Many large international companies have been making investments in China. Indeed many of these large multinational corporations will write checks for millions of dollars to the Chinese government every month. For them it’s a win-win situation, not only do they get a tax break, but they also get an opportunity to invest in one of the fastest growing economies on earth. These are just a few of the reasons why these huge multinational corporations are lining up to take advantage of the Chinese economy. So how do they do it?
Many western companies to invest in China because they believe that they can manipulate and get access to markets that other nations are just beginning to tap into. In fact just recently in November the European Union proposed a law that if companies do invest in China then they cannot trade products in their own country or hold executive offices there. Could this law be used by those trying to take advantage of the Chinese market? The truth is, no company or leader can match the level of global reach and influence that a corporation can. In fact these companies have become so large and so important that they don’t want to be seen as taking advantage of the Chinese market.
So how do they make these investments? One way is by tapping into the huge State Owned Corporations in China. Many of these large State Owned Corporations have enormous financial resources thanks to the state involvement. They also have access to resources and markets beyond China that other foreign companies may not have access too.
This is where the third option comes in. Many countries throughout the world have made it illegal for companies to invest in China. In many cases this has been an effective measure because there are simply not enough markets outside of China for these companies to penetrate. On the other hand many companies try to circumvent the laws and find ways to invest in China, often using secret deals and shell companies. Many times these companies do not end up paying the required taxes either.
There are a few ways that a company can circumvent the law and still make an investment in China. For example many Chinese companies have large off shore operations. They often route their products through these countries rather than investing in China themselves. There are also Chinese manufacturers who produce and sell goods outside of China that can be leveraged to help create new markets in developing nations. Many times these products can be resold on the Chinese market once they reach a certain point and then be exported to these countries.
One of the easiest ways that Western companies to invest in China is by finding a Chinese partner that can finance and provide the tools that are necessary for them to do business in the country. Some of these countries have very strong free trade agreements with other international companies. China has been seeking out these types of relationships for years and now has many of them already lined up and ready to invest in the United States and other Western countries. Because of the importance of these relationships for Chinese companies there are actually quite a few of them around already. If you have your own Chinese partner, you can leverage this relationship with them to help you invest in China.