Until recently, business globalization/integration (the expansion of business operations and or marketing to different countries around the world) has been undertaken by primarily large corporations. With international growth and the surviving urgencies after the 2008 financial tsunami, small and medium size businesses are slowly moving in this direction. China has been the number one destination for foreign business, with good reason. But along with this good has come many challenges. As a result, new trends are ensuing in the Pacific Rim.
Advantages of doing business in China:
- Stable central government aiming for continuous economic growth.
- Little effort required to obtain land for new infrastructures or improvements.
- Mandatory and far-reaching nine-year education program produces high quality workforce.
- Extremely competitive college entrance system generates good engineers, managerial staff and government officials.
- Strong and stable currency.
Challenges of doing business in China:
- Little advance notice on changes in laws.
- Little or no administrative and or regulatory transparency.
- Questionable judiciary independence.
- Enforcement of the laws often times at discretion of the officials.
- Discriminatory treatment regarding market access for foreign owned enterprises.
- Weak intellectual property rights protections.
- Confusing laws and regulations.
- Rising labor costs along the Chinese coastal cities are forcing China’s manufacturers to raise product values or move inland, resulting in high start-up costs.
- Many of China’s manufactures are tired of being contract manufacturers (OEM) because of low margins and market controls. They would prefer to partially control U.S. distribution channels or create their own brand names.
- While China will continue to grow at an estimated 10% per annum in the next few years, three other members of the Pacific Rim (Taiwan, Hong Kong, and Singapore) are becoming key players in the Chinese economy, resulting in abundant capital sources. These countries, along with China, control 35% of the world foreign exchange reserves.
- Taiwan is becoming a major player in the international market, providing foreign companies with incentives such as lower corporate income tax, IP protection, favorable government policies, and reasonable listing costs. It is also the largest investing country in China.
Contact Ted Hong at 972-818-5300 or fill in the form below.
Ted Hong joined Goldin, Peiser & Peiser in 2007 and is the firm’s primary resource in handling inbound and outbound tax implications for U.S. companies that do business with Asia. He also specializes in the various business aspects of litigation support, forensic accounting and mergers & acquisitions. Hong is a graduate of the National Taiwan University, where he earned a Bachelor of Science degree in Industrial Management and attended Graduate School of Business at the University of Chicago. He currently holds a Board of Director position with the Taiwanese Chamber of Commerce of Dallas/Fort Worth and the Asian American Forum.