Wagas Group


Difficulties when Doing Business in foreign markets.

WAGAS pros as a Soft-Landing

To address these key issues the soft-landing program shall include staff members who will be dedicated to:
Liaising with the local & central Governments
Administrative tasks for Foreign employees whom will require the management of the following:

Difficulties: Bureacracy

It is not a coincidence that foreign companies have legal issues due to China’s complex legal framework. The Spanish-based news platform Libre Mercado stated that 31% of 338 foreign companies respondents in a recent business survey had listed bureaucracy as their number one concern when expanding to China. Most common complaints revolve around obtaining the required licenses and permits, with many respondents bemoaning the laborious processes.

Rules stating how products should be designed, manufactured, sold, used and disposed exist in China which all products must comply with before entering the market. Which can be a very heavy procedure to many companies and can impact the appeal of the country.

Administration, licensing, product approvals and many more laborious operating tasks can leave managerial desks flooded in paperwork. For many firms, overcoming the bureaucratic hassle is the biggest task to successfully breaking the Chinese market.

Difficulties when doing business in China: Human Resources talent recruitment and retention

When creating a team in China, it is important that the human resources can cover a series of aspects that will add to the company’s wellbeing. These aspects include:
Understanding Chinese business traditions
A fair Chinese language proficiency
Clear understanding of the Chinese market in their respective industry experience in building relationships with Chinese and foreign connections (guanxi)
In order to accomplish this, there are two main options:
Internal transfer and promotion
Professional recruitment
Year in and year out, western companies in China rate human resources as among the biggest challenges of doing business. While western employees tend to delegate responsibility and have flexible lines of authority, Chinese workers are accustomed to a more hierarchical structure in which each person has a clearly defined role. Such differences can often lead to tensions between western managers who are used to employees whom take their own initiatives, and Chinese staff who have been trained from a young age to always follow instructions from the top.

In addition, regardless of the size of the company, one should divide employees into small teams which each have a clear leader who oversees the group and reports directly to his or her superior. To best motivate Chinese employees, it will be necessary to closely monitor their work while also encouraging them to be creative and take risks.
A lack of talented, skilled workers was the #1 issue last year, and there it remains. To put it simply, the demand for good workers is way higher than the supply. And that’s for anything from managerial professionals to blue collar factory workers.

And this is another reason why wages are inflating so quickly. Companies are trying to keep the workers they already have, and the competition is fierce. For senior managers, changing jobs can mean a 30% wage increase. The US-China Business Council recently published a report that showed 62% of respondents said that they had increased wages by 5% to 10%. Eight percent of respondents had hiked them more than 15%. This was the area that concerned respondents the most on the whole survey.

WAGAS pros as a Service soft-landing

To address these key issues the soft-landing program shall include staff members whom will be dedicated to:

Difficulties when doing Business in China: Administration

The administration of employees in China varies whether they are locals or foreigners. Foreign employees do require more administrative efforts, and these must be managed by someone who perfectly understands China’s labour laws and legal environment.

In China, many administrative and bureaucratic tasks that have been simplified in the West can still be quite time-consuming. Everything from opening a bank account, to registering a company, to gaining product approval, can drag on for months. The lack of a strong rule of law and an inconsistent application of regulations means that such processes are not always designed for company’s convenience.

In addition, many procedures that would be handled electronically in the West require reams of paperwork which need to be filled in and stamped by hand. The time required to complete these efforts can be unexpectedly lengthy.

We know of many foreign companies that hire 1-2 full-time staffers in China, hoping they will lead their marketing and sales efforts, only to find that their employees spend more than half of their time completing administrative tasks.

A final challenge to overcome is the difference in legal systems. Companies and governments outside China, especially those in the West, have long barked at China for not committing to market opening and keeping its promises of lowering tariffs after joining the World Trade Organisation. Under existing Chinese regulations, either foreign companies need to seek a partner in China for doing a number of business activities in the form of a joint venture, or they are confined to sharing ownership restrictions for most business activities. The government has eased restrictions on shared ownership in some sectors in the last year, as reported earlier this year by Reuters; however, there is always a delay for policies from the central government to be implemented by the local authorities. Municipal governments in China heavily rely on state owned companies and Chinese companies for tax revenue. Easing restrictions on foreign companies will undermine the monopolistic position by Chinese companies over foreign companies in the Chinese market, which will result in less revenue from the Chinese enterprises. But nevertheless, restrictions have yet to ease up on foreign-owned companies.

Take the auto sector, for example. Foreign companies are required to team up with a local car marketer, often leading to forced technology transfer, in exchange for access to the Chinese market, as allegedly complained about by multinational CEOs in the yearly business confidence survey report in China compiled by the European Chamber of Commerce.

Merger and acquisition transactions in China involving foreign parties will be subject to review and can be halted due to anti-trust law which came on effects on 1st August,2008 (Lam, 2012). On 19 January 2015, the Ministry of Commerce of the PRC(“MOFCOM”) published a new Foreign Investment Law on its official website. Under the current foreign investment regulatory regime, a foreign-invested enterprise, regardless of its scale, investment amount and industry, will require governmental approval from cradle to crave, including its incorporation, liquidation, increase or decrease of capital or share transfer. The regulatory red tape increases regulatory costs for foreign investors and, to some extent, impedes free competition and liquidity flow (King & Wood, 2015).

In Britain, by contrast, registering a limited company is just a click away on your computer. Companies House, the de facto government agency responsible for registering companies and recording company information, is accessible online. There are no restrictions on business activities when registering a company by foreign entities or individuals. Also, no share capital needs to be pledged before and after incorporation. In other words, you are not required to put up any registered capital to register a limited company, neither are you obligated to fully pay the registered capital after operation.

All things considered, government restrictions in China are easing up, nonetheless, the hurdles to operate business in China faced by European companies have not come to an end. In fact, many are still struggling with the legal systems in China. The Chinese government seems willing to talk about easing restriction on foreign companies, but the implementation of government policies from the top to the local authorities has not been stressed. The local governments, from an economic point of view, are afraid of a slump in tax revenue, should they decide not to offer favours to Chinese companies. As a result, the promises of relaxing limits on foreign enterprises have not been fulfilled.
This support will free up time for sales staff to focus exclusively on promoting the company’s products, without having to spend time getting approvals from offices all over town.
Licensing & permits tasks
Product approvals
Many more laborious operating task
Administrative Tasks
Legal expertise on specific topics & submission of paperwork
Recommendations to collaborate with trustworthy local legal practitioners or consultancy to avoid legal issues

Difficulties when Doing Business in China: Intellectual property rights enforcement

Intellectual property rights are an area that has been notoriously difficult in China, although recent reports suggest this is an area that is improving the most. Gary Locke, America’s ambassador to China, recently said that “for every foreign company calling for stronger IP protection, there are more Chinese companies calling for the same,” suggesting that progress is occurring.

China has increasingly sophisticated IP and legal systems which are used by large numbers of foreign companies to obtain IP protection and enforcement relief. One source of risk is that IP rights are territorial – that is, they only give protection in the countries in which they have been granted or registered. This leads to fierce competition from local, low-quality and low-cost manufacturers in certain sectors, such as information technology.