With management’s go ahead to set up this operation, I contacted the U.S. Department of Commerce to get any assistance they could offer. They had an office in Shanghai with which I made an appointment for discussions on my next trip to China. In addition, I contacted our corporate attorneys to see if they had any dealings with Chinese law partners. They also had a contact with a Canadian law company that had a Shanghai office staffed with both Canadian and Chinese lawyers.
With my export manager for assistance, we headed for China. We were joined in Shanghai by our new Chinese partner, whom I was determined to make an integral part of any planning we did. The meeting with the U.S. Commerce people was not too helpful. They basically told me to do all the things I already had done. First of all, find a good Chinese partner to work with. Then get together a workable business plan. We not only had all of this, but we also already had customers – the most important element of any business plan!
Our meeting with the attorney was much more fruitful. Here we discussed the nuts and bolts of what we needed to do to set up an office in Nanjing. The first thing we needed was an address, which we did not yet have. Then we needed to contact the local district office in Jiangsu Province, of which Nanjing is the capital. There we would get all the details of registering the company. We also found out that we could hire all our employees through the local district office, which would cover their payroll expenses including all their benefits. This would relieve us of having to finance an accounting department and administering all the benefits required by law.
The law office provided us with a draft agreement from which we could choose several variations. We agreed on the contents, and a draft was prepared for our presentation to the Jiangsu bureau. A young Chinese attorney was assigned to us to travel the next morning by train to Nanjing to begin the process.
The morning after our arrival in Nanjing, we began the search for office space. Our new Chinese partner had already started the process before our arrival and had several prospects ready for us. In addition, the attorney had contacted some locations in buildings that allowed foreign companies to occupy.
The beginning of our search was not very encouraging. Most of the possibilities were pretty run down. I was quite concerned about our image for our customers, and I wanted to hire the best people we could find. My belief was a modern, up-to-date office space would help on both counts. Finally, late that day we came to a brand-new tower building that was just opening in the heart of Nanjing. It was also the tallest building in the city. Since it was just opening, prices, as they always are in China, were very much negotiable, which our attorney handled well. We got a great deal.
The next morning we signed a contract, and we were under way. We visited the local bureau and set up our legalities and payroll account.
Next week:From sales office to a wholly foreign-owned enterprise (WFOE).
Business Planning - China (Part 3)
By Jack Marino