Start up business in China has its share of challenges and rewards. In this article, we’re focusing on two key aspects that can determine success: local manufacturing and financial management.
In recent years, many start-ups from all over the world have expressed interest in the vast Chinese market. Many companies have taken the leap and established local entities in China, in order to offer their services and market their products directly in China. The Chinese market has many advantages – but it can also be very challenging to penetrate and thrive from a business perspective. In this article, we review two facets that can greatly impact success:local manufacturing and financial operations.
Manufacturing in China
Manufacturing products for the Chinese market requires careful deliberation. Companies that manufacture products in their native countries must import them into China – and this means dealingwith import regulations. Along with various transportation logistics, these regulations increase overall production costs, which naturally has a negative impact on total revenue.
Therefore, it is recommended to explore the option of transferring all or part of the products’ manufacturing and assembly process into China. Yet this too can be challenging, as companies must make sure their manufacturing processes are deployed in the most efficient manner. In addition, setting up a factory in China at the very beginning can be a risky commitment for many start-ups.
Many start-up companies many not aware of this, but by partnering with a trusted partner in China, local manufacturing can become much easier, efficient and cost-effective. At PTL Group, we offer foreign companies operating in China three manufacturing models, according to their specific needs:
For a detailed overview of our China assembly and manufacturing services in China
Financial and accounting services in China
Every country has their own financial and accounting rules for businesses. But if you compare China‘s financial regulations tothose of western countries, the gap may seem very large at times. Why are we stating this fact? Because start ups entering the Chinese market must understand that while it can be challenging tolearn all of China’s financial rules, it is absolutely necessary. If you’re operating a business in China, breaking these rules would be very bad, regardless of whether you were not aware of them or not.
In addition, if your company’s CFO works from the main HQ, he or she may find it difficult to oversee your China entity’s financial operations from afar – due to cultural differences and communication barriers. Relying on expert local staff may be efficient to a certain degree, but the communication with your local management team will probably present many challenges. To illustrate this point, we’ll use financial reports as an example. Your CFO will often ask the local staff to view the financial reports they have written and sent. Yet these reports comply with Chinese CAS standards, which are sometimes drastically different from IFRS standards. In order for your HQ to fully understand your China entity’s financial reports, they will have to be translated and adjusted to IFRS terms. This process is called mapping. A similar rationale applies to many areas of financial management in China.
Dictating and implementing your CFO’s agenda – while complying with China’s rules and regulations – often requires a trusted local partner who is proficient in working in China and can effectively bridge the gap between foreign HQs and local financial operations. PTL is such a partner.
Over the years, we have provided financial governance services to many companies operating in China. These services have included bookkeeping and accounting that adhere to China GAAP laws, budget planning, VAT refunds, tax deductions, financial report mapping, and more. For more information on our financial management services in China
