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China Market Entry
UK direct export of goods to China stood at £10 billion in 2012 and China is now the UK’s 7th largest export
destination. As UK direct exports have grown significantly in the last 5 years, so have the export of services and
the expansion of UK investment in China, from manufacturing to retail. Despite being far away and operating in a
different time zone, language and culture, the China market is increasingly accessible to UK companies. UK
companies of all sizes and from across different business sectors are increasingly recognising the opportunities
that exist in China.
All companies have to choose an appropriate market entry strategy for China, which depends on a number of
factors unique to them. These include: commercial and/or consumer “need”; potential for future growth; the
company's resources; commitment; and timeframe. Market conditions dictate strategy, often necessitating
effective localisation.
Market Entry Options
Companies looking to sell in China need to consider whether this can be done through direct exports or whether
there is a need to establish a local China presence.
Direct exports can be subdivided into the following categories: direct sales to clients, direct sales to consumers,
sales by single or multiple agents/distributors, licensed sales or franchising. A market presence can take the form
of Representative Office (RO), Joint Venture (JV), Wholly Foreign Owned Enterprise (WFOE), Foreign Invested
Commercial Enterprise (FICE) or Foreign Invested Partnership Enterprise (FIPE). For CBBC members a market
presence can be obtained through Launchpad. Each option has its own have advantages and disadvantages, as
outlined in the following table:
Mode
Direct Sales/Export
Advantages
 No local presence required
 Low resource requirement
Agent or
Distributor,
Licensing
 No local presence required
 Access partner’s existing networks
 Improved after-sales support
Franchising
 No local presence required
Representative
Office (RO)
 Low-cost way of establishing a first
stage local office
 Good for liaison, marketing and
administrative activities
Joint Venture (JV)
 Benefits from partner connections
 Lower entry costs
Wholly Foreign
Owned Enterprise
(WFOE)
 100% equity
 Complete management control
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Disadvantages
 Limited client relations/after-sales
capability
 Only suitable for products with low
end-user footprint
 Partner training required
 Potential loss of marketing strategy
and client liaison
 Often requires multiple partners
 Limited control over brand and
requires trusted partners
 Cannot issue invoices or generate
profit – but is taxed
 Time and cost for establishment and
dissolution of entity
 Clarity over managerial
responsibilities resource ownership
required
 Exit strategy can be complicated
 Most costly and time-consuming to
set up
 Need to recruit talented staff
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Launchpad
 Low-cost way of establishing a first
stage local office
 Not taxed and simple to set-up/ exit
 Cannot issue invoices or generate
profit
Market Research
The China market is typically very fragmented in terms of logistics, local regulations, government priorities,
income levels, consumer preferences and so on. As such, it is important that companies go through a process of
market research before determining their market entry strategy and mode of entry. Undertaking market research
can help to provide you with a better understanding of the market opportunity, customers’ needs, route-tomarket, the competitive environment and to identify specific regions or market segments to focus on.
UK Trade & Investment’s Overseas Market Information Service (OMIS) can be used to carry out this research. As
well as helping you to develop a market entry strategy, OMIS research can also be used to identify local partners
and to make the necessary introductions.
Government & Regulatory Bodies
Navigating Chinese bureaucracy can seem challenging to companies with limited experience of doing business in
China. An understanding of the various government ministries and administrative units that oversee investment
and trade is critical before committing to the market. Chinese government departments can also act as soft
support to your enterprise in China.
For those foreign companies who plan to sell to market through direct sales, even with an agent or distributor in
market, independent knowledge of the function and responsibility of the General Administration of Customs is
vital. This government body supervises all imports and is responsible for customs and revenue collection. Other
bodies such as the State Food and Drug Administration may also be relevant when certain approvals or
registrations are required. MOFCOM and SAIC (see below) may need to be approached in order to gain domestic
sales licenses for certain product types and business sectors.
Foreign companies establishing a formal presence in the market need to know the function and responsibilities of
the following government agencies:
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Ministry of Commerce (MOFCOM) - For the approval of a business entity and issuance of certificate of
approval
State Administration for Industry and Commerce (SAIC or AIC) - For the registration of the business
entity and approval of the business license
People’s Bank of China (PBOC) - Governs Chinese Renminbi (RMB or CNY) transactions
State Administration of Foreign Exchange (SAFE)
State Administration of Taxation (SAT)
It may also be necessary to liaise with other government departments such as the Intellectual Property,
Environmental Protection, and Health Offices.
How CBBC Can Help
The CBBC member network is an invaluable source of support. It encompasses specialists in law, tax, HR, IPR, and
other operational issues. For more information on Setting Up In China, please refer to the following CBBC SME
guides:
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Setting Up In China Guide
Setting Up A Wholly-Foreign Owned Enterprise (WFOE)
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
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Setting Up A Representative Office
Setting Up A Joint Venture
Setting Up A Foreign Invested Commercial Enterprise
Finding and Managing Partners
Introduction to CBBC’s Launchpad Scheme
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