Selling, Licensing and Distributing Products and Services into China

I have been writing too much about foreign companies looking to leave China and not enough about foreign companies looking to get into China. For the last few months, the work lives of the international lawyers at my law firm have been tilted towards those looking to leave China, rather than to get into China, for the following reasons:

1. For every phone call or communication we get from a new client, we get 5-10 from existing clients.

2. Existing clients do not call us to say “everything is going great in China, let’s talk again soon.” That is not the nature of the lawyer-client relationship. They usually call us to say, “we have this China problem, can you help us?” Or, “we are making this major change involving China, can you help us?”

3. The overriding problem our existing clients have with China is the US-China trade war. It is important to note that this is true of our European, Australian, Canadian, and Latin American clients as well, because so many of those clients import made in China products into the United States.

But at the same time, the number of companies contacting us to do business in China (including US companies) has been much greater the first nine months of this year than the first nine months of last year — by every metric. In other words, as one door is closing, another is opening.

I was reminded of this after reading Easier to Import into China? The article answers its own question with “Two parts YES, one part NO,” which translates to an overall “YES.” The article begins by discussing the “flood of announcements from China’s government” on how China wants to import more and how it is moving to make imports easier. It then notes how China is easing its lending requirements and that means Chinese companies are engorged with cash. All true.

It then notes how the following have increased and will continue to increase Chinese imports:

1. Streamlined customs clearance procedures to get product through faster.

2. Investment at ports and airports will reduce logistical costs.

3. Tariff reductions will reduce end user prices by almost US$10 billion.

3. As trade ministers visit China, they are increasingly handed agreements to take back with them that open up access for products from their home market. For example, over the summer visits by Ministers from the UK led to announcements of the opening up of Chinese markets to UK dairy and beef products

4. Moves to make cross border e-commerce into China easier is an important move for many SMEs, for whom the cost of exporting to China was previously prohibitive. The development of free trade “ports” to hold product in China duty free, the new e-commerce law holding e-commerce platforms accountable for counterfeit products sold on their platforms, and the upgrading of teams within Alibaba and to reach out and market to potential exporters to China in dozens of countries globally have all helped SMEs to get to market at lower risk.

Now is a good time to be a seller of foreign products and services into China.

Our China lawyers are seeing how China’s import push is impacting foreign companies. The direct impact shows up with more foreign companies looking to sell into China and more companies seeing their China sales rising. The indirect impact shows up with more foreign companies doing brand and technology licensing and distribution deals with Chinese companies seeking to leverage foreign technology and branding to their own Chinese customer base. My law firm has seen a phenomenal increase in legal work for foreign companies doing licensing and distribution deals with China.

So though many foreign companies that manufacture in China are feeling pain these days, foreign companies that sell in China or sell into China are thriving.