How to expand into China through Hong Kong

Why start from Hong Kong

To capitalize on the Chinese market, Hong Kong is the ideal place to start for a couple of reasons:

• Geographically and culturally rich location
  Hong Kong is located at China’s southern tip at the Pearl River Delta’s mouth and shares a common culture with mainland China.
• Economic freedom and business opportunities
  As one of the Chinese mainland cities, Hong Kong is unique. While other cities in China practice a mixed socialist market economic system, Hong Kong practices free and open market economic system. Hong Kong’s free trade policy, no trade barriers, and no limit for foreign investments have successfully attracted investors from different parts of the world to invest in Hong Kong.Hong Kong is also one of the most e-ready economies in the world. It is also the most significant single investor in the Chinese Mainland and close to 45 percent of outside investment in China’s main cities.
• Sophisticated and simple business
  As the SAR of the people’s republic of China with a high degree of autonomy in all matters except defense and foreign affairs, Hong Kong enjoys many advantages like a robust economic relationship with mainland China.It has zero export tariffs and strict Intellectual Property Rights (IPR) legislation, and free flow of information. It also enjoys a network of bicultural business professionals and most corruption-free economies.

  Corporate taxation in Hong Kong is also very business friendly. With a low tax rate and many possible exemptions, it is easy to conduct business in Hong Kong.

  Hong Kong companies also pay zero tax on business activities conducted overseas. If you are not aware of it, not to worry, Paul Hype Page can advise you on all the various tax incentives and obligations of Hong Kong. This simplifies the process even further.

• Visa-Free Support
  Hong Kong is the fifth-busiest international passenger airport operating more than 85 airlines in the world, making it a global business hub. Its visa system invites foreign investors in the city to visit The Guangdong province, which is China’s largest provincial economy.It has convenient visa policies that attract Mainland Chinese. There are various schemes and policies for the employment of Mainland talents and professionals for those wishing to invest and open a new company. Visitors can access China’s main cities through Hong Kong’s ports using an entry permit and visitor visa. Learn more about Hong Kong’s visas and the restrictions relating to them here.
• Business Support & Assistance
  There are various programs and schemes established by the Hong Kong government and the private sector to help a company improve every aspect of their business. Programs like government funding schemes, business development support, seed capital providers, market access co-working spaces, and promotion platforms.While the schemes and forms of assistance available are many, it can be difficult for businesses that are not familiar with the legislation or the schemes to benefit from them. Fortunately, Paul Hype Page is well versed and knowledgeable on this, and we can advise you on the options available for you, and how to ensure your application to these programs are successful.

Strategies on How to operate in China

Research

If you want to expand into China, conducting full research on any local regulatory obstacles that could fend off market entry in particular regions is recommended. You should also constantly monitor for any changes to legislation or regulations that could affect your business. Besides, you should spend time mapping out customers’ and suppliers’ locations and understanding how distribution channels vary between different locations.

Advantages of researching

1. It helps determine the size and nature of the market opportunity and acts as a benchmark against which firms are able to measure future performance.
2. It helps identify potential roadblocks to market
3. It identifies any weaknesses in a company’s product or service offering.
4. It helps prevent poor decision-making and establishes a clear strategy map for the future.

If this all sounds too difficult for you to do alone, or you have questions regarding the market in Hong Kong, Paul Hype Page is able to advise you on the market conditions and how to best enter the market. We have a wealth of experience in the region and are able to advise you based on your specific needs.

Identify and Segment the Market

Know the geographical locations of these markets and how to access them by understanding the local environment of china. Below is how china market looks like:

It is socially and economically disparate and fragmented due to uneven economic growth rates in different parts of the country. There are huge variations between different provinces in terms of population levels, education levels, literacy rates, consumer spending habits, and lifestyles.

China’s markets vary in nature and make-up. Hence, a company should think carefully about which geographical location offers the best vantage point to target the broader China market by tending focus in the densely populated and higher-income coastal regions like Guangdong, Jiangsu, Zhejiang, and Shanghai.

A company should not ignore the economic growth and rising incomes in China’s Tier 2 cities like Nanjing, Wuhan, Dalian, Shenzhen, Chongqing, Hangzhou, Chengdu, Qingdao, and Dalian. As they have the advantage of lower operating costs and increased consumer spending power that is creating rapid growth in demand for foreign manufactured goods and products.

Choose the Right Market Entry Mode

Entry mode depends on many factors like industry landscape, geographical size & scope of the market, nature of the company & the level of on-the-ground sales & technical support required by consumers, the cost of setting up a local entity, and of hiring local employees. The cost will vary depending on the size and scope of an enterprise along with the specific characteristics of the market it is entering. A company can enter as a wholly foreign-owned enterprise (WFOE) or a Joint Venture (JV) business model

Carrying Out Due Diligence

Due diligence helps verify the trustworthiness of partners and employees and to expose any skeletons or any hidden agendas before proceeding with any sizeable investment. It can help in-house or through risk assessment consultants.

Develop an International Property Rights (IPR) strategy

The infringement of IPR is widespread in China. Therefore, any company entering the market for the first time should work under the assumption that its technology will be compromised at some point. Here for it is advisable that foreign companies, especially those with large IP inventories, should consult with lawyers and IPR specialists to formulate and IPR strategy for the China market.

A company should be sure to understand the first-to-file patent system, first-to-file trademark systems. Register trademarks in China before market entry and know how to register them both in English and Chinese.

Difficulties in Hong Kong and China

Language Barrier
In Hong Kong, the official languages spoken are Cantonese, Chinese and English. In China, the official language is Chinese. For foreign investors from outside the region, they may not be experienced in the language, and may face communication problems.

Culture Barrier
The culture in Hong Kong and China is very different from western culture. The concept of Guanxi, dominates professional relationships. This affects how business is conducted and being an uninformed participant can cause riffs with their local stakeholders.

IPR Infringement
As mentioned above, IPR in China can be problematic for companies with patents relevant to their core business activities. This is due to the process that China has adopted, and the regulation surrounding it