Many businesses look to licensing deals with Chinese companies as a low-cost way to enter the Asian market. However, while an agreement to license your product in China can provide many benefits there are a few important differences between the U.S. and China that come into play.
The market in China is too big for American businesses to ignore. Despite pessimistic assessments, there are signs that America and China are resolving business issues.
While there’s been discussion regarding intellectual property and forced technology transfers in China, these may not be American businesses primary concern. The most important concern may be more basic than that.
After months of interruptions in trade talks between the United States and China, President Trump announced that there had been “substantial progress.” Such progress will lead to the U.S. postponing implementation of higher tariffs.
Many American companies create joint ventures in order to expand their market and lessen the risks that they face. Yet efforts by American companies to form joint ventures in China have often been problematic.
Many businesses have concerns about operational costs and regulatory scrutiny when doing business. This is not unique to doing business in any particular location. And while there are obstacles to doing business in China, there are also many reasons for why businesses wish to relocate there.
We have spoken many times about Chinese efforts to introduce legislation that provides greater protections for foreign businesses. However, there continues to be debate regarding the effectiveness of legislative efforts.
China has the power to control and even hamper business conducted by American companies. According to one news post, China has vamped up its regulations. They have also increased surprise inspections concerning American businesses. This is motivating American legislators to act.
With talks of trade wars between the U.S. and China, conducting business in China is becoming more difficult for American companies. This is in great part due to the Chinese government implementing tougher regulations. Chinese officials are also more likely to reject shipments after surprise inspections.
There are indications that Chinese officials may provide incentives for start-up companies doing business in their country. This is certainly true in the tech industry.