Retailers and brands heading for China need to be aware of the market’s unique “rules of engagement” according to trade show founder Jina Park.

Park, CEO of Plush, a luxury baby and toddler trade and consumer show, says there are always challenges to doing business in a foreign country. And each has its unique business challenges and opportunities.

So she has shared some rules of engagement from her experience in establishing the show and working with exhibitors…

1. Beware the copycats.
Products can potentially be copied and even replaced by Chinese manufacturers. If an exhibitor’s product is heavily dependent on costly R&D, with constant upgrades and revisions, staying ahead of Chinese copies can be a profitable, but frenetic endeavor. A product’s shelf life ranges from six to eight months before rip offs appear and huge reductions in product orders occur. If business owners have a product that they don’t think needs revisions or upgrades, the product can be copied, revised, and finally replaced. Chinese manufacturers copying the product can replace it by flooding the market and advertising it as their own.

2. No limits.
Big brands are not off limits. As seen with ‘Welcome to China’s Fake Apple Store’, just because a brand may be big in the US does not mean it cannot be copied.

3. The cash challenge.
Be aware of how difficult and costly it is to transfer money out of China. Have a strategy to get the money made in China, out of China. The ideal scenario would be to hire a Chinese attorney to set up a business identity in China and open a business account in a Chinese bank. At the very least, a bank account in Hong Kong with an international bank that has branches in the US should be acquired. China also has its own Internet and a near-impenetrable firewall. Therefore, any proceeds from Internet sales a company may make in China will be sent to the Bank of China for processing until that company pays the bank fees to wire their money out of the country. There is no Paypal, Ebay, or credit card processing avenues with Internet sales in China.

4. Avoiding double tax.
Having an entirely separate Chinese business entity avoids the double tax. US companies without a valid Chinese entity, are taxed in China as well as in the US for every dollar made in China.

5. The importance of sponsors.
Find a sponsor or benefactor in China. It is important to have a powerful, high-up contact in your network who is involved with the Chinese government. This way if anything goes wrong, a trusted source can look after the company’s wellbeing.

6. The shipping challenge.
International shipping must be taken into account. Remember that business owners may have to ship products into China and will need to quickly be educated on the methods. Hiring a third-party freight forwarding company that can handle all shipping necessities can help with the shipping laws and nuances, but the costs are astronomical. Piggybacking is a great way to save money but it may deter from time efficiency as it can take months to ship goods. There is an alternative option of hiring a personal shipping company, but business owners must be ready to front a 20 per cent deposit for the shipping, and pay other upfront fees including insurance charges, post bonds and pay demurrage fees. These are the charges a company’s shipment pays as it waits in line at the port of destination. Daily rates can cost anywhere from $8000 in China to $18,000 per day in Hong Kong. Shipping companies also have large minimums of 20,000 tons, but prefer working with 50,000 tons a month for a two-year contract.

7. The success equation.
Success in China is an equation. To be successful in China, businesses must take into account the time spent traveling, working, and potentially even living in China. All of this comes as additional costs to those spent on setting up bank accounts, business entities, hiring lawyers, and shipping products. Setting up a business in China is all part of an equation that business owners must be willing to pay for success.