10 Steps to Starting a Business in China #3

Though the documents you'll need to register for a WFOE will vary from place to place, you can find an extensive list of what you might need, here.

Always prepare for a wildcard, though. "We've had local authorities say they want to see exactly what it will be we're manufacturing, so we bring it in," Harris says. "We just did one, and they required we write a legal opinion explaining how LLCs worked in the United States. We'd never had that before, but when it happens, don't fight with them, because you'll lose, and you'll waste time."

Application forms may also differ depending on who you're dealing with, so Harris says it's usually best to get it directly from the local authority.


7. Trademark your intellectual property.


Intellectual property violations are a big issue for foreign investors in China. Many U.S. manufacturers believe that because they have a trademark at home, it will hold up in China, but that's not the case. In China, the first person to register a trademark owns the rights to it, regardless of whether or not that person is the first person to use the trademark.

"Somebody could go register what you thought was your trademark," Harris says. "Then, when you're about to ship $3 million worth of product, and your product's held up at the port, you get a phone call from someone saying, 'You're using my trademark, and I'd like to sell it to you for $300,000 a year.' If you don't pay them for the trademark, your goods will never leave China."


8. Find a bank.

This part should be quick and easy, since there are plenty of banks with a huge presence in China. Try HSBC, which is based in Hong Kong, or Bank of America, which you can find all over the country.

"If you're dealing with a bank that doesn't have any relationship with banks in the United States, it makes it tough to keep track of your money," says Wong. "You want to make sure you have a bank in the United States and a bank in China that has some sort of corresponding relationship, so your banking is more transparent."


9. Hire a staff.

Hiring in China is a delicate process, especially when it comes to hiring managers. Don't assume that just because a person's English is impeccable they'll be able to run the business properly.

"If all things are equal," Frisbie says, "the language skills can be greatly beneficial, but it's far more important to have a smart business person in that role who's going to run the company the way you want it run."

In Hoffman's case, he tracked down a Chinese public relations professional and asked that she come out to the company's headquarters in Silicon Valley to learn the ropes for several months. She then returned to China with all the company's values and practices in mind and started the business.

"I think that really served us well," he remembers.

There are other options, of course. Try reaching out to human resources consultants and headhunting agencies in China, and don't disregard American-born Chinese or Chinese citizens who were schooled in America, either.

"Seriously consider using talent that's had some overseas experience that have been able to bridge the U.S. community and the Chinese business world," Collins recommends.

Good talent doesn't come cheap, according to the experts, so if you want the best, you have to be willing to pay them what they're worth.

"If you go to China expecting a deal, you'll be sorely disappointed," Hoffman says.

Once you have trusted managers in place, they should be able to assist you in hiring the rest of the staff. Remember, though, you need to have a contract for every employee you hire, as well as an employee manual. Without either, says Harris, "it may become nearly impossible for you to fire anyone."

"In China, you need a reason to fire someone," he explains. "That reason needs to be set down in your employee manual, otherwise your ex-employees can sue you for a lot of wages."


10. Take it slow.

Now that you're all set up, you have to manage expectations. If Hoffman's story about the recruiting ad proves anything, it's that things can move slowly in this fast-growing country.

"If you don't leave your Western lens behind, it can be frustrating," Hoffman says.

Don't jump into quick business deals just to turn a profit. It takes time to build business relationships over there. "It's much different than the U.S. in regards to the amount of time that's spent developing the business relationship before the actual deal is consummated," says Wong.

What will win you success in the Chinese market is patience. "The Chinese have been doing business in a certain manner for thousands of years. Don't even start to think for a millisecond that you're going to change it."