07.10.2024
Business with China, in China and in Russia: business and legal aspects
China has become one of Russia’s leading trading partners, opening up new opportunities for entrepreneurs. Creating a joint business with Chinese companies not only improves the investment climate in the country, but also simplifies interaction with foreign partners. In this article, we will discuss the key legal aspects that should be considered when organizing business with China.
The main legal aspects
To successfully conduct business with Chinese companies, it is necessary to understand the basics of Chinese contract law. In 2020, China adopted the first Civil Code, which significantly changed the rules of doing business.
The Chinese prefer to sign paper contracts, even if the transaction is carried out over the Internet. This may include signatures, seals, or fingerprints. There are two main types of contracts in China:
- Partnership agreement: an agreement on a simple partnership where the parties jointly conduct business.
- Technical agreement: combines elements of a license agreement and an agreement for the performance of scientific research.
It is important to note that China does not have certain types of contracts, such as banking and insurance. In case of disputes, the decisions of the Russian courts do not apply in China. In such cases, you should contact the International Commercial Arbitration Court or the China International Economic and Trade Arbitration Commission (CIETAC).
Steps for Success in Business with China
1. Development of a business strategy
Usually, business in Russia begins with the purchase of goods in China for subsequent sale. Determine how the purchase will be carried out:
Wholesale bases: supply goods for subsequent sale.
Import companies: take care of all stages of purchase and delivery.
Intermediaries: often the most expensive option.
Direct purchases: it will require more effort, but it may be more profitable.
2. Defining a niche
Explore the market and choose less competitive niches, such as household chemicals or specialty products. Pay attention to consumer demand and trends.
3. State Registration
You need to register an individual entrepreneur (IE) or a limited liability company (LLC). For small turnovers, it is better to choose an individual entrepreneur, and for large ones — an LLC. Don’t forget to open a checking account for business.
4. Search for A Supplier
Popular platforms for sourcing suppliers include Alibaba and 1688. Participate in the Canton Fair to find new products and establish connections with manufacturers.
5. Supplier Verification
Communicating with a potential partner will help establish trust. Check the availability of licenses, documentation, and company history. We strongly recommend requesting a Proforma invoice to avoid unpleasant surprises.
6. Request for Documents
Before starting cooperation, you will receive:
Proforma invoice — a preliminary invoice for the product.
Packing list — information about each product.
A business license is a document confirming the legality of a business.
7. Payment For The Goods
Funds can be transferred through Russian banks or branches of Chinese banks in Russia. Make sure that the bank supports international transfers and check the fees.
8. Logistics and Delivery
Choose the best delivery method: sea, rail, road or air transportation. Consider the cost and delivery time when choosing the method.
9. Customs Fees and Documents
Do not forget to pay customs duties and issue all necessary documents for the import of goods into Russia. Prepare a declaration of conformity, certificates and other permits.
10. Checking The First Batch Of Goods
It is recommended to hire an intermediary to inspect the first batch of goods to ensure compliance with the stated standards.
Frequently Asked Questions
What are the specifics of working with Chinese partners?
It is important to record all the conditions in writing and avoid oral agreements. Take your time in negotiations and try to establish trusting relationships, avoiding discussing political topics.
Organizing business with China in Russia requires a careful approach and knowledge of legal aspects. YANG CONSULT International business law company is ready to help you with issues related to opening and running a business, as well as with legal support of transactions. We will provide reliable legal protection and support at every stage.
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