditions are created for doing business.

And the last aspect that gives manufacturers an advantage in pricing is the fight against environmental pollution. More precisely, her long absence. In the USA and EU countries, the issues of cleaning and reducing production waste are taken very seriously, investing hundreds of millions of dollars. Chinese industrial enterprises have abandoned expensive Western technologies. Now the problem of air pollution comes to the fore.

The ecological situation in the country is catastrophic in some places, 20% of arable land is contaminated with hazardous substances, and smog on the streets is a common occurrence even in the capital, Beijing.

Understanding the criticality of the current situation, the authorities introduced a number of measures designed to reduce emissions into the ground and atmosphere. In order to reduce the use of coal in industry, a multi-billion dollar gas contract was concluded with Russia. The government has introduced the death penalty for environmental crimes . But hundreds of thousands of factories across the country continue to operate, and at the same time, air, land and water pollution continues. We will find out in a couple of decades what this will lead to.

Equipment for own production

To start your own product manufacturing company, you need machines and other technical equipment. The big advantage of such equipment is its price. It is much smaller than its European or Japanese counterparts. However, Chinese factory machinery can also be expensive.

There are 3 price ranges:

1. Low price range. Well suited for small businesses with small production in China. The service life is up to 2 years, then the equipment must be repaired. After this, the machines can be put into operation again. The main advantage is the short payback period.
2. Average price range. High-quality equipment that can produce metal products. Most likely it will work for more than 10 years. Does not require periodic repair of individual components.
3. High price range. This technology can compete with its foreign counterparts. It has a long service life and the ability to create complex technical devices.

When purchasing equipment, an entrepreneur must carefully study the equipment offered, since many sellers pass off low-quality equipment as expensive devices. Purchasing should take place directly only from well-known brands.

Chinese equipment on the Russian market