DOING BUSINESS IN CHINA

UNDERSTANDING EMERGING MARKETS I I

T E R M I I / P R O J E C T
P G D M [ 2 0 1 3 1 5 ]

ADMINISTRATIVE LICENSING
&
DIFFICULTIES GAINING BUSINESS LICENSES
&
PRODUCT APPROVALS

BY:
R I S H I R A J
[ D M 1 5 1 4 1 ]


P a g e | 2


GREAT LAKES INSTITUTE OF MANAGEMENT | CHENNAI

CONTENTS
S.NO. TITLE PAGE NO.
I INTRODUCTION 3
II DOMESTIC SALES RIGHT 5
(i) IMPORTATION VIA DISTRIBUTORS 6

(ii) JOINT VENTURE - PARTIAL ASSEMBLY /
MANUFACTURING
7
III MARKETING BY THE NUMBERS 7
IV PRODUCT SELECTION 8
V DISTRIBUTION CHANNELS 8
VI TREATMENT 8
VII REFERENCES 8











ADMINISTRATIVE LICENSING AND DIFFICULTIES
GAINING BUSINESS LICENSES & PRODUCT
APPROVALS
I. INTRODUCTION
The just about endless licensing and
approval method remains a relentless
challenge in China. Companys
international business models area
unit in gear toward leverage Chinas
market scale, however their ability to
implement those plans is hindered by
functionary barriers to growth and
work burdens for continued
operation.
Administrative licensing, that refers
to the array of licenses and
government approvals needed to try
and do business in China, is one in
every of the foremost complicated
challenges to handle.
FI G. 1: THE ORAGNI SATI ON FACED
PROBLMES & DI SCRI MI NATI ON


According to a survey seventieth of
business doers indicated that they had
veteran challenges with licensing in
China. The foremost frequent issues
area unit in obtaining approval for
product to be oversubscribed within
the market, increasing operations,
and securing approvals of foreign
investments a lot of usually (Fig.1, 2).
These issues area unit occurring not
solely at the central government
level, however additionally at the
provincial and municipal levels.



FI G. 2: TYPES OF PROBLEMS FACED


P a g e | 4


GREAT LAKES INSTITUTE OF MANAGEMENT | CHENNAI


FI G. 3: SI GNS OF PROTECTI ONI SM
Major Challenges can be said of as:
- Uneven Enforcement or
Implementation of Chinese
Laws and Regulations
&
- Non-discrimination/National
Treatment
These challenges are closely
connected and modify however
foreign and foreign-invested firms
are treated in China versus their
domestic competitors. In essence, the
principles and rules aren't applied
systematically or equitably in China,
and that foreign firms typically aren't
treated constant as Chinese firms
with reference to regulation and
implementation.
Companies report seeing signs of
economic policy in a very kind of
areas, as well as licensing and
restrictive approvals, tighter social
control of rules against foreign firms,
government pressure to shop for
product and services from Chinese
firms and direct advantages like
direct subsidies, denotative finance
and higher ability to sell product to
the government (Fig.3)

There area unit several changes
Chinese regulators will create to
unravel the issues created by
uneven social control and unequal
treatment. In its 2013 Statement of
Priorities, 2 vital actions were
recommended:
- Ensuring equal treatment in
licensing for all firms operational in
China no matter possession.
&
- Ensuring equal treatment in
government procurance for all legal
entities in China, no matter possession.
Marketing to the general
public Republic of China isn't
any walk in the park. It needs gaining
contacts in each business and business.
Government permits and
approvals will convince be a
very time overwhelming and
frustrating task.

II. DOMESTIC SALES
RIGHTS
To market merchandise or services
within the Public Republic of China,
one should get approval for Domestic
Sales rights from the govt. bureau that
oversees their product or trade.
Typically times this is often a fancy,
and time overwhelming task.
For a remote company to sell in to the
general public Republic of China, one
should get AN import sticker. This
sticker could be a tiny, round,
holographic sticker that once gaining
government approval to sell their
merchandise or service in country.
The Public Republic of China is much
a lot of seemingly to permit your
merchandise into their market if the
domestic market doesn't give the
merchandise or if it's an engineering
product. Correspondingly, ought to
one conceive to enter the market via
AN assembly operation, engineering
merchandise and tiny domestic
production will increase the chance of
ones manufactory gaining domestic
sales rights.
Gaining actual Domestic Sales rights
is commonly a ballroom dancing
method. In fixing a producing
operation, one might fairly simply get
approval and verbal guarantees or
assurances. Ones business license
P a g e | 6


GREAT LAKES INSTITUTE OF MANAGEMENT | CHENNAI
might also quite simply be approved
with provisions for an explicit share
(usually 20 to 50%) of the output to be
oversubscribed domestically. truly,
this is often solely the primary and best
step within the method. The second
step is to achieve approval to promote
a selected product (product by
product).
A wholly in hand foreign enterprise
(WOFE) can sometimes have an
especially tough time in gaining this
approval to promote domestically. The
Chinese government clearly wishes
foreign companies to enter into
venture agreement with a
neighbourhood Chinese partner.
A venture (JV) is that the common
route for smoothing the approach for
domestic sales rights. Coming into a
venture can, of course, return at a
worth. Joint ventures may be
established in an exceedingly variety
of various ways that. The percentage
of possession by the native partner
may vary considerably. Impatience in
cutting the deal, can solely lead to
terms less favourable to the party.
Chinese businessperson area unit
cognizant of the impatience of outdoor
businessmen. Theyre going to not
hesitate to require advantage of this
weakness. One has to exercise
voluminous patience to extract the
simplest deal.
The venture will take several forms. A
partner is also the simplest for your
operations. Be artistic if want be. One
is also ready to cut a deal wherever the
someone could be a partner. In
exchange, one will guarantee the
partner a collection come despite the
gain of your endeavour. This typically
times works well in an exceedingly
producing state of affairs wherever the
transfer costs area unit set
comparatively low and should not
otherwise provide the someone a
suitable come.
Without domestic sales rights one
cannot sell your product inside China,
notwithstanding they manufacture in
China. Of necessary note, one cannot
even sell from one in every of their
subsidiaries (separate legal entities) to
a different.

I MPORTATI ON VI A DI STRI BUTORS
One avenue for commercialism
product is to self your product to a
Chinese distributors in a very location
P a g e | 7


GREAT LAKES INSTITUTE OF MANAGEMENT | CHENNAI
outside of China. The distributor then
moves the merchandise into the
domestic market. The distributor then
faces an equivalent difficulties in
importation, however it's on the far
side the purpose of your sale. Clearly
this has several, several implications,
is at a big value (lower revenue), and
sometimes works in just little
quantities. We have a tendency to don't
suggest this approach.
J OI NT VENTURE-PARTI AL
ASSEMBLY / MANUFACTURI NG
In this choice, you enter a venture with
a Chinese company and perform a
minor quantity of producing. It offers
a number of the advantages of
producing in country and a few of the
advantages of a venture. Its a hybrid
choice that will add many cases.
III. MARKETING BY THE
NUMBERS
Never not get fixed within the numbers
pool of Chinas population. Yes, it can
be a really sizable market base for the
merchandise. However it's very vital to
essentially perceive the market size,
wherever the client base are going to
be, a way to bring the merchandise to
plug, and at what value.
One might argue that research is even
a lot of vital to assure sell through of
their product. One should additionally
detain mind that the first goals of the
Chinese government is to higher
themselves and their country and folks.
Therefore, they'll encourage ones
producing and assembly investments
that bring jobs and tax revenues,
however it's their robust need to stay
domestic sales to native enterprises
wherever potential. The market isn't
open and therefore the government
sets, and often changes the principles
The nature of this market base is totally
different than alternative countries.
One cannot use ratios from alternative
countries in decisive market potential.
The magnitude relation of cars per
person is additionally one among the
lower ones within the world, albeit that
range is currently increasing.
Additionally the combo of cars is way
totally different. From a proportion,
there are higher priced vehicle and
limousines. This can be as a result of
the common person doesn't own a
vehicle.

P a g e | 8


GREAT LAKES INSTITUTE OF MANAGEMENT | CHENNAI
IV. PRODUCT SELECTION
Market research efforts ought to
completely examine the market
potential for ones line of products.
Price, quality and wish all play a vital
role. Some newcomers to the market
believe the poor quality image of
Chinese product and therefore the lack
of shopper wealth interprets to sales of
low price, calibre product. Not so.
Throughout one exhibition at China,
showing native promoting workers one
in every of the low price product that
were near to assemble in China and get
Domestic Sales rights. The promoting
personnel aforesaid no approach
wouldn't it sell within the country. The
majority WHO had cash to shop for
that product didn't wish one thing low
cost like that. They wished quality and
a definite level of options, saying a
number of the mid-range models
offered because the presumably
candidates for the domestic market.
In addition, Chinese shoppers with a
bit cash to pay are whole and style
aware. Confine mind their purchase
statements don't seem to be cars and
houses within the suburbs. Simply
strolling down one in every of the
foremost streets within the largest
cities and one can realize international
shops and world notable whole names.
Once visiting abroad, a Chinese
visitant can invariably buy designer
brands which might carry 100% tariff
rates into China.
V. DISTRIBUTION
CHANNELS
One can possibly got to acquire a
neighbourhood distributor for his or
her merchandise. Caution ought to be
wont to assure that the native
distributor has the capabilities that
they're promising. Somewhat due
diligence here can assure one to own a
top quality distributor with the
regional or national channels to the
selling shops that one is targeting at.
VI. TREATMENT

Ensuring equal treatment in licensing
for all corporations no matter
possession.
Strengthening implementation of the
executive Licensing Law.
Further rising rule-making
transparency.
VII. REFERENCES
www.uschina.org/reports

www.chinaunique.com/business

www.chinabusinessreview.com