Despite the fact that most companies had increased profit while doing business in China, there are some glaring challenges to counter when doing business there. This leads many prospective entrepreneurs probing on how to invest in China. Top on the list is the lack of talent and skilled labor that has seen the need for capable workers remain much higher than what is available in China. This cuts across the board from the professionals to the factory workers. The situation has led to inflation of wages as a result of the government trying to bridge the gap between the rich and the poor. Companies try to retain their current workforce against vicious competition. The turnover of employees is relatively high as workers leave for better working conditions and better pay. This definitely has an effect on the continuity of business as employers have to bring in fresh talent every now and then .The system of operation in China leans more towards a set way of doing things as opposed to the flexibility in operations that is commonplace in western firms.
The number two biggest challenge to doing business in China is the delay in business licensing which should essentially take a few weeks but often times take up to months for the process to be complete. This leads to a slow down of the pace of doing business and could cause discouragement in prospective entrepreneurs due to the bureaucracy that is involved. This goes for the rate of approvals for products as well. Even simple matters such as opening a bank account could drag on unnecessarily long due to irregularities in the application procedures. Instead of online applications manual procedures are still in use in China thus prolonging processes.
The increase in labor cost as well as materials and a rising inflation has an effect on doing business in China. The elevation in the cost of operation caused by an increase in wages at various categories is also a contributing factor to the difficulty in doing business in China. This is because it is more expensive doing business in China because of the operating expenses that a foreigner has to incur in the process. Then there is the inflation of the cost of materials in China which is a major concern to most people. These factors among others have seen foreign companies move their businesses out of China to other places.
Anyone wishing to do business in China will have to contend with the competition that is offered by the state owned projects. There are reports of heavy corruption in the way of effecting procedures most of which do not favor a foreigner who is keen on doing business in China. This is a further discouragement for prospective investors since there is little fairness employed in the running of business in China. A competitive tender might be awarded a Chinese firm mainly because of individual interest of a government hand or even corruption thus denying a chance to one who is more qualified to do the job on the basis of ethnicity. Having to further compete with other Chinese companies that are keen on making their products much better in order to sell them outside China is also a challenge to most prospectors who are keen on investing in China. The government favors local companies so much so over those of outsiders and this could serve to discourage foreigners from investing there. After all, there are no guarantees of merit in the way of getting business in China since the decision lies in the hands of the government representatives.
Language barrier has a role to play as well as most Chinese do not speak English even though there is a relative growth of English speakers of late. The Chinese are conservative and still follow the set way of doing things even among those who are learned. The language barrier has an effect of the person being unable to deal with fragile business negotiations. As a result of the cultural differences in running business there could be misunderstanding between the foreign company representatives and the Chinese side way down into the process of clinching a business deal. There needs to be an international team to bring understanding between the two sides otherwise business will be lost.