3 Compliance Issues Foreign Companies Must Maintain in China

A considerable number of US companies are getting worried about the prospect in the Chinese market because of the tariff war between Washington and Beijing. Most of them are concerned that the Chinese authorities may come up harder on them and this may harm their China production.

The US Treasury Secretary Steven Mnuchin said “the reason why we put on tariffs is for the last two and a half years, we’ve been working with China to rebalance the trading relationship and it hasn’t rebalanced. The trade deficit has grown significantly despite assurances from China.” Despite the ongoing trade war, the U.S. businesses continue to do well in China. American companies like Boeing, Nike and Starbucks now are deriving a huge revenue by serving the vast and growing Chinese middle class.

It is an accepted fact that Chinese authorities may tighten the noose around US companies doing business in China, but it is unlikely that they will aggressively go against them. The current economic situation in China requires a revival and showing doors to the foreign and the US firms will certainly not going to help that cause. There are few factors and issues that foreign firms need to focus on in order to continue their operations in China hassle-free and smooth.

Maintaining China Compliance

After the recent high-profile anti-corruption investigations by the Chinese enforcement authorities, nothing should be taken for granted. MNCs are reminded to reconsider and reassess their China component of their internal compliance programs.

The US and foreign firms need to conduct a detailed analysis of the industry requirements in relation to their business and what is essential to make sure the compliance standards are met. At this moment, the services of a China law firm becomes valuable. The highly experienced China business lawyers can provide a strategic and solid plan in relation to what is required to maintain China compliance.

Joint Venture and WFOE is licensed

The second important thing US companies need to make sure their WFOE and Joint Venture or Representative Office actually exists. Maintaining their license is crucial as the Chinese authorities may conduct a check and if you can’t produce these papers, be ready to face a prolonged legal battle.

Environmental compliance for foreign businesses in China

China is undergoing an environmental paradigm shift has dramatically strengthened the enforcement of its environmental regulations. Companies and public institutions that discharge listed pollutants directly into the environment will pay taxes for producing noise, air and water pollution as well as solid waste. China now has the toughest emissions standards in the world. The foreign companies who have a manufacturing hub in China need to familiarize themselves with the Environment Protection Tax Law as they may now be subject to additional obligations and liabilities.


Final Thoughts

Although the current geopolitical situation between the US and China is not highly-conducive, but still China offers a huge business prospect. Beijing, Shanghai, Shenzhen and Guangzhou generally have the best business environment. Businesses from retail to electronics to home goods, can grab the diversity of business opportunities available in China.

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Gameplan for Assessing the Risk of Doing Business in China

When it comes to nurturing the elements necessary for business growth, China has comprehensively taken the lead position compared to other emerging countries. The sheer size of China’s population makes it an attractive nation for investors to commit capital to higher-end industries like healthcare, information technology, engineering, and luxury goods. The country’s economy is ranked the second most attractive to multinational companies for 2017-2019, only behind the U.S. with steady growth for several years.

Beware of Industrial Dynamics

However, businesses looking to make their investment in the country or expand their existing presence must consider the associated risks. Foreign companies need to follow a strategic plan to mitigate the risks associated with doing business in China. According to the prominent Chinese business lawyers, knowing the do’s and dont’s of doing business will help you a lot to gain maximum profit out of your investment.

Conduct a Proper Business Analysis

While China has started to open up its economy in some areas, there are restrictions on the extent to which foreign companies can operate in large areas of the economy. Personal relationship networks can exercise significant influence. There is a widely held perception that local companies may also enjoy greater political protection, including from local courts. Working in and with China is not easy and the Westerners find it very difficult to continue doing business with Chinese counterparts. A business analysis risk assessment – assessing, combining and grouping the risks as identified in this process, as well as determining the Company’s responses to those risks is the most crucial part. China seems like the perfect destination for expansion. But with lengthy bureaucratic procedures and a constant risk of IP threat, having a trusted China law firm on hand to help navigate the complex business arena of China is vital.

The Basic Takeaways

China is really unpredictable in its measures for curtailing corruption. Also, it is unpredictable regarding enforcing those laws frequently. Chinese government’s behavior with the foreign companies has always been that of a foster child. They always strike more on foreign companies to safeguard the interest of the homegrown companies. It has struck down and still continues to strike on the foreign companies lot more. As a result, the foreign companies have been hit the worst in this regard.

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