Hong Kong

Category Archive Hong Kong

Once in China, Do as the Chinese Do

 

Considering the dramatic cultural differences from the West, doing business in China can be difficult.  How well you adapt to the deeply rooted Chinese customs will profoundly influence the success of your business.

In China, cultural competence takes time. Business culture is very traditional, involving behaviors and beliefs that date back over 5000 years. That said, having a local representative who clearly understands both sides is crucial.

 

You will quickly learn:

Guanxi is everything. Defined as the connections and relationships which facilitate business and commerce, this is the most critical aspect of Chinese business culture. Cultivating strong relationships is the first step towards any Chinese market.  To properly establish Guanxi, awareness of and compliance with the following aspects of Chinese business culture should be the primary focus of all companies.

 

1. Basic Communication

In China, even at the most fundamental level, we find a tone language entirely different from common western dialects. Having someone able to communicate in a native Chinese tongue will be favored and seen as a sign of respect.

Clear communication by your host country’s standards may translate rudely in China. While the individualistic mindset of Western business fosters the idea of speaking up, of using as many words necessary to communicate one’s point, China business culture favors extreme modesty.

Furthermore, there are considerable differences in both verbal and non-verbal communication.

To name a few:
• Greetings and pleasantries differ
• Chinese names are reversed compared to western names
• Eye-contact is not necessarily a sign of respect
• Casual talk is a necessary precursor to business

2. Collectivist Culture

Westerners often view themselves as highly independent entities, whereas in China, an interdependent mindset is essential. China’s workforce is built on discipline and corporation, where the group always takes priority over the individual.

To showcase one’s commitment to the bigger picture, one is expected to act in a calm collective manner at all times. They should listen with intent and always be heedful to the needs of others.

3. Hierarchal Society

In China, hierarchy holds true, and status is power. Seniority must always be respected.

Especially in the decision-making process, seniority dictates authority and patience is pivotal. Decisions made with haste will be seen as insulting. Even simple matters are expected to be processed by multiple people until eventually, the manager with the highest status decides on a verdict.

4. Saving Face or giving face, especially in the midst of conflict

The concept of face, or miànzi, is an essential abstract notion that governs all social interaction in Chinese culture.

Extreme emphasis is placed on harmony and public dignity. People are expected to further these values by “giving face” or “saving face.”

To give or save face, extensive etiquette must be applied to all interactions. Composure is key. Limit expression to what is appropriate, and continuously consult a trusted Chinese representative on how to behave.

Especially in the midst of conflict, the art of “face” is vital. No matter the issue, maintaining face will always be the most pressing concern. You will find, negotiations often preserve harmony, and consequently save face, by implicitly working around a conflict, as opposed to confronting it straight on.

Such diversity may be overwhelming at first, but with patience and the right representatives, this highly educated, highly capable business atmosphere will generate authentic and successful long-term foundations.

“The time is now. Be part of the process as China becomes tomorrow’s economic powerhouse.”

 

 

Know more: How Important Is To Have Local Representatives In China?

Ready to expand your business and break into China’s upcoming markets? Call now for a consultation with an IncorpChina team member, and establish your most important relationship in China success.

+1 561 729 6508 | info@incorpchina.com

#chinesebusiness #chineseculture #whychina #chineseindustry 

 

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The Transformational Trend: Why China is the place to be and how to start your business there

Why bring your business to China?

The future of China’s economy has never looked this bright. With a thriving middle class, a new wide-spread consumerist approach to spending, and increasing liberalization, China is now home to a wide variety of promising untapped markets.

Since the late 1980s and 1990s, China’s economy has been executing significant reform to the state-owned industry. Upon the passage of The Company Law in 1993, limited liability companies were approved, and firms were able to retain a share of their profits. As a result, private ownership increased rapidly. By 2005 it accounted for about 70% of China’s gross domestic product.

Among reforms, China established an unprecedented manufacturing presence as a result of highly competitive pricing and sheer production power. After dominating our global economy as the world’s largest exporter of goods since 2009, China’s focus now shifts from expansion to stability, that is back to service and consumption.

Amidst all this economic activity, China’s middle class has boomed. With a current urban population of around 800 million people, that is only going to grow, 54% percent are expected to be the upper-middle class by 2022.
Take a look:

China’s Middle Class as Percent of Urban Households, doing business in china

At this point, the economy’s growth has slowed. However, China is still ahead of their goal to double GDP between 2010 and 2020 and more industries are open to investment than ever before.
See below China’s GDP yearly growth since 2008 and China’s GDP annual growth rate over the last four years, respectively:

 

 

 

 

 

Even with a declining growth rate, China’s economy is still expanding at a rate three times higher than that of the US.

This is merely the start of China’s rebalancing. Economic prosperity is spreading as wages rise and workers demand better treatment. Furthermore, the quality of life is improving thanks to upgrades in transportation, health standards, and a wealth of technological advancements.

Increased opportunity and success is leading to higher disposable incomes and ideal target markets as the new Chinese consumer emerges, ready to spend. See below China’s consumer spending trend over the last ten years:

 

 

What is driving the Chinese consumer? Markets dealing with luxury items and services are bursting with opportunity and demand.

Interest continues to increase in:
• technological products
• luxury brands
• cosmetics
• nutritional care
• trendy foods
• high-quality goods
• entertainment
• travel

Get specific: See why Hong Kong is a great place to start

“The time is now. Be part of the process as China becomes tomorrow’s economic powerhouse.”
Ready to expand your business and break into China’s upcoming markets? Call now for a consultation with an IncorpChina team member, and establish your most important relationship in China success. +1 561 729 6508 | info@incorpchina.com
#chinesebusiness #chineseculture #whychina #chineseindustry #RO #JV #WOFE #chineseeconomy #GDP #thenewconsumer #culturaldifferences #chinesemarket #economictrends #AIC

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7 benefits from opening up a company in Hong Kong




Besides being a prestigious business address, Hong Kong has a variety of benefits to offer for those who are looking to or already own a company in China. Ranging from financial over legislative to cultural reasons. Below are your top 7 benefits from opening up a company in Hong Kong together with a WOFE in Mainland China.

 

  1. Tax benefits

While you are expecting to pay 25% income tax on your profits in China, with a Hong Kong company under your name you are able to send said funds across the border for a 5% transfer fee. This method can save you a considerable amount of money, especially considering that funds can be transferred between China and Hong Kong companies without currency controls. What that means is, when sending money from China abroad, usually, there are extremely high fees in place as well as a maximum amount of money that can leave the country per person or company per year.

Additionally, Hong Kong operates under a territorial tax regime. This means that there is a zero percent tax rate on money that is not earned in Hong Kong. Profits earned in Hong Kong are subject to a 16.5% tax. On the other hand, startups are eligible for VAT tax refunds. Either way, income tax in Hong Kong is significantly less than on the mainland. The exact tax break will always depend on the industry of your company as well as the location of your WOFE. In the QianHai zone in Shenzhen, for example, companies are given a particularly generous tax break.
To find out about this in more detail, contact Incorp China to get first-hand tax advise from local accounting and tax experts.

 

  1. Free economy and trade

Imports from abroad to Hong Kong are significantly easier to arrange and cheaper than transporting goods straight into Mainland China. Under CEPA, an agreement between Hong Kong and China with the aim to encourage trade, Hong Kong goods can even be imported into China under zero tariffs, as long as said goods and your company complies with CEPA rules. (http://www.hktdc.com/resources/MI/Article/cepa1/2009/06/274914/1244104141867_cepapdf.pdf) If you are planning on regularly moving cargo across Chinese borders, Incorp China would strongly advise talking to us about setting up an entity in Hong Kong.

 

  1. Intellectual property

Other than in Mainland China, Hong Kong takes into consideration the prior use of intellectual property when filing for trademarks, patents, copyrights, etc. China, on the other hand, operates under the first-to-file principle. If you are interested in finding out about the Chinese trademark system in more detail, please read more about it here.

 

  1. Familiar and regulated legal system

Whether tax law, intellectual property registration and enforcement, an open economy or the general bureaucratic processes, Hong Kong offers a much more Western mindset when it comes to legal systems and business culture. Familiar documents, consistent bureaucratic procedures and English speaking government officials can offer a smoother entrance into the Asian business world, not just for inexperienced businessmen. Bureaucratic processes can furthermore be executed more rapidly in Hong Kong than they would in China. For example, changing the structure of your company by reallocating shares would take about two months in China, whereas such an action would only require about a week in Hong Kong.

 

  1. Hong Kong as an international node

The proximity to the mainland and its open, capitalist mindset make Hong Kong the perfect connecting point between East and West. Strong economic ties with the ASEAN countries as well as a trustworthy environment for Western investors make Hong Kong a fertile ground for businesses from all around the world. The combined understanding of both the Western and Eastern business and cultural mentality will prove to be beneficial in more ways than you would expect.

 

  1. Relatively hassle-free setup

…especially if you are turning to Incorp China to help you out! We are offering a free initial consultation to help you figure out how to open up a company stress-free.

Hong Kong companies take less time to open in comparison to Chinese enterprises. More importantly, government institutions are considerably more straightforward and consistent regarding their requirements for opening an entity. In Mainland China, rules and regulations can change unexpectedly and abruptly, making it absolutely essential to have a team on the ground that is tirelessly checking up on your application and actively pushing it forward. On top of legislative changes, in China, it is common that institutions like banks or government bureaus will change their mind unexpectedly about a signature or document they require on top of what you were instructed to provide. Don’t let this discourage you as this is a commonly observed phenomenon, especially towards foreigners.

 

  1. Simplified China WOFE setup

Opening a Hong Kong entity makes applying for a Chinese WOFE significantly easier. Hong Kong incorporation documents are filed in English as well as Chinese which speeds up the process of incorporating a company on the Mainland.

 

  1. Limited liability

Setting up a limited liability company (LLC) in Hong Kong can protect you from lawsuits even in Mainland China. Since each shareholder of an LLC can only be held accountable for the capital they have invested and the Hong Kong company is liable for the registered capital in Mainland China, in case of a lawsuit, your personal capital outside of your business would be protected.

 

 

No doubt, a Hong Kong company can be highly beneficial to those planning to open up a company in China and even those who already own one. Nevertheless, if you are unsure or would like to talk to us about your specific situation. Don’t hesitate to contact us by calling us (+1 (561) 729 6508) or sending us an email (info@incorpchina.com).

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How Important Is To Have Local Representatives In China?

While every business needs to keep a tight grip on their expenses, some investments do truly pay off. One of such investments is hiring a local company in China to represent your business here. Why? Because Chinese bureaucracy and law is of complicated and ever-changing nature. Even more importantly, here, nobody stands a chance doing paperwork over the phone. Doing business face-to-face remains the most effective and respectful after all.

Incorp China was just retained by a Human Resource company based in the US to register their consulting WOFE (Wholly Owned Foreign Enterprise) in China. As part of establishing a WOFE, the company is required to own a bank account at a Chinese bank. Until the recent crack down on money laundering by the central government, representatives were able to open up bank accounts on behalf of their clients as long as an attorney was present.

china local representatives,China, money, Yuan, Renminbi, bank, currency, economics, market, growth, legislation, law, change of law, change of legislation, security, opening up business, WOFE, FICE,incorpchina, incorp chinaNow, however, the client himself has to make the request personally, which is not only a time intensive procedure but often impossible, as our clients tend to be based overseas. This issue doesn’t just affect businesses on Chinese main land but equally in Hong Kong. Since Incorp China is a small boutique consultancy our management is able to personally oversee every project we take on.

In this case Incorp China’s CEO, Robert Fisch, went directly to the bank manager’s office to first establish guanxi over tea, talking about their families and personal life, before addressing the issue of the bank account. Having initiated a personal connection, the bank manager instructed his employees to open the account for Incorp China’s client that same day even though the customer could not be present.

While this case reflects the benefits of hiring a local consultancy very well, there is a deeper reason why a company might employ an advisory team for business in China. Rules and regulations are constantly changing in every country around the world. Other than in the Western hemisphere, however, laws made in Beijing when funnelled down to the provincial level, are being translated and reinterpreted differently in every part of the country. Fully understanding the impact of such non-transparent law on individual companies, and arguably even more importantly, knowing what legal changes to expect in advance, is crucial to every successful enterprise. Incorp China’s task is to stay informed and ahead of the game so we can give your business the best advice for its growth and success.

For any additional enquiries, please contact info@incorpchina.com or call us on +1 (561) 729 6508

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In China, Guanxi Can Open Many Doors – And Borders

Some life lessons are best conveyed through a story. This one is about never underestimating what power an extensive guanxi holds in China.
Guanxi is the mandarin term for the network, the connection people form privately and in business relation to one another over a long period of time. Other than in Western cultures, China doesn’t differentiate between personal and professional relationships. Upholding one’s ‘face’, one’s reputation, making new connections and maintaining them becomes an omnipresent necessity.
There hasn’t been a single client for whom we didn’t need to make good use of our extensive guanxi network.
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Offshore oil platforms. Photo: Chad Teer

One particularly interesting case was a logistics project for a multinational oil company we worked on a few years back. Construction parts had to be delivered to an off shore oil platform over night or else the 400 employees working on the platform would have had to be evacuated via helicopter. Six government officials ranging from police over inspection to immigration officers would have to be convinced to keep the border open long past their regular hours to ship the cargo across – and we had only one day to do exactly that.
The negotiations started at the Hong Kong airport with the customs director. He needed to agree to wave the goods through customs clearance prioritizing it to other shipments. While in the Western business world a simple call from an insider might be the correct approach, our CEO personally sat down with the customs director for tea. Slowly guiding the conversation from personal exchange to business affairs our CEO’s excellent knowledge of the Cantonese language helped form common ground and resulted in a successful endeavor.
With the cargo out of the airport ahead of time the next hurdle were the borders. What proved to be problematic were the border’s operating hours between Hong Kong and China preventing the construction parts to be passed through before the deadline. Keeping open a border beyond scheduled times requires, firstly, the border officials of both countries to be in agreement and, secondly, a trail of legal documents permitting such an inconvenience. In wise foresight, Mr. Fisch, our CEO, had already payed the Chinese border commander a visit on his way to Hong Kong. Usually, these types of high-ranking officials would never accept the visit of a foreigner. Mr. Fisch, however, instead of attempting to make an appointment, walked through the government building as if he belonged there, straight into the commander’s office. He immediately started conversing in Mandarin. Stunned by an American speaking fluent Chinese and being this straightforward, the officer invited our CEO to enjoy tea together.
After, again, a very private conversation about their backgrounds, families and commonalities guanxi was established and one could move on to business affairs. The Chinese border commander helped Incorp China not only to acquire the approval of the police, customs and immigration but even agreed to organize a chopper waiting nearby the border to transport the cargo directly from behind the Chinese frontier to the company’s offshore platform.
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Shenzhen FongTin to Hong Kong Bridge. Photo: WiNG

On the Hong Kong side of the border the Hong Kong border commander who made a grand entrance with his two bodyguards greeted our CEO. The initial encounter was rather tense but after tea, good conversation and Mr. Fisch’s ‘renqingwei’ (English interpretation: “human touch/flavor”) he managed to get through to the officer. Since the Hong Kong border commander was seemingly nervous about granting such a great exception, Mr. Fisch called the Chinese border commander to speak to him personally over the phone. With reassuring words the two officers came to an agreement.

It was an achievement comparable to a miracle. Never before had the border been left open without the time consuming effort of preparing the legal documents required. The vital construction parts passed customs, inspection, and the boarder without problems and were delivered on time for the platform to undergo repairs. Our client was able to keep his business in operation and none of the employees had to be evacuated. With no representatives on Chinese ground who could have personally convinced Chinese officials in their native languages to help this company, huge financial losses couldn’t have been prevented. Establishing and maintaining a strong guanxi is vital and simply cannot be done form afar or by someone not in touch with Chinese customs and manners.

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