By Smart China Sourcing

Q: When establishing a China presence, overseas companies have several options -- wholly foreign-owned enterprise, representative office, joint venture. Is there a preferred option for a China sourcing office?
A: The simplest and most common method is to establish a rep office. The setup process can take as little as a few months from start to finish. The benefits of this kind of structure are the simplicity and low cost of setting it up. For straight sourcing operations this is the most practical option.

Q: How should overseas companies handle the process of registering and setting up a sourcing office in China?
A: It's more important for foreign companies to find a company to build their operations and infrastructure than to build a corporate structure. Numerous companies offer cookie-cutter company registration services, but a corporate structure doesn't do anything without having the right infrastructure in place.

Foreign companies should look for a service provider specific to their industry that can help them set up an office, hire the right people, give them the right connections, manage the corporate structuring and report back to the foreign company on the progress. This is a total package service that not only establishes a corporate framework, but also gives life to the operations.

Q: How long should it take from the decision to open a China office until that office starts shipping product?
A: This depends on who is in charge of the sourcing operation. Someone with existing contacts in place and a focus on what they need to buy could be moving products in a matter of days. An operation which is starting from scratch will have to spend a few weeks considering potential suppliers and business service providers. Running a smooth sourcing operation requires the leadership of someone with experience and contacts in place.

Q: What are the biggest challenges in managing sourcing operations in China?
A: Details are a big deal in sourcing. From writing the purchase order to delivery, there are always problems that can arise if the details aren't worked through by the sourcing office. And certainly if something is overlooked it's important to have a good support network that can act quickly and resolve any problems.

A sacred rule for Western companies doing business in China is: do not expect anyone in China to do something the way you would expect someone in the West to do it. To be fair this isn't always a bad thing, and in many cases it's a good thing. But either way it's best to have the details laid out clearly.

Q: What simple advice can you offer in the following areas?

Taxes?
A: Outsourcing this is generally the best bet.

Q: How should an overseas company assess the performance for its China sourcing operation? Is there a standard they should use?
A: Basically, it's all about the result. Are the products landing on time? Is the quality good? Are the prices competitive? The details are what the sourcing office needs to worry about. The foreign parent should only be gauging the end results.

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Benjamin Dolgin-Gardner founded Xtatix, a US brand of consumer electronics, in 2004. To better manage the branding and supply chain of Xtatix, Ben moved to Shenzhen, China where he began Shenzhen CE and IT Ltd as an independent sourcing services company. Ben speaks six languages (English, French, Chinese, Spanish, Portuguese, and Thai) and has proven expertise in sourcing, costing, quality control and troubleshooting in China. Shenzhen CE and IT Ltd offers its clients sourcing services, OEM brand management, and turnkey sourcing office setup with a focus in consumer electronics and computer products.

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Readers have left 4 comments.

 1. manager
semere, Unregistered

Good information but you should cover small scale bussness people also.

 Posted 2008-04-11 22:29:14

 2. CEO
Uday Prabhu, Unregistered

Honestly, its a good move to educate overseas Customers with such information, so that he is fully equipped to take it further without any loss of time, thereafter.

 Posted 2008-04-12 14:40:53

 3. trader or factory
Guest User, Unregistered

Very nice, can you also do a study on how to identify if the business is a trading company or manufacturing factory?

\n This e-mail address is being protected from spam bots, you need JavaScript enabled to view it ' target='_blank' title='Click to visit this website'> Posted 2008-08-04 02:48:35

 4. Re: trader or factory
Guest User, Unregistered

Very nice, can you also do a study on how to identify if the business is a trading company or manufacturing factory?

— Guest User

\n This e-mail address is being protected from spam bots, you need JavaScript enabled to view it ' target='_blank' title='Click to visit this website'> Posted 2008-08-21 20:39:09

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