Entering Chinese Markets — Set up a Branch or Find a Local Distributor

Andreas Karasamanis: My client wants to set up a warehouse in China to distribute his products to the Chinese market. Please share your thoughts if it is best to set up a branch, subsidiary or find a local distributor?

Kevin Wu: Andreas:

1. Have distributor(s) warehouse for you during the early stage.
2. Set up a liason office to protect your own interests.
3. Set up a branch or subsidiary 3 – 5 years later.

Christopher Devonshire-Ellis:

Andreas, you need to be aware of a number of factors:
1) The nature of the product to be imported and whether any additional licenses are required to do this;
2) The dutiable amounts to be levied;
3) Whether any special storage conditions are required;
4) Issues over whether or not your client wishes to claim back VAT paid in China;
5) Whether he wants to develop his own supply chain in China;
If the imported items are in a small amount, its better to find a local distributor, if the business is expected to be significant he may wish to consider investing in his own facility.

Tian Meng: Dear Andreas.
I would like to make some commend for your client which, I hope, can be help you and your client make strategic developing plan.
1.Marketing research
In accordance with the nature of goods, marketing research should be conducted at the very beginning Firstly I assume your client’s products is consumer goods, something like palm oil or wine(industrial products should be taken another way for the research).
Chinese region is very vast, Traditionally has divided several Sales areas ,such as North China, south China, northwest and northeast China etc in which consumption level and custom are different. You shall choose some major cities for the research, generally 5 bigger cities, such as Beijing, Tianjin, Shanghai Guangzhou and Shenyang which are the distribution centre of their region. .
Compare your product with the same or similar products in the market that from abroad and that made in China .so you may come to a conclusion and know The sales quantities of the goods , general Price level, the main object of consumption. All of these are the principle to make your goods price. And evaluate your future profits. Anyway, you may find your potential distribution partners during the process of marketing research.
2 Profit budget.
Scale of investment includes the value of the goods to the Chinese market, the cost of establishing sales company, operating costs, promotion expenses…
3. Warehouse
Considering the tariff if the value of the goods is very high, or may need a certain time to be sold out, you may need store the goods in Bonded Warehouse. If not, the goods can be put in General warehouse after pay the customs’ duty.
If you not only put your eye on the Chinese market but also distribute your goods to Southeast Asian countries you should hire bonded warehouse for transportation
4. Package
Considering to reduce the cost, the goods can be delivered in large bulk and sub packaged in bonded warehouse or general warehouse.
One of the stipulation that Chinese authorities have set is any goods sold in China market should have Chinese printed in package , printing the package in China is a fine choice.

5.Set up representative office
If you find proper agents and distributers in China, the business is very simple, setting up a representative office, the main task is responsible to making promotion and collecting marketing monthly reports from distributors and sign contact with them on behalf of your client’s head office, but you have not power of business operation, and not easy to control the market.
Establish your client only company in China is the better way to sell the goods, because you are granted by authorities concerned to operate your business in China.
The company should be located in a big city near the harbor, which is convenient for shipment and rent bonded warehouse if necessary.
As for tax, there are so many investors handling their business in China and get goods profits. It is not a big question to consider of your whole plan.
You can get the Tax rules from Website; if necessary I can send you some relevant tax documents.
The above is only my rough idea, I can not make a specific suggestion because of not knowing the goods that your client dealing with.

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