• International
    • International Trade

Trading with China – what you need to know

  • Article

Considering expanding your business into China, but unsure of the opportunities and challenges it presents? Alice Du, Head of China Desk, HSBC UK addresses some key questions that may help.

1. Why China?

By 2030, China looks set to overtake the US as the world’s largest economy. Its recovery to pre-pandemic levels of growth has been remarkable and it is emerging as a key player in global trade. The signing of the Regional Comprehensive Economic Partnership, which includes China and 14 other member states in the region, has created the world’s largest free trade bloc. A large population and high levels of skill make this a strong contender for inward investment.

It is also one of the easiest countries in the region to do business in, according to the World Bank, and China has made concerted efforts to streamline new business registration and corporate tax payments, for example.

2. Where are the opportunities in China?

In the most recent 5-Year Plan endorsed by the National People’s Congress, China has pivoted towards supporting increased domestic consumption. A growing and affluent middle class, and increasing urbanisation presents new opportunity for sectors focused on consumer goods, healthcare and education.

Technology and the Green revolution were also highlighted in the 14th 5-Year Plan, with policy incentives for investment in wind, solar and hydro power likely to emerge. China also plays a key role in the global supply chain in electronics. Meanwhile, manufacturing, biotechnology and pharmaceuticals, and digital technology continue to be strong sectors.

3. Is China open to foreign investment?

In 2021, China overtook the US as the top spot for new foreign direct investment. It follows a number of measures designed to promote FDI, such as the creation of free trade zones and a new foreign investment law in 2020. It is designed to provide greater safeguards for foreign investors and to support a more level playing field between domestic and overseas entities. It is also now easier to move money out of China through inter-company loans, for example, with regulatory approval.

The Renminbi has been transformed into an international currency in recent years, highlighting China’s desire for a more active role in the global economy and its burgeoning economic strength.

4. What are the main differences to be aware of between doing business in China and doing business in Europe?

Despite an evolution in regulation, there is still a high administrative burden for businesses operating in China. Purely from a banking perspective, for example, different accounts are required to meet different needs. They are also quite digitally advanced compared to Europe, so e-payments are much more the norm. HSBC’s long history in China means that we’re in frequent touch with regulators across the country to ensure our solutions are compliant with the most up to date requirements, which reduces that risk burden for our customers.

5. What do businesses need to be aware of?

China is a vast country and different sectors/industries are stronger in some regions than in others, so it’s worth thinking about where you want to base your operations. Regulations also differ locally, so working with experienced advisors who can help you interpret them is really important. A regional approach or one that starts out in one of the largest cities may help when you’re first entering the market and working with an agent, partner or distributor can be a useful way into the market.

Communication is perhaps the most difficult thing that overseas investors and businesses encounter, which is where working with a bank like HSBC that has a huge market presence and decades of experience can make a real difference.

If you’d like to discuss your plans for expanding into China in more detail or to find out more, please contact your Relationship Manager or take a look at our International Business Guide for China

US acquisition – key learnings from overseas growth

Expanding overseas may be daunting, but the rewards can be impressive. Tony Conophy, Group Finance Director at Computacenter, and Jim Tindol, Vice President, Finance, Computacenter US, share their experience of the US market and their key learnings.

Managing your risk trading overseas

Trading overseas can offer great opportunities for your business, but it can also increase your risk. Watch our video to find out how our trade solutions can help you manage that risk and benefit from international trade.

How to streamline your trade

Businesses can access great opportunities trading overseas, but it can also lengthen your trade cycle and place additional strain on your cash flow. Watch our video to find out how our trade solutions can help you manage your cash flow more effectively.

Need help?

Get in touch to learn more about our banking solutions