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How to Start Import Export Business in China
This guide will show you exactly how to start import export business in China.
Types of import export business in China
China business registration
So if you want to start your business in China and grow your profit, this guide is for you.
Let’s get started.
Chapter #1 Guide to start a business in China
Trading has been present probably since there have been people living on earth. We use the import and export process to transport entities from one place to another. It is all the reason we can buy varieties of foods, furniture, or items that come from everywhere else in the world.
Imports are products and services that are held from one country to another. On the other hand, exports are what you produce in your area to sell to other markets. As a result, it is vital to deal with the trade whatever type of process you choose.
A China trading company is one the most common industry form for overseas firms and global clients. The trading business in China plays a vast role in making the two processes cited above work. Based on the data provided by World Integrated Trade Solution (WITS), the China goods import ratio is at 17.34% of GDP. In contrast, the export rate is at 18.50% of GDP.
Furthermore, the trading partner China has a high rate of import export rate. Based on the data provided by OEC, “China largest trading partners” are as follows:
- South Korea ($136B)
- Japan ($128B)
- Australia ($111B)
- Germany ($107B)
- United States ($103B)
- United States ($429B)
- Hong Kong ($268B)
- Japan ($152B)
- South Korea ($108B)
- Germany ($96.9B)
It is wise to start an import export business in China. However, if you’re unsure where to start, this guide is for you.
What is a China trading company?
A China trading company is deemed the storage of a wide range of goods that come in various types to satisfy consumer needs. At the same time, they are a Chinese company that serves as a bridge for buyers and suppliers in the same area.
A Trading Company China also acts as the middleman that sells its products to buyers looking for them. What they sell is slightly higher than a Chinese manufacturing company most of the time. Since they also bought their products from multiple china manufacturing companies. Then, they branded it themselves.
The import business from China and export business from China is always thriving. China had exported at least 2.5 Billion USD and imported at least 2 Billion USD. Aside from that, the Shanghai port continued to be the largest port in the world, with over 43.30 million barrel rate.
A Trading Business in China used this rate to ensure that their business continued—but this is not solely the reason why. Most of these china businesses and Chinese in business know the right technique. Plus, they are aces when it comes to rules and regulations that will make all the processes easier.
A China trading company has similarities in their goals and how skilled they are. They deal with suppliers and china manufacturing companies in bargaining to make sure they get products at a lower cost then sell them higher for sale intents.
Why is the import export business in China important?
Importing and exporting items has evolved much over the years due to consumers’ demand for many things. The local and foreign market has grown too; this trading business in China became a profitable venture. Because of this reason, a small business in China and an overseas owner choose the import export business.
The pros of doing this kind of business extend not only to profit or even serve as an essence to big companies in China. They are important in the way that they aid the growth and expansion of the global market and economy.
Moreover, not all countries have all the resources, services, and products they need. But through importing and exporting, a country and people have the means to enjoy these specific commodities.
What are the areas of potential growth in China business market?
Doing business in China is the best way to earn and make your business known. Despite China being a tough market, we cannot deny that it can cater to any economic demands. At the same time, they are ready for economic transition, expanding their resources, and shifting to trends. They are also prepared to welcome firms, especially if they are a trading partner of China since they have a bigger GDP and market.
Based on the data provided by the International Trade Administration, because of how vast the china business sector is, there are many rooms of potential growth you can choose from. Some of these are Agriculture and Education.
Based on OEC, here are the top imports and exports you can consider.
- Crude Petroleum ($204B)
- Integrated Circuits ($123B)
- Iron Ore ($83.1B)
- Petroleum Gas ($47.8B)
- Cars ($43.1B)
- Broadcasting Equipment ($208B)
- Computers ($141B)
- Integrated Circuits ($108B)
- Office Machine Parts ($82.7B)
- Telephones ($54.8B)
Furthermore, the World Integrated Trade Solution (WITS) provided China largest trading partners for import and export in 2019.
- Korea (China goods import worth $ 173,553 million with an 8.39% partner share)
- Other parts of Asia (China goods import worth $ 172,801 million with an 8.35% partner share)
- Japan (China goods import worth $ 171,523 million with an 8.29% partner share)
- Unspecified (China goods import worth $ 130,726 million with a 6.33% partner share)
- United States (China goods import worth $ 123,236 million with a 5.96% partner share)
- United States (Export goods worth $418,584 million with a 16.75% partner share)
- Hong Kong (Export goods worth $ 279,617 million with an 11.19% partner share)
- Japan (Export goods worth $143,224 million with a 5.73% partner share)
- Korea (Export goods worth $ 110,985 million with a 4.44% partner share)
- Vietnam (Export goods worth $ 98,004 million with a 3.92% partner share)
To know how you can use the areas of potential growth, you must take note of the biggest companies in China and China manufacturing companies list.
Based on Companies Market Cap, here are the ten biggest companies in China:
Largest companies in China by market capitalization
- Chinese Company Tencent ($524.12 B)
- Kweichow Moutai ($364.95 B)
- Alibaba ($292.11 B)
- ICBC ($250.18 B)
- CM Bank ($199.65 B)
- CATL ($190.89 B)
- China Construction Bank ($188.44 B)
- Agricultural Bank of China ($159.47 B)
- PetroChina ($158.18 B)
- China Mobile ($143.90 B)
Based on Clutch, here are the ten China manufacturing companies:
Top China Manufacturing Companies
- MH Manufacturing
- NAO Labs
- China 2 West Services LTD
- Nansteel Manufacturing Co., Ltd
- Titoma Manufacturing NPI Services
- TIPLAS INDUSTRIES LTD MOLD MOULD MANUFACTURE
- WeLink Industry Ltd
Chapter #2 Types of import export business in China
Most of the largest companies in China rule the business and manufacturing sector globally. And China, too, is the largest exporter and the world’s second-largest importer, with an export value of $2 trillion and an import value of $1.6 trillion.
And as we’ve mentioned above, the top trading partner of China when it comes to imports are the United States, Japan, and Hong Kong. At the same time, its leading trading partners of China when it comes to exports are the United States, South Korea, and Japan.
Furthermore, when it comes to items, the biggest companies in China and China manufacturing companies industry that have the most profits are the following:
- Electrical and industrial machinery
- Furniture industry
- China garment factory
The import export business in China may appear as a confusing and intimidating environment. It is why it’s critical to know all of the essential parts before investing or starting a Chinese company.
There are three types of import export trading firms, which we’ll be discussing in this chapter.
An import export merchant, also known as a free agent, buys items from a china manufacturing company. Then, they will sell it back to different sectors all over the world. They don’t have a specific client and focus on one product or industry, so they are free to explore their market.
When it comes to this business type, there are several risks associated. Yet, the returns can be more significant with fewer third parties. However, compared to other China business types in this list, owners take all the duty for dangers and profits.
Export Management Company
An EMC is a Chinese company that handles all the shipping processes to any part of the world. They manage the exportation processes of a local that wants to sell the products in parts of the world but doesn’t know. Most of the time, their expertise is in the product and foreign markets. They are also paid through charge, salary, or retainers.
The EMC is also in charge of everything, such as :
- Hiring distributors
- Marketing operations
- Shipping logistics
- Invoicing clients,
- Handle marketing, ads, and promotions
- Oversees marking and packaging
- Manage budgets
Export Trading Enterprise
An ETC, on the other hand, determines the demands and supply by first knowing the needs of the buyers or desires. After that, they will identify the domestic supplier or a list of companies in China that are willing to export.
Note: An ETC gets rights to the products, and they work on a contract basis
Chapter #3 Starting a company in China
Suppose you want to import export business in China or a China trading company. In that case, you need to consider many things, the same with any other starting business. There are advantages when having finances, international dealings, and knowing the big companies in China. Because of this, it would help you minimize the risk and hurdles you’ll face once you start selling your products and services.
Strategy and planning
Anyone starting a Chinese company and wanting to be among the best company in China must examine and analyze. As we’ve noted, China is an attractive market. Still, if you don’t plan and strategize properly, you can end up losing profits.
First and foremost, you have to regard the following:
- Sector Structure
- Demands and supply of the products
- Your competitors and how to become among the China biggest trading partner
- How your china business adapt to changes
You also have to note the process of entering the China market, which seems to be easy, but in reality, not. Plus, is your chosen product fit to the import and export capabilities?
You have to reckon and figure everything through strategy and planning. In this way, you have a higher odds of competing among the largest companies in China.
Get the core of your Chinese company
One of the most important things is to know what you’re entering into. So before doing any field works to keep your Chinese company starting, first establish the core in order.
As you establish your core, register your company with the state where your office will be situated. You must also register a domain name, get any required permits, and so on.
Likewise, it would help if you had an effective business plan. It will ensure that you have definite rules and regulations and the markets and products you want to enter. For example, one of the products you want to export is alcohol—you’ll need consent from Tax Bureau.
The core of your China business will also affect your financial resources. The value of starting an import export business in China varies due to the type of business you start.
Choose China goods import export
Another crucial step is to know which product you need to export. You need to find a product or industry that you are willing to work with for the long term. But, the most important is a product that will become a hit overseas.
There are many resources online that you can use to develop a high-demand product list. First, you can utilize China’s sourcing services like JUSTCHINAIT to produce what you need.
Through these services, you can ask to give you a list of products china manufacturing companies that you can work with, and compare your business to the largest companies in china. It’s also possible that you can inquire about a list of the trading partner of China, how you can market through them, and shipping.
Second, you can use the power of the internet, China website, and social media platforms. For instance, you can search the international business in china or investment companies in china. Then you can study and research the list of top searches.
Third, you can contact local government officials or visit verified websites for more accurate results.
Finding suppliers are among the easiest step you can take. The only problem is you have to build close ties with them for the long run. Nevertheless, you can find a supplier on different China websites like Alibaba, Made in China, and Global Sources. And as we’ve mentioned, a China sourcing company will also help you find the legit and reliable one.
Identify the China business market
After you determine your products and suppliers, it’s now time to figure out your target and business market. These two are essential factors in knowing whether your business in China will succeed.
Your target market is whom you will sell your products. Hence, you have to recognize the trends, demands, and liking. Most of the time, the products that are starting to become popular have a more promising chance to be sold out in the future. These types of products are ideal for import export business in China.
There are pros and cons when you choose a popular product today. One of its pros is having a bigger target market and a chance to expand. However, many competitors are selling and marketing the same as you.
For example, you are planning to build an internet business in China. You will compete with many China internet companies, especially the largest one—Alibaba.
Selling and distribution
It would be best to know about the crucial aspects needed to boost your chance of succeeding in the foreign markets. The following are some of the top company ideas that you can choose from:
- Online business in China
- Niche Markets
- Online Retail
- Medical supply products
Set Product Price
Determining how much you will charge is vital before you start selling. Most import export business in China often contains two key notions, such as:
- The volume of units sold
- The commission earned on that volume
Importers and exporters have a 10% to 15% charge to their manufacturer’s original price. This rate varies depending on the markup and the fees that the consumer is willing to spend. However, you must remember that you do not want to set it so low that you will never profit or select the price above the range.
Figure out the shipping process
The shipping process is taking your products and selling them somewhere to the largest trading partner of China. Maybe, this is the most confusing and hard to understand before starting.
However, this will be easy if you hire a freight forwarder or shipping company like JUSTCHINAIT. They will serve as a logistic agent for your products. There were many benefits when you opted to use one, like saving you time and stress to all arrangements.
Some of their roles are:
- Handle the shipping arrangements
- Fix insurance
- Arrange the licenses, permissions, tariffs, and quotas for shipping in another country
Comply with all laws
Of course, when a product or service enters a foreign country, they are subjected to their laws and must follow them. Strict compliance with laws, legislation, and regulations is essential to smooth trade.
China is strict too when it comes to these laws; it is why there are many companies moving out of China. Because of the rigorous data privacy that the Chinese government regulates, international firms are relocating. These businesses have determined that the rules and reputational dangers exceed the benefits of being in such a large market.
Permits and Licenses
You need to check if the product you’re importing and exporting has an export license—for example, products such as chemicals and weapons. In this way, you need to get a license from a government agency.
Chapter #4 What to remember before having a Chinese company
List your skills and resources
To begin a thriving import export business in China, you need to have a strict approach and use your business plan. At the same time, you must commit your time and effort to plan, market analysis, research, and build ties. It’s also a must that you can invest in making your products and business effective to your target market and overseas customers.
Once you are done with research and planning, it’s time to sell them. However, this is where the hard part begins, since selling products to international clients is more complex than selling them to your location.
There are skills and knowledge needed to effectively make the importing and exporting business. Some of what you need to do are organize transportation and customs clearance. For beginners and start-ups, these concepts are hard to grasp. However, you can use a helping hand, such as a Chinese shipping company or agents.
Know how much your capital
These types of business can be demanding, not only in resources but also in funds. To start, you need to put up enough funds into many processes. Some things that need fund shares are product development, papers and licenses, and shipping. You also need to pay for your chosen Chinese manufacturing company, if ever.
Furthermore, you will also need to calculate the prices of all the products you will sell. There are lots of estimations, so you have more room to earn.
These documentations outline what should be included in your contracts and all the papers required for customs, transportation, and payment. These papers will be a big help in making sure that your firm will not have a problem once the operation starts.
Organized your papers
You have to know all the documents you will have. Because having the correct paperwork is vital in business in China. Missing or incorrect papers will also result in added cost, risk, and delays, affecting your company.
Therefore, you must know what kinds of paper is needed before starting and how it works. Even if you hire a freight forward or China shipping agency, you will still be liable for proper documents.
As noted below, an export declaration is needed for harmful products and can cause risks like chemicals and weapons. At the same time, these licenses also vary in the country to which you are exporting.
The export declaration specifies the type of products being exported and the destination country. Based on the Customs Law of the People’s Republic of China, the order and payment of duties may be handled by the buyer or the consigners.
However, these legal steps can also be done by the following:
- Customs brokers who have registered with the Customs
- Freight forwarder
Export products are zero rates because of VAT reasons. But it would help if you keep your VAT invoices and proof of export. It will help you prove that the items departed the nation and that you are not liable for any export VAT.
You must check the criteria, laws, and rules in your customers’ locations. their country agency might need paperwork for import and export such as the following:
- Commercial invoice
- Shipping paper, such as Airway Bill
- Certificate of origin
Without all these things, your products might not pass through customs.
Global trade and incoterms
Every nation has its own rules, language, and business culture. It is why you must have a clear contract, and you understand all the documents. And one form to achieve that is through global incoterms, to know what shipping terms are being settled upon.
- The location where you will deliver the goods
- Who is in charge of transportation?
- Who pays for insurance?
- The person liable for insuring the items
- Who is in control of customs processes
- Who is responsible for any duties and taxes
There are also different kinds of incoterms that you can choose from, such as:
- Cost, Insurance, and Freight (CIR Incoterm)
- Cost and Freight (CFR Incoterm)
- Delivered Duty Paid (DDP Incoterm)
- Freight on Board (FOB Incoterm)
- EXW Incoterm (Ex Works)
Chapter #5 China business registration
When you choose to put up your business in China, renting an office in the district where your business is based is necessary. However, based on Company Law, there are many criteria for various offices which you must look into.
Chinese company name
The name of the import export business in China should be formatted as follows:
- City of Formation
- Company Name
- Business Type
- Company Ltd.
Example: Shanghai ABC Consulting Co. Ltd.
A Proprietor is a person who owns or has a share in the company. This person needs to give a copy of the ID when checking the Chinese names of a company. At the same time, a company needs to provide a company license with an official seal.
Business bank account
Having a bank account is a must when establishing a business in China. As a rule of thumb, you need to open at least a Basic account, a Capital account, and a Foreign Exchange Account and label it as a China trading company. You have the option to open a bank in a Chinese or foreign bank.
There are four notable China banks that you can choose from, such as:
- China Bank
- China Construction Bank
- China Industrial and Commercial Bank
- China Agricultural Bank
Some of the foreign banks in China are:
China’s tax authorities require invoices (Fapiao) to pressure China businesses to pay taxes ahead of time. The China Accounting Standard (CAS) divides taxpayers into two categories. These are small-scale VAT taxpayers and general VAT taxpayers. A China trading company uses the General VAT Payer status most of the time.
Chapter #6 FAQs for starting a business in China
Is doing business in China earnable?
The import export business in china is a thriving industry. You can keep most of your earnings because of its low expense. However, building a Chinese company will need you to have the knowledge and funds to be effective.
What is an export and import license?
An export license is a document granted by the China government. For shipping items out of China, a permit is necessary. Without these, the customs will not clear your cargo. Importing products from China does not have any licenses. However, other products and classes need to have this, such as food.
What documents are needed?
The papers you will need vary, but you can not find some in the list below.
The following are the documents needed for importing:
- Commercial invoice
- Bill of Lading (B/L, BOL)
- Air Waybill (AWB)
- Packing List (Waybill, Shipping List)
- Pro forma invoice
- Certificate of Origin
- CITES Permit
- Import/Export Declaration
- CE Certificate
- Single Administrative Document (SAD)
- Fumigation Certificate (SAD)
The following are the documents needed for exporting:
- Bill of lading
- Commercial invoice
- Packing List
- Sales contract
- Proforma invoice
- AES filing
- Customs declaration
- Insurance policy
What is the business scope of a Chinese company?
In China, unlike in other countries, there is a business scope that is the Commerce Bureau of the district of the city or city where your business is. This business code is essential since it is included in the license and company laws.
If the company conducts business out of its scope, it will be held liable. Moreover, China Briefing sets some tips you can do when writing your business scope.
What are the biggest companies in China?
Based on the data posted by Companies Market Cap, here are some of the biggest companies in china:
Is registered capital a must when starting a company in China?
As the Chinese company law went into effect (after March 1, 2014), they will not require capital proof criteria for registered funds. It is why foreign investors can prove any even part of money under their facts.
However, the lowest amount needed for a China trading company is around USD 100,000. You can only become a general taxpayer in the Tax Bureau with this value.