Mutual Fund Primer

China, you, me and business

China is a growing business market. If you are in any business you should look ways to expand to chinese market. Here are some tips

You might think that the recent outpouring of negative publicity with respect to China would have led to a marked decrease of companies looking to expand their business with the help of the permissive political and economical climate of that country. Interestingly, just the opposite appears to be case! In spite of parental outcries and consumer grumbling, larger as well as home based businesses wanting to make it with the big times are scrambling to file their paperwork and get their business relationship with China cemented. You might say that they are hoping to beat out the competition or conversely benefit from those businesses who fear the negative publicity and perhaps will choose to pull out of the Chinese market in favor of reestablishing themselves in the United States or exploring Third World countries, where labor costs are just as cheap and governmental red tape can be circumnavigated with a bit of palm grease.

There is no doubt that China’s economy will not only survive the recall related backlash but as a matter of fact it will most likely flourish! This creates a new middle class which is hungering for the goods and services American consumers are taking for granted but which until recently were considered luxuries in China – quite often unattainable to the average citizen. Especially the younger consumers are clamoring for the products American companies offer, and while businesses are relocating their manufacturing facilities offshore, they also have found that saving money on import tariffs by simply selling some if not all of the products being manufactured in that country to its citizens is indeed a profitable venture.

If you believe you are ready to take your business across the ocean and to China, do your homework prior to your move! As a small company you will have the advantage of being able to move quickly without having to wait for shareholder approval and proxy votes to be counted, and in addition to this advantage you will also enjoy the lack of governmental regulations with which American laws protect the workers and also the environment, but in spite of this seeming free for all you will be subject to extreme scrutiny when it comes to the tax obligations your company will have. While the United States’ IRS is known for its tenacity, they could still learn some lessons from their Chinese counterparts which are virtually ruthless in their efforts to collect business taxes due to them.

You will be wise to understand the tax codes, the expectations that the Chinese government will have of you, and also the little quirks of the law that have caused many a business to vastly overpay their tax debts. Add to this the need to become well versed with local laws and regulations as well as the regional interpretations thereof, and you can understand why so many American companies choose to find a Chinese partner who will handle this aspect of the business. Even as China is a budding business’ best friend, there is the possibility that the last little quirk might throw a monkey wrench into your business planes if you are unaware of the need for local assistance.