Creating your Chinese marketing business model

You are not ready to commit to the Chinese market, but you know there is

interest for your product and/or services and you just want to get started in

an easy, non-committal, minimum capital investment way. This session is going

to provide you the legal in’s and out’s of marketing your product and/or services

in or outside of China and the pros and cons associated with each.

How effective is it developing a China marketing strategy from home versus in China
There is no right or wrong answer, BUT it is important to understand what choices you have in order to build and develop an appropriate strategy for your business.  By all means begin your market strategy from your home jurisdiction. Try and outsource as much as you can initially, but eventually at some point in the future (i.e. your long-term strategy) you will probably want to be local and be in complete control over everything.

Determine the legal structure that fits your business activity and your commitment level

Here are the following options available:

  • Company in the home jurisdiction - Doing it alone!

  • Using a distributor locally in China that handles your marketing and sales needs

  • Outsourcing to a marketing and branding agency to handle your market and sales needs

  • Hiring an individual from your home jurisdiction to be placed on the ground in China

  • Hiring an individual via a local agent to be placed on the ground in China
     

From a legal standpoint, there are several types of business structures that can be set up by foreign investors in China – the most common being a Limited Liability Company, or LLC. A LLC is an independent legal entity owned by one or more shareholders. A business wishing to trade under a commercial or industrial license (including trading, ecommerce, industrial and manufacturing activities) must form one to set up a company in China. A Representative Office (RO) may be suitable for businesses looking to establish a short-term presence in China with no need to generate revenue, or for very limited sourcing ventures.

The tools needed to market in China and the administrative requirements

WeChat – the official branding and marketing tool
 

  • Opening an official WeChat account via your overseas company
    Tencent has a case-by-case application process for companies wanting to create a WeChat Official Account. It’s a longer application procedure (about 2-3 months) and costs approx. $1,120 USD for the first year and approx. $120 USD for subsequent years.  It has the great advantage of enabling you to create an account entirely controlled by your oversea structure. This process removes the risk of temporarily relying on a third party structure which has control over your followers 
     

  • Opening an official WeChat account via a 3rd party
    Your account will have your name, description and logo, but will still be linked to the legal entity which created the account. This is a good way to get started fast. If things go well and you decide to later create a company in China (which will then be able to create a new account), you’ll be able to transfer your followers to your new account.
     

  • Opening an official WeChat account via a Chinese company
    Most of WeChat Official Accounts are created using a local Chinese Business License (on the WeChat Official Account website: https://mp.weixin.qq.com). The main requirements to create such an account are: Business license of a company in China. Access to the bank account of this company (the verification fee has to be paid by this company, or a small amount is sent to the company as a “verification code”). The Chinese ID of a mainland China citizen with a WeChat Payment account linked to his/her bank card. It takes around 1 to 2 weeks and the only cost (if you handle it on your own) is a 300 RMB (USD 50) verification fee.
     

Requirements for registering a Chinese domain name (.cn)

A Chinese domain name is a distinct online identifier representing the registrant’s value and orientation in China. A foreign company that has set up its business network in China, e.g. a branch company, representative office, distribution channel etc., or is planning to expand its business into China soon, may deem a Chinese domain name containing the company's brand name or relevant keywords an important way to enhance its corporate image and succeed in the market.

The China Internet Network Information Centre (CNNIC) is the official Chinese government body with this responsibility. The CNNIC is a non-profit organization with English and Chinese language capability authorized by the Ministry of Information Industry (MII) to operate and administer China's domain name registry for China's country code Top Level Domain known as ".cn". Based in Beijing, all .cn domain name registrations are centralized through the CNNIC.

More than 60 registrars are accredited by the CNNIC to undertake the registration of ".cn" Chinese domain names. Applicants can choose any one of those local registrars to carry out the registration in the People's Republic of China. Some foreign applicants, e.g. Canadian companies, may find it more convenient to turn to the accredited overseas registrars authorized to register .cn domain names outside of China. In these instances, companies should contact CNNIC's overseas registrars or overseas partner.

After the submission of the domain name registration form, approval is fairly straightforward, as long as the domain name has not been registered and the related company exists (the .cn domain names are not for personal users). An important point to note is that brand name or trademark registration in China is independent from domain name registration and is administered by the Trademark Office of China (CTMO) (in Chinese only). Both registrations are on a first-to-file system. Applications from non-Chinese nationals must be made through an accredited agent. Registration for ".cn" domain names is based on the "first-to-file" principle. Some multinational corporations operating in China, e.g. Samsung, Motorola, etc. have registered a number of ".cn" domain names (even in the hundreds) that contain the keywords of their brand names or trademarks in order to secure their distinct identity and avoid them being registered by others.

Where is the best place to host your website?

A website hosted and operated from outside of China requires no specific licenses in China. China’s Internet regulations are not there to regulate the operation of foreign-hosted websites. For companies that continue to use their website outside of China – meaning the servers are outside mainland China be assure that there is no requirement to secure specific licenses in China.  HOWEVER, a website hosted outside of China which seeks to cater to the Chinese market may be subject to other challenges, such as: increased slowness and dormancy and the potential of having China’s Firewall acting as a true barrier to gaining access to the site.

China’s Firewall is supposed to be centered on blocking ANY undesirable local and/or foreign website, however, the standards for blocking sites are not transparent, and some sites may be readily available one day, but not available on another day. Websites are particularly susceptible to targeting by the Great Firewall if they contain content that could be deemed politically or socially sensitive. For example, websites that appear to rely on Google APIs or resources may be difficult to access from China, or a website may be blocked because it contains a word which is on the unpublished blacklist used by China’s Firewall’s filter. Restrictions tend to be tightest around the time of politically significant dates.

Compared to a website hosted outside of China, a local website hosted within China can be faster and more stable for end-users in China. HOWEVER, a website hosted within China is also subject to the full Chinese licensing regime.

ICP License versus ICP Filing

A company operating a website within China needs to obtain an Internet Content Provider License (“ICP”) or complete an Internet Content Provider Filing, depending on the activities and usage of the website.

Under Chinese law, a company that provides “commercial internet information services in China” (i.e. generates revenue or makes a profit from internet information services – an ecommerce site) must secure an ICP license to carry out its business, while a company providing “non-commercial internet information services in China” (i.e. the website is utilized purely as a marketing tool – a non-commercial website) only needs to complete an ICP filing. 

In both scenarios the websites must have registered domains in China and require a Chinese-registered company to initiate these applications. To clarify this means that your Representative Office, Wholly Foreign Owned Enterprise, Foreign Invested Enterprise, Joint Venture within China will be the entity OWNING AND PURCHASING the domain within China from a Chinese domain-supplier. It is important to note that currently regulations state that only Chinese nationals and Joint Ventures with foreign shareholding not exceeding 50% are qualified to apply and secure an ICP license, which is used to provide information services “for profit”.

Simplified Conclusion – Do it from home OR do it in China?

- Do it from home if you are looking to test the market, research the market and you have no need to generate revenue – you are agreeing to give control to 3rd parties/individuals
 

- Do it in China if you want to generate revenue and trade locally under a commercial or industrial license – you are committed to the market and at this point take full control
 


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DISCLAIMER: All information in this article is verified to the best of our ability and is assumed to be correct at time of release; however, Woodburn Accountants & Advisors does not accept responsibility for any losses arising from reliance on the information provided within. The information provided is for general guidance and does not replace specialized advice.

 

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