A business plan in China may sound so easy but it is actually a lot more complicated compared to other trade markets. The Chinese rules and regulations take its toll on commerce making it more complex for businesses caught in its web. A lot of businesses are discouraged by this factor, but it is important to understand business in China is not difficult, it is just a little different. Here are a few things I can suggest when it comes to selling certain products in China.
How to Sell Your Medical Products to China
China’s National Health and Planning Commission (NHPC) published a new policy this week stating the purchase of any products or services must be denominated in RMB and the purchase must be made from a Chinese company.
If you force the hospital to pay in dollars for a direct purchase from a foreign manufacturing company, you are not likely to succeed in selling your product or your services to a Chinese government owned hospital. Here are the following levels of “local” for making a sale in China, starting with the least local:
- No China presence.
- Your company is in the United States, but it has a China distributor or sales agent that imports the product into China and then sells it to the Chinese hospital in RMB.
- You form a China joint venture and that company sells your U.S. made products to China’s hospitals.
- You form a China WFOE and that company sells your U.S. made products to China’s hospitals.
- You form a China WFOE and that company uses a domestic Chinese distributor or sales agent to sell your product to China’s hospitals.
- You form a China WFOE and that company actually makes your medical products and sells to China’s hospitals.
- You form a China WFOE and that company actually makes your medical products and uses a Chinese distributor or sales agent to sell your product to China’s hospitals.
- You form a China joint venture and that company actually makes your medical products and sells them to China’s hospitals.
- You form a China joint venture and that company actually makes your medical products and uses a Chinese distributor or sales agent to sell your product to China’s hospitals.
- You license the contract manufacturing of your product to a Chinese manufacturing company
How to Import Wine into China
In this business you must do your homework first to understand the intricacies involved in importing wine — from wine sourcing, to manufacturing cost, to shipping and warehousing, to marketing, product pricing and selling. Therefore, there are 6 factors to follow:
- Budgeting: Make sure you have sufficient working capital available, so you don’t get caught in a bind wondering, “Where did my money go?”
- Product Pricing: Importers expect 35 percent to 40 percent markup, wholesalers add another 35 percent to 40 percent markup and retailers add another 40 percent to 50 percent markup.
- Logistics: Make sure packaging design is strong and protective.
- Distribution: Make sure to understand what a good distributor needs before you enter into any agreement, set expectations at the outset, communicate often and support them.
- Licenses: Consult with the Alcohol Beverage Control Board-United States, Canada and Mexico, among others.
- Regulatory Issues: Importing wine is a gray area for a lot of folks, thus, each wine you import needs a Certificate of Label (COLA) approval indicating the name of the wine, copy of the front and back of label, alcohol content, sulfite declaration and health warning statement, among others.
What Every Business Should Understand about E-commerce in China
Trade and commerce no longer must be traditional but remains as an option for all of us doing business in China. Like how we import wine or sell medical products or any form of goods in China; traditional trade and commerce is still the most logical thing to do. However, due to the rise of e-commerce globally, it is now practical to direct an e-commerce business plan and this holds true for the wine industry, medical product manufacturing companies, technology companies, fast food chains and any other businesses.
E-commerce in China is also a bit different much like how doing business in there has always been. Domestic consumption and investment is a major theme of the current Chinese administration; e-commerce has been one way to do that. While the government is actively promoting private corporations, it is taking a “hands on” approach to market development. The caveat is this: the government is looking to build a Chinese owned e-commerce sector — not one dominated by companies financed abroad.
Investors such as Yahoo will be hurt, while Alibaba (and its subsidiaries) will thrive. One clear understanding is that the Chinese government will provide funding for mergers and acquisitions. By doing so, this will be a quick way to develop the technology for a fully functioning e-commerce market. This will mean these companies must adhere by international standards — particularly for good business practices such as IPR enforcement.
Why is developing it so important? Think about these facts, China has an internet marketplace of more than half a billion users about 35% of all users worldwide. Currently, sites like Taobao and JingDong dominate the market, but are owned by the same company—Alibaba. Alibaba.com and Taobao have more than 700 million users worldwide.
While many legitimate vendors operate and sell products online, a simple search of Bing or Baidu will pull up several counterfeit goods (brand names are often translated into Chinese.). Developing proper payment mechanisms both safeguards against these sorts of issues and adds legal repercussions to those who violate them.
On such websites, one will often see vendors unassociated with the official company, have multiple products with large price discrepancies, or provide second hand goods—none of which benefit the end consumer nor the business.
From the business owner side, getting these counterfeit goods can be difficult as the intellectual property rights software is in Chinese. Beyond that, a trademark or copyright registration and some supporting business documents (in digital format) will suffice. Alibaba group is craving the internationalization of an Amazon or eBay and is willing to enforce its anti-counterfeit measures; this strategy will take time and will only become effective after the government enacts more stringent IPR protection.
Filing a trademark according to the Madrid protocol (and Paris convention) gives some precedent but requires a business to file within 6 months of the original filing. Since many businesses file trademarks early (i.e. before expanding to China), they forgo this opportunity; their only remedy is filing in China which takes about 18 months and is a first-to-file system. Such a system provides a disincentive to use the mark.
Setting up an E-commerce website for your business is definitely the way to go if you want to thrive and succeed as a China-based business.