Compliance in China: 7 Important Steps for Your Business

by | July 12, 2018

Compliance in China: 7 Important Steps for Your Business

July 12, 2018

Compliance in China, is it even possible? Many foreign organizations active in China are in danger of breaking Chinese legislation. However, this risk is often not taken consciously. It is not a matter of bad intent, but rather because compliancy in China is the most difficult aspect to running a business in one of the most difficult business environments in the world.

 

Reasons why compliance in China is hard

There are both internal and external reasons to why compliance in China is so challenging. Internally it is hard because of language, habits and culture differences. Besides these more obvious differences, it is difficult because of the difference in administration, HR, and other departments regulations. Western people simply do not have the time to learn every detail of running a business in China.

Externally, it is hard because of the volatile regulatory landscape. Policies are created, implemented and changed again rapidly. If such policies are announced beforehand, they are announced in the Chinese language on Chinese platforms. Therefore, it is tough to see policy changes coming, and prepare your organization for such changes to make sure you stay compliant to these policies. Also, the implementation of the policies can be confusing, as new rules often are not clear for the regulatory bureaus themselves. For foreigners it is even more confusing.

The question you might ask yourself now: Is complete company compliance in China even possible? It will be a challenging task; however, any organization can take measures to make sure they are as compliant as possible. Furthermore, companies can make sure that they have measures and systems in place to always discover challenges as soon as possible. Here are 7 important steps you can take to make sure your business is compliant:

  1. Make sure your contracting, finance and admin is handled by professionals
  2. Make sure you have employees who speak Chinese & your language
  3. Create a flow of information relevant to your organization
  4. Create a compliance manual for your staff
  5. Create an interval to check every component of your organization
  6. Confident you are compliant? Triple check yourself
  7. When in doubt about your own compliance, check with a third party

 

Step 1: Make sure your contracting, finance and admin is handled by professionals

One way to make sure you are compliant is to make sure all business components are handled by professionals. This is obvious, and it is not difficult for big corporates and other large organizations to achieve. However as small/medium enterprise or a start-up, it can be financially challenging to involve a CFO or third party. We know keeping your spending in check is important in order to become successful as a smaller organization. However, hiring qualified financial and legal experts will save you a lot of potential trouble. Penny wise, pound foolish!

 

Step 2: Make sure you have employees who speak Chinese & your language

It sounds simple and straightforward. But we still run into foreigners trying to run their Chinese operations themselves. The easiest and most straightforward step to compliance in China, is hiring an employee who speaks Chinese and your own language. Of course, this employee should be someone you know and trust. It takes China experience to know what your staff actually thinks and what is true. However, this is a different issue and not directly related to staying compliant in China. Furthermore, hiring a local Chinese is also crucial to compliance, because it is obligatory for WFOE’s in China.

 

Step 3: Create a flow of information relevant to your organization

One of the most difficult parts of business in China correlates to the fast-changing business environment. China’s government is a fastmoving organization that implements policies, regulations and taxes at an incredible pace. Make sure that you hire someone who reads Chinese and is able to check governmental information bodies. It helps you to become aware of any changes which have an effect on your business and will help you stay afloat in the fast-changing environment.

 

Step 4: Create a compliance manual for your staff

Compliance in China is something all employees in your organization are part of and contribute to. Everyone needs to work on making your company compliant. A manual, which is interesting to read and is not too elaborate, will increase the chances of having your employees contribute to compliance. Present the manual in a way people want to read it. Consider connecting this manual to their Key Performance Indicators could even have a higher impact!

 

Step 5: Create an interval to check every component of your organization

Checking yourself once, as suggested in the final step, is important. Checking yourself on a regular interval is even more crucial. Because of the fast-changing business environment in China creating a compliance rhythm will be of high importance. Since all of your employees are involved in compliance, this check needs to be communicated throughout the company as well. Many of our most sensible clients, check their compliance in China at least quarterly.

 

Step 6: Confident you are compliant? Triple check yourself!

When we ask entrepreneurs and managers if their organization is compliant, many respond in a confident way. They feel they are running their business correctly and they seem to think they are compliant. However, acknowledging you might have a blind spot, is the first step towards running a compliant organization. 1421, a company assisting other companies in doing business with Chinese organizations, regularly have third parties check our own compliancy. Interested? Check yourself in 2 minutes!

 

 

Step 7: When in doubt about your own compliance, check with third party

When you have doubts about your compliance in China, or when you have listened to step 6, you do well in checking your compliance with a third party. Someone who knows about compliance in every part of your business and who has no issues with pointing out your mistakes. Such a check or scan will help you to identify risks and potential risks. Combined with the flow of information you create in step 3, it will make sure you will cover potential blind spots. 1421 Consulting Group has created the Chinable Business Scan for that purpose. Within 10 working days we provide you with full scan of the compliance within your China organization, uncovering all potential liabilities.

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What happened in the year 1421?

From 1421 to 1423, during the Ming Dynasty of China under Emperor Zhu Di (朱棣) the fleets of Admiral Zheng He (鄭和), commanded by the Chinese captains, discovered Australia, New Zealand, the Americas, Antarctica, the Northeast Passage; and circumnavigated Greenland.

Due to this endeavour we can conclude that “1421 is the year that the Chinese discover the world”.