Business is booming in China – in the last three decades it has grown to become the world’s largest economy, and this presents a huge opportunity for UK businesses thinking of exporting to China.
Jaguar Land Rover is currently the UK’s biggest export to China, and if you’d like to join it and become one of the many UK companies doing business in China, here’s all you need to know…
The pros and cons of exporting to China
There are a many UK companies now operating out of China, Jagaur Land Rover being the biggest exporter, and there are many strengths to the market, including:
- Flourishing business base
- Strong government investment programme
- Largest Information and Communications Technology (ICT) market in the world
- Over 160 cities of 1 million+ inhabitants with new cities emerging
- Coastal areas developing into sophisticated urban clusters.
And the benefits to UK businesses exporting to China include:
- Largest country in the world by population
- Fast growing consumer market
- Growing number of middle income consumers
- Close proximity to Asia Pacific region and economies
- Marked growth ensured by Chinese monetary policy
- Forecast to become the world’s largest luxury goods market by 2020
- London being positioned as a developing centre for Chinese currency business.
Exporting to China is not without its problems though, and you’ll face some unique challenges, such as:
- Large parts of the economy are still closed to full foreign participation
- Strong competition from well-resourced and positioned state-owned enterprises
- Finding and retaining the right skills in the local workforce
- Complex business culture
- Language barriers
- Need for patience to build up trust and networks
- Significant time difference
- Weather extremes across the country and high levels of pollution in certain urban centres
- Anti-monopoly legislation used against foreign firms
- Bribery and corruption.
The top five industries exporting to China are:
Industries importing into China
- Electrical machinery and equipment
- Mineral fuels and oils
- Machinery and mechanical appliances
- Medical, optical, photographic, cinematographic, measuring and precision equipment
- Ores, slag and ash.
If you’re doing business in China, you’ll need a reliable and cost-effective conference call provider to help keep in touch when travelling isn’t an option. Here’s How to set up a conference call between the UK and China.
And remember, you can now screen share and video conference, using Crankwheel.
Tax and customs in China
The UK has a double taxation agreement with China, so tax isn’t paid twice – once in each country – on exported goods and services.
If you’re VAT registered you can zero-rate the VAT on most goods you export to China. In order to benefit from this, you’ll need to get evidence of the export within three months from the time of sale.
All service companies generating income in China or with consumers based in China are subject to Chinese taxes, unless exempted by Chinese regulations. And if you set up offices in China then corporation tax will apply at the following rates:
- Enterprise income tax: 25% (rate for SMEs under Chinese law is 20%)
- Business tax: usually 3% or 5%
In order to export goods to China, you need to make export declarations to HMRC through the National Export System (NES), and must must classify your goods as part of the declaration, including a commodity code and a Customs Procedure Code (CPC).
Importation of goods into China can fall into 3 categories:
Chinese customs are based upon a valuation database which lists the values of several imports based on international market prices, foreign market prices and domestic prices. Importers’ values are generally accepted, but will be recalculated but if they don’t tally with the valuation database.
If you’re temporarily taking goods into China, you can use an ATA (Admission Temporaire/Temporary Admission) Carnet to simplify the customs procedures.
Image from Pablo by Buffer.