For Sale In China Blog

China’s laws in relation to business ownership and in fact property ownership in general are entirely different to anything I am accustomed to. In fact it is not just the laws to ownership but the attitude that is alien. I guess decades of communist rule have a major part to play in peoples expectations.

To operate my business in China I first needed to incorporate a Honk Kong registered company which in turn became the owner of a subsidiary Chinese company. I then had to appoint a Chinese National as my appointed representative to head the Chinese business. Obviously there is a huge amount of trust involved as the risk is great and the temptations for Chinese operators are huge. Anyway having now incorporated two foreign companies you have to set about creating banking facilities in two countries and all the normal business requirements that seem so easy in your own land.

I engaged a Hong Kong solicitor and accountant who in turn engaged Chinese solicitors and accountants. At my first meeting I was told ‘I will require money for which I cannot give you a reciept’. Strange statement………but this was my first experience of how China operates. The solicitor explained that it would not be feasible to operate through normal channels as it could take years to accomplish, if at all. He said it was at this stage that most potential operators back off due to the lack of trust and faith that things will proceed the way they hope. I had the feeling that the solicitor was conveniently finding a way to accommodate people……mainly himself. I needed to get things moving so put myself and my money in their hands.

It took several months for the necessary process to be followed but eventually it happened and I mistakenly thought we were ready to go.

Oh no! Not so easy. It now seems that we had significant hoops to crawl through in relation to being able to export from China. Yes, it is fairly easy to get hold of products, but to legally export them is not so easy. You need to have an export license…………..but most companies don’t, so what they do is pay other companies to put the products through their export licence. Again, fraught with problems, however, do-able. So we began, but set off down the road of acquiring our own export licence, which I am pleased to say we now have, but after two years and considerable expense………..Everywhere you turn in China there is another ‘fee’ to pay, either legitimate or not so legitimate. The rules from Central Government are fairly clear but the interpretation at a local government level are significantly different. It seems that the more you are prepared to pay then the quicker things can get done.

Then you try exporting under your own licence, and the goods we had being exporting for the previous two years, suddenly required a whole new series of testing procedures and approvals…………..more time and expense, and once again the more you pay the quicker you get it done.

It can be frustrating at first but the system does seem to work. In England we might call it fast tracking and charge a premium for the service in China the ‘premium’ is by negotiation. Is it fair? Is it decent? Is it proper? Who am I to judge. I get equally frustrated with the business practises of Western companies with their ‘clarity’ of charges and their ‘customer charters’ and local authorities with such overburdened protectionist beaurocracies where getting an answer to a simple question is difficult and getting someone to make a positive decision is nigh on impossible.

China works and the more you understand it, the better it can work for you and those around you. China will continue to develop for the benefit of its business’ and its citizens. It will undoubtedly follow Western ‘Best Practise’ but ultimately won’t operate much differently than the way it does now.

My experience so far tells me that most Chinese are inherently fair and consider to some extent the good of all. Is this at least one positive result of Communist collective thinking? I only hope they can retain this philosophy as they ‘develop’ as a nation.

Tags: business, China, export license, ownership law

This entry was posted on Saturday, February 23rd, 2008 at 12:08 pm and is filed under China business. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.