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Potential disadvantages to doing business in China

On Behalf of | Feb 1, 2018 | Blog

China is among the most populated countries in the whole world which makes it one of the largest markets globally. Its move from being an export-oriented powerhouse makes China the most preferred business destination for all companies looking to expand abroad. Its economy has grown rapidly over the past decade.

With many Chinese consumers regarding western brands as of high quality and convenience, more US companies are looking at ways of establishing a successful business in China. However, this can come with its fair share of problems. Below are some of the disadvantages of doing business in China.

Intellectual Property

Intellectual property rights have always been a major issue in China although some recent reports indicate that the country is improving. A survey by the United States-China Business Council indicated that most of the products manufactured in China are limited to other markets since intellectual property rules are mostly unenforced.

In fact, most companies in this country feel like the Chinese government lacks a precise understanding of the importance of protecting trade secrets. Another study conducted by Deloitte showed that most of the foreign companies are always reluctant to form critical technology-sharing partnerships with Chinese companies out of the fear that these local Chinese companies will fail to honor the agreements once they receive the technology.

Skilled Labor

The issue of the skilled workforce remains a major hurdle for companies looking forward to setting up their businesses in China. The demand for professional experts still outnumbers the supply. Most of the companies are finding it difficult to hold on to some of their best staff as some job changes here mean a salary increase of up to 40%.

Rising Costs

The cost of land and human resources has always been cheap in China compared to its neighbors. However, this is no longer the case, especially in major Chinese cities. The demand for qualified and skilled workforce has increased which means that a lot of companies are now left to compete for the best available talent.

To survive, companies are now forced to increase the salaries of their valued employees. Although most businesses here still report good profits, the rising cost of materials and land could soon have a negative impact on company revenues.

Lack of Transparency

Firms are still struggling with unfavorable laws and regulations in China with bureaucracy being top on the list. Furthermore, laws and regulations aren’t published, and it is still difficult to access the various state regulations. This lack of transparency makes foreign companies believe that they are being targeted and treated unfairly.

However, hiring a lawyer can help you succeed in doing business in China. A good lawyer will provide vital help in almost every aspect of your business from formal business incorporation to crucial copyright, intellectual property, and trademark advice. An attorney will come in handy if you’re looking forward to setting up a business in China.