Having recently opened an office in Shanghai, it’s fair to say that there has certainly been a steep learning curve to establish ourselves in a market with such a different business culture. For anyone thinking of opening up in China, here are the lessons I’ve learned along the way…..
1. Getting Established
Because of government regulations, operating in China has to be done officially. The first problem businesses often encounter is finding out exactly how to go down the official route. Gold-i joined the China-Britain Business Council (CBBC) and met a number of people who gave us really good advice.
We were advised to set up as a WFOE – Wholly Foreign Owned Enterprise – in which you can operate a business in China and repatriate some of the profit .The process is quite complex, involving about 40 different steps, and it would have been impossible for us to navigate it successfully without a local expert to help.
we have had to pay for office space which has been completely unused for almost a year
It takes about six or seven months from when you first submit your documentation until you are granted your WOFE status, although you do get notified of initial approval after about three months. The frustrating thing is that you can’t start recruiting people until the end of the process.
You also need to have physical office space from the start of the process. It’s taken us almost a year from the start of the process to being completely ready to open for business, with fully trained staff in place. Unfortunately, to comply with all requirements, we have had to pay for office space which has been completely unused for almost a year. This is unavoidable and certainly worth being aware of from the start.
2. Find Reliable Local Agents to Help
Everything seems to be a challenge – from how to market yourself to how to get simple things such as phones or the internet – so you need to find reliable local agents to help. It can also be a challenge to find the right agents. How do you know who to trust? Who is going to advise you properly? We found an excellent agent who introduced us to other useful contacts.
ATFX Institutional Business Continues to Expand: Adding a New Prime BrokerGo to article >>
3. Have Servers in China
Don’t underestimate how difficult it is to get through The Great Firewall of China. It would be impossible to operate without local servers inside this firewall.
4. Speak the Local Language
We have come across so many people who don’t speak any English and we would not be able to grow in China without a team of local speakers. This is absolutely critical to future business success in the region.
5. Ask for Up Front Payment
Getting paid can be very difficult. Always ask for upfront payment as the default seems to be not to pay. It’s worth knowing that everything happens quite slowly in business – even things like banking or ordering goods. International payments can take about one week and internal payments often take 4 to 5 days.
It’s no use ‘making noise’ to try to speed up the processes. It won’t make any difference.
6. Always observe the local business etiquette
Be aware of the many local business customs – for example, if you are given a business card you must receive it with both hands, look at it and appreciate it in front of the person who has given it to you and then put it in your top pocket. Putting a business card in a trouser pocket is considered to be very rude. It has to be placed in a pocket in the top half of your body.
In general, the process of operating in China is far more personal than I had previously realised. For example, contracts are rarely signed electronically. People meet at your office to sign contracts in person – and this in itself highlights the importance of having a physical presence in China.
The B2B retail FX market is at an early stage of development but there are huge opportunities. It is similar to Europe or the USA ten years ago. At the moment there are very few industry specific business to business forums, events or websites, which makes it difficult for brokers to find software vendors and vice versa. However, this will change.
The Chinese are very entrepreneurial and are keen to do business, enter new markets and access the latest technology. There is huge potential for companies with appropriate products, the right approach and strong local language capabilities. We are excited about the opportunities ahead.