Doing business in China 2023
«Five cases to learn from and how to mitigate risks and avoid conflicts»
During these 3 years of the pandemic in China, lots of businesses have been going through great changes. Most of these international companies have been highly affected by the uncertainty in the market, however, the real reasons might go beyond their expectation. Here are 5 horror movies:
- A sourcing company from the Netherlands doing business in China for 9 years, seeing how their sales went down in the last two years due to the pandemic (apparently), only to find out their Director in Shanghai had actually been selling their products to their client under a newly established company behind their back. We avoided a lengthy and costly litigation process by collecting enough evidence to pressure the ex-employee.
- An electronics enterprise from North Europe doing trading in China for a decade, after we conducted a financial audit, they found out their China subsidiary had been doing activities outside their business scope and selling products that are totally for different target clients, with high operational expenses that were reported to the headquarter as standard costs.
- A Spanish logistics company was running their business in China smoothly until they had to let go of one employee during the pandemic, who was not very satisfied with the compensation. The headquarters later found out their China office had unsolved matters with compliance regarding their human resources management, employment contracts, non-competition clauses, personal information protection, employees handbook, and liability risks, basically, they totally lost control of their team and negotiation power.
- A Chilean company in South China saw how their China office’s expenses were growing unusually high, including travel expenses, accommodation and meal reimbursements. We sent a team of accountants to their office to find discrepancies between their reported financial statements and the actual ones and offered the headquarters a periodic control system and trained their internal bookkeepers.
- An American investor with a Joint Venture here had a conflict with his Chinese counterpart after he found out she had a parallel business doing the same electronics products and got under the attention of their local tax bureau which now claims tax returns documentation that they cannot provide. We reached an agreement to separate one specific line of business into an independent company and sold shares to his Hong Kong Limited, and negotiated with their suppliers to find a common ground.
We dealt with all sorts of cases and almost got used to hearing them, unfortunately. These ones were related to Legal, Audit, HR compliance, Accounting and Company Structuring / Acquisition, however, there are many other stories involving other areas of expertise.