Staff

Putting Them In Control Of Everything
Yes, it may be very useful to have that ever-so-nice-and-efficient local Chinese person help you with all aspects of setting up your China operations, including all business licences, offices, bank accounts, handling all documentation and so on. The language and bureaucracy are almost unintelligible and you?re a busy corporate executive. But wait :

Is it normal business practice ? anywhere – to have one person in control of all aspects of your country operations ?

No, it isn?t. And with very good reason :

  • Their abilities may not stretch as far as international competencies
    Although they may in fact be honest and helpful, the way in which foreign companies have to be administered in China, and the reporting structures they have to go through, are very different from those that Chinese companies have to adhere too. In reality, foreign businesses in China face far more scrutiny than Chinese companies do. If your employee, good as they are, is not familiar with the regulatory aspects concerning operating and maintaining an international office or business in China, chances are there will be issues your company will immediately be out of compliance with. That can and does get expensive. Additionally, there are circumstances where the employee may deliberately keep the company out of compliance ? to obtain benefits or other leeway later if any argument arises against their favor later on.
  • Having one person in control of all your corporate documents and/or banking
    Very common. The risks are obvious. You can lose all your abilities to operate the company overnight if he/she decides to walk out of the door. Plus all your money.
  • Insertion of family and friends into your supply chain
    This is very common. You need to audit your purchasing and sales departments regularly to ensure employees are not placing orders with companies owned by friends or relatives that are then charging your business at rates well over the market odds.
  • Setting Up of Parallel Business
    In one particularly nasty case we were called in to investigate, two Canadian-Chinese were hired, having worked for the parent company overseas for several years, to establish a China manufacturing entity. This they did, however the China business never was able to attain anywhere like the projected sales, and had to be continuously funded from the parent to tide it over. A variety of ?market conditions?, ?competitor pricing? and so on were given as excuses. When, just before a new USD1 million investment was to be injected into the China entity, the parent decided just have a quick ?look-see? internal audit ? things started to become clear. The two trusted employees had established a mirror company, with similar sounding Chinese name to the international brand, and had been diverting all orders to that business instead. ?Local competitive pricing? indeed. From a business the staff themselves had established to compete with their employers.


To know more, the whole issue is available (after a free subscription) on China Briefing website with others archives
For more information on China’s legal and tax issues or to ask for professional advices in related matters, please write to info@dezshira.com

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