Expanding into China in 2010: what you should consider.

• Author: Brehm, Jill
• Position: GUEST column - Column

As the Chinese economy develops, more Colorado businesses are looking to China's large population and friendly business environment as a market to grow their sales. In fact, China is currently Colorado's third-largest export market, with Colorado businesses exporting $508 million of products to China in 2008.

While a large portion of Colorado exports to China are by the state's largest and best-known businesses, smaller companies can also benefit from expanding into the China market.

"Now that numerous multinational companies have established successful operations, we are seeing similar opportunities for small- to mid-sized companies," says Don Pangburn, a senior principal at GHP Horwath P.C. who has been providing accounting services in China since the 1980s. For those companies that decide to expand into China, the next issue to deal with is how to best distribute one's products to the Chinese.

DIRECT TO CONSUMER INTERNET SALES

While the Chinese have historically been wary of purchasing goods on the Internet, it appears that young people in China are becoming more willing to trust online buying. This is best illustrated by the success of Taobao.com, the Chinese equivalent of eBay, which is currently one of the hottest websites in China and the biggest e-commerce site in Asia. However, it should be noted that while e-commerce in China is thriving, the older generations have generally not adopted it as a means to obtain goods. While selling over the Internet may be a good option for those Colorado businesses whose products appeal to young people, it is probably not as good an option for others.

RETAIL SALES

Chinese laws and regulations issued in 2006 now allow companies foreign to China to establish wholly owned distribution entities through which they can distribute imported products. Although government-imposed limitations exist for certain products, this option can work for most industries. Setting up one's own distribution entity should be done with caution, however, because Chinese business regulations can be extremely complex.

We would advise that Colorado businesses entering the Chinese market this way only do so if they have an agent or trusted person in China who can help them communicate appropriately with the government and comply with all laws and regulations.

WHOLESALE DISTRIBUTION THROUGH A TRADING COMPANY

Because of the complexities of doing business in China, a...