Header graphic for print
China Law Blog China Law for Business

China Is Getting Tougher On Foreign Business. Stay Flexible And It Will Be Just Fine…

Posted in China Business

One of the themes of this blog for years has been that China is making things tougher for foreign businesses by increasing the strength of its business laws and by stepping up its enforcement of them against foreign companies.  We hear that the same thing is happening to Chinese domestic companies, but starting from a much lower base.

But virtually whenever we write about this, someone leaves a comment or emails us to say that we are making this up to scare people.

The American Chamber of Commerce in China recently came out with a survey of its members and hidden and far more publicized fact that 78% of the respondents said they had been hacked was that only 28 percent of respondents view China’s investment environment as improving, down from 43 percent just last year.  In other words, China is getting tougher on foreign businesses doing business in China. Running a foreign business in China has never been easy, but it has in the last few years gotten even harder still.

So what can or should you do?  One, consider whether it makes sense to move some (or in very rare cases) all of your operations somewhere else.  In the last two years, we have experienced an uptick in our clients expanding beyond China (Vietnam and Thailand and returning home have been especially popular lately) or at least considering doing so.  Two, consider not entering China at all by way of actually setting up shop to do business there.  At least think about how you can profit from China’s growth without having to set up and operate a Joint Venture or a WFOE there.  Selling into China via a distributorship relationship or a licensing deal are just two obvious ways that have grown rapidly in popularity over the last couple of years.  For more on these two methods of “entering” China, check out the following:

What are you seeing out there?  Do you think the AmCham results reflect reality?

  • Mark

    To be honest, I’m not seeing what you are seeing for the markets in which we focus. Yes, the regulatory environment is becoming a bit more stringent but not insurmountable and on a par with other countries. I certainly could see a manufacturing company up-root and move somewhere else (Thailand or Vietnam) but for many (most?) companies, this would be ridiculous. Also, doing a distributorship or licensing deal without being here in China isn’t at all practical for many vertical markets.

    I was a member of AmCham for several years in Beijing (way too expensive for what you get in return, IMO) and I can tell you I never received any surveys they sent out. I know several ex-pat existing members and they say the same thing. I view their surveys as being severely and take their results with a grain of salt but I don’t think it is reflective of the opinions of the ex-pat management community here if, for no other reason, than their survey methods are deeply flawed. Most ex-pat executive managers here aren’t even members of AmCham. Just something to consider.

  • Whitney Clark

    How many people were surveyed and what percentage of them responded? If the response rate is something like 20%, then these results don’t really mean anything. Anyone with experience in China knows how much some ex-pats love to complain. Chances are they will still be here this time next year, saying the same thing in the same publication.

  • Eric Meng

    On the subject of selling in China without having a legal entity here, I have been seeing a boom in “sales outsourcers,” “sales incubators,” and other entities that find different ways to sell U.S. products tin China indirectly, whether through having a dedicated salesperson for each client company or selling through Taobao or a specialized website.