Get ready to do business in China
China can be a highly promising market, but it is also highly competitive and subject to regulatory and political risks. Businesses may underestimate the commitment required and should balance assessments of opportunities with consideration of potential operational, financial, legal, and reputational challenges.
Make sure you are ready
Entering the Chinese market requires a long-term commitment and sustained effort. It is vital that your company establishes an in-market presence and complies with China's import requirements and regulations. Also be aware that overdependence on any one market poses risks. Diversifying both within and beyond China is essential to mitigate risks.
Ask yourself: Why China? Why now? Why not another market in the region? What is your competitive edge?
Narrow your market
Start your expansion into China by targeting a specific region or major city, and analyze market size, growth, product demand, team expertise, business environment, and tariffs.
Consider alternative market entry strategies such as cross-border e-commerce, or through another market like Hong Kong, which may offer a more familiar business environment.
Consider distribution strategies
Explore collaborations and options like hiring local sales representatives, joint ventures, or partnering with a Canadian firm experienced in China.
Be sure to conduct extensive research and due diligence before entering into agreements to ensure selecting suitable partners, strategies, and regions.
Consider financing and insurance needs
Engage with banking partners early, as companies often underestimate the costs of expanding into China.
Anticipate working capital challenges and explore your options in advance. Export Development Canada and the Business Development Bank of Canada offer financing and credit insurance for Canadian companies.
Protect your business
Above all else, it is vital to understand that China is not a true free-market economy. Changes can occur suddenly and arbitrarily, often for political or other non-economic reasons, affecting market access, tariffs, or the business activities of foreign companies. Ensure that you comply with Chinese business regulations and practices and be aware of sudden changes and that local enforcement can be uneven.
Ensure that intellectual property (IP) rights are protected before you enter China and ensure compliance with both countries' export control laws and any potential sanctions. Be aware of cyber risks and take steps to protect yourself, as cybercrime and theft of valuable corporate information, including IP, remain significant concerns, whether you expand your business to China or not.
Consult the Government of Canada's travel advisory for China before travelling. Challenges may include obtaining a visa, navigating payments largely made through Chinese payment apps (as foreign credit cards are often not accepted), and booking train travel.
Adhere to responsible business conduct principles and regulations, such as human rights and environmental standards. Have a deep understanding of your supply chains and ensure that you conduct in-depth supply chain due diligence, in which the Trade Commissioner Service (TCS) may be able to provide some support. Pay close attention to the risk of inadvertently sourcing products made by forced labour.
Examine all contract terms carefully and ensure that they align with financing and insurance requirements. Seek expert advice and consult your bank and insurance partners. If possible, work with a law firm or consultant either located in or experienced with China.
Contact the Trade Commissioner Service
We can provide expert guidance, both in Canada and China, and can connect you with professionals in China and provide references from active businesses and trade groups.
For more information and resources, check out the Canadian SME Gateway to China, or email us directly at bejingtdinfocentre@international.gc.ca.
You can also register for MyTCS to receive updates on funding, support programs, and upcoming trade events and webinars.
