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3 things you need to know about…Doing business in China

China is a country of numbers. Two of the most commonly cited numbers are 1.3 billion people and several thousand years of history. A business person wanting to sell his or her products in China or buy materials in China should be aware of the market opportunities, and numbers are good indicators of those opportunities.

1. What number of the population has significant disposable income?
Many people are aware of the tremendous size of China. With 1.3 billion people, it is the most populous country on the planet, but other numbers are even more significant. Particularly for a business person looking to do business in China, the significant number is not 1.3 billion but rather the approximately 200 million people who are in the middle class with significant disposal income. If you are a business person and have a product that may be of interest to this size market, then you should be thinking about, if not actually, doing business in China. The lesson, however, is not to get misled by the larger number of 1.3 billion, but to focus on the more functional number, since the critical question is not how many people there are but how many of them can afford to buy your product. That number is approximately 200 million.

2. Is China’s legal system keeping up with the growth of the marketplace?
Over the past five years, 20 percent of the world’s economic growth has occurred in China. This means that to a large extent economic growth in the world has been the result of China’s emerging participation in the world economic system. While there are many reasons for this tremendous surge, the decision of China’s political leaders to move to a free market system has had the greatest impact. The implementation of that decision took many different forms. One of the most important is the creation of a set of rules and laws that guide the way business is and can be conducted in China. Such rules create certainty by establishing parameters within which business can operate and expect to receive the benefits (profits) of its efforts. The transition to a formalized legal system is recent, however, and business people should understand that stories about previous legal situations in China even five years ago may be out of date. In the area of intellectual property protection, considerable progress has been made, and China is making strong efforts to enforce and protect intellectual property rights.

3. Will the Chinese consumer embrace American products?
In the United States, Americans look up to or are inspired by French and English culture, language, cuisine, etc. Similarly, in China, many Chinese look up to American culture and business people. This respect goes so far as trying to learn the English language. It is expected that in the next several years the number of English speaking people in China may exceed 300 million, which would mean that there will be more people in China speaking English than in the United States. Therefore, American goods are likely to be welcomed and find a receptive audience in China. This also means that American product names can be used. In some cases, depending on the image you are intending to create, American product names may even be preferred.

These three things are not, however, the only issues you should consider. For more information or for any questions, please contact Greenebaum’s China Team.

Greenebaum’s China Team is staffed with nearly 20 legal professionals who have significant legal experience in the U.S. and Asia. Team members work closely with local business communities and governments, as well as foreign legal professionals and government agencies in Asia, providing strategic solutions to clients both in China and the U.S.



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