There are four ways to export goods or services to China: • Direct exporting: direct exportation of goods/services from the producer in one country to the final consumer in China. • Indirect exporting: selling of goods/services through an intermediary involved in the producer’s sector and market, who in turn sells to final consumers in China. Such intermediaries are agents, distributors, and franchisees. • Cross-border e-commerce through direct shipping: goods/services sold and shipped by producers abroad directly to the final consumer after customs clearance. • Cross-border e-commerce through bonded warehouses: goods/services sold and shipped from bonded warehouses located in mainland China, directly to the final consumer after customs clearance. Considerations regarding the model of entry most suitable for an individual company’s business plan include: (i) size of the enterprise; (ii) nature of its products; (iii) previous export experience and expertise; (iv) business conditions and regulations in China (both exporting and investment requirements); (v) need for on-the-ground representation (such as marketing and after-sales services); (vi) need for control of the product and IP rights protection; (vii) time and resources available to the company. Each model requires exporters to comply with different regulations, and that no matter the model chosen, Danyan also helps our clients to ensure that all their IP rights are properly registered in China before exporting.

Foreign companies in general do not have sufficient resources to build an extensive sales network, therefore they usually need to engage several different distributors and sales offices. We advise use of a two-stringed sales and distribution model, relying on local distributors in combination with their own direct sales force. The local distributors provide geographical and market scale while the internal sales force’s focus should be on the direct access to existing and new customers, as well as end-users. Finding the right distributors and partners is critical. Danyan can provide you with a list of importers/distributors based on our broad networks with local chambers and other relevant commercial associations. We also help to exercise due diligence for our clients when they are working with any distributor or other business partner in China.

If a foreign company simply intends to sell its own goods and services to Chinese customers on the internet, the easiest way is to do it on a China-based third-party platform, opening up a virtual store on such e-commerce platforms. It is not required to obtain license or permits that apply to the operation of such online sale portal under the PRC laws. To adopt this business model, companies should first choose one or more e-commerce platforms they intend to engage with and then sign service contracts with the platform operators. There are many well-established e-commerce platforms in China, each platform may have its own entry requirements and management rules by which companies should abide. Companies should comply with certain special licenses or permits requirements that apply to the sale of its own goods or services under the PRC laws, no matter whether the sale is conducted online or offline. Before entering into the PRC market, companies shall conduct a general legal assessment to find out what particular license/permit may be required by the PRC laws for the sale of their goods or services. Danyan is able to help on this matter.

Although Internet service providers (ISPs) can help to remove infringing products through a ‘take-down notice’ requested by the right holder (which requires the previous registration in mainland China of the IPR), their powers are limited. E-commerce platforms ISPs cannot impose fines on infringers or grant any compensation to right holders. Additionally, the ISP cannot make a judgment on conflicting IP infringement claims. Conflicting claims should be taken before Chinese administrative authorities, e.g. Administration of Industry and Commerce (AIC), or before Chinese courts. Danyan assists our clients to combat against the IPR infringement and acts as the representative in front of Chinese courts or relevant authorities.

Mainland China consists of 23 provinces, four municipalities and five autonomous regions, and within these there are 22 pilot Free Trade Zones, more than 200 national industrial/economic development zones, more than 170 high-tech zones, and numerous local industrial parks. There are various factors to consider when selecting a location for the foreign-invested company in China: • Target consumer group: where are your consumers concentrated? • Infrastructure: different locations are connected in different ways (both domestically and internationally), each presenting different logistics challenges, time and costs • Human resources required: highly skilled talents (e.g. top scientists and engineers) are more available in first-tier cities and areas with polytechnic universities; • Incentives provided by the local administration: including tax incentives, financial subsidies, access to services, support when applying to grants or loans, etc. In general, in order to register a company in China, investors must provide an exclusive office address, which will be the company’s legal business address appearing on its business license. This means that investors must rent dedicated office spaces. But there is an exception which is applying for new start-ups. Following the growth of entrepreneurs and start-ups in China, most co-working spaces, incubators and accelerators in China allow resident entrepreneurs to register a virtual company address within their facilities – for modest fees compared to other office buildings.

In addition to national level regulations governing foreign investment, all local-level authorities – starting from district level to provincial level – have some latitude to adapt and apply local rules which may be advantageous to foreign companies. Local governments in China often compete fiercely to attract foreign direct investment within their jurisdictions, particularly when involving advanced technologies or operations in line with national or local priorities. Therefore, local administrations regularly offer a series of incentives and preferential measures, such as relaxed market access requirements, favorable terms for the acquisition of suitable land, fast channels to obtain permits or licenses, tax rebates, etc. Pilot FTZs feature innovative policies with respect to finance, customs, liberalisation of foreign investment, tax treatment, and simplified administrative measures e.g. reduced investment barriers with respect to the qualifications of foreign investors, application requirements of some licences, equity holding percentage and business scope restrictions.

Giving the brand a good Chinese name is an essential step to ensure the company’s future success in the Chinese market, especially for companies that sell products directly to Chinese customers. A good translation, which is a combination of both sound and meaning, boosts the chances of your products being remembered and recognized by more local Chinese customers. There are four common strategies that foreign companies in China adopt to translate their brand names: (i) no adaption; (ii) sound adaption; (iii) meaning adaption; and (iv) dual adaption. The best outcome is to have a Chinese name with both phonetic and semantic associations with the original (dual adaptation), especially for those companies that aim at reaching the wealthier sections of Chinese consumers. To ensure the translation is adequate, ask our advice.

According to Chinese labour law a foreign company (a company registered abroad) cannot conclude labour contracts with Chinese citizens if the place of work performance is in China In order to be able to employ a Chinese citizen in China, the foreign company must either establish a representative office and employ local individuals through agencies like FESCO or CIIC or establish a foreign-invested enterprise in China. These arrangements allow foreign-invested companies or partnerships to employ local individuals in its own name. For those foreign companies which do not wish to have any permanent establishment in China but still need someone ‘on the ground’, there is only one solution: establishment of a commercial relationship between the company and a self-employed individual. In terms of hiring foreign interns, this only applies to foreign students studying in Chinese universities and therefore already based in China: they can apply for an “internship remark” on their residence permit for study purpose, which needs to be approved in written form by the student’s university (overseas student office). After the “internship remark” is obtained, foreign students can legally start their off-campus internship in mainland China. For foreigners studying in foreign universities and based abroad, currently there is only one option for legally doing internships in China: being invited for internships by ‘renowned’ enterprises or institutions registered in China. In this case, foreign interns will need to apply to an S2 visa with an “internship remark”, which will have a duration of maximum 180 days. It is not recommended for foreign interns to enter China with other categories of visas, such as tourism or business. Although until recently a very common practice, this is illegal and can lead to detainment and even deportation.