Before You Make the Move
In order to get some perspective on the investment of time and effort required to take your business to China, it's good to take stock of just how “easy” it is to do business in China. The “Ease of Doing Business” ranking , based on a scale of 1-183 with a higher score meaning greater ease of doing business, measures a country’s regulatory environment and how conducive it is to starting and running an operation there. It considers essential aspects of business setup including: dealing with construction permits, registering property, protecting investors, and paying taxes.
As of 2011, China’s rank hovers at 79, down one point from last year . To put this in context, countries like Singapore, Hong Kong, the United Kingdom and the United States are all ranked in the top five, whereas China keeps company with Italy, Vietnam, Jamaica, Pakistan, and Zambia. Granted, China is perceived as a commercial powerhouse on par with the likes of the U.S.; however, the differences in ranking reflect real difficulties in time, money, and frustration on the ground. In the U.S., for example, it only takes one day and no charge to register to collect State sales taxes. In China on the other hand, it takes seven days at a cost of 100 RMB.
Briefly looking at the other rankings components, it is clear that China has made dramatic strides in the “Paying Taxes” category, which measures things like how long it takes to prepare tax forms – jumping up 10 points from last year alone. However, in all of the other components, China has not made such progress in recent years, showing, in fact, two to five point declines.
What Does This Mean to You?
As China’s economy continues to grow at an accelerated rate, it is still imperative to understand that the “ease” of doing business there is not yet moving at a comparable rate. It is essential to take these factors into consideration when making decisions to export your business activities. Regardless of these obstacles, business is still booming in China, particularly in consumer products and services, and these impediments should be only one of the factors in the many issues to be considered in determining whether, when or where to move a business.
Moving Forward- Some Tips That Will Put You Ahead
According to the Shanghai based American Chamber of Commerce’s (AmCham Shanghai) joint publication with Booz & Company, ”China Consumer Market Strategies 2011,” there are six fundamental trends that will have a heavy impact on the Chinese consumer market in the near future:
- Increased use of internet and other mobile methods of communication
- Changes in domestic Chinese consumer demand based on more exposure to external sources such as foreign media and more overseas excursions that have accompanied China’s economic growth
- China’s consumer base gaining more mobility due to major infrastructure development, which in turn creates more domestic demand for goods, especially pertaining to travel and economic development in new areas
- Changes in China’s demography. According to an article by a representative of the Singapore government Charmaine Tan, “In 20 years’ time, China will witness changing demographics. There will be a rise in the number of dependents and a shortage of young workers in the 15-25 age group.” With this trend, there has already been seen a refocusing of labor from export to domestic consumption
- The evolution of the family unit. The change in the family unit is imminent, based on the dramatic demographic and economic changes occurring in China. These changes should have an observable effect on purchasing behaviors, including packaging sizes, designs, and overall access to products
- Changes in work-life balance among Chinese consumers. In tandem with the changes described above, societal trends have shown Chinese beginning to look more at quality of life to supplement and balance the rigors of work life. More focus should be placed on products and services associated with leisure activities, domestic travel, and interests in overall health
Make Your Move
Indeed, China’s development continues to move at a blinding pace, and a smart business venture/businessperson should realize its peoples’ needs are moving at the same rate. As such, taking these changes in consumer demands into consideration will offer an advantage in forecasting the demand for goods. And having a presence there will give you a first-hand, real-time insight into changes as they unfold.
Marc-Anthony Isaacs is currently a graduate student of Pacific International Affairs at the University of California, San Diego’s school of International Relations and Pacific Studies (IR/PS) studying international management. Having worked in both Japan and China for a number of years, he now lends his skills and experience to the Rowland & Associates team as a summer intern.
- The ranking is a composite score comprised of nine topics: Starting a business, Dealing with Construction Permits, Registering Property, Getting Credit, Protecting Investors, Paying Taxes, Trading Across Borders, Enforcing Contracts, & Closing a Business
- Doingbusiness.org (All figures and components pertaining to the “ease of doing business” ranking were sourced from here)
- Amcham published report
- Charmaine Tan report