The JLJ Group Solutions for China Entry & Growth 2011.

The JLJ Group

Solutions for China Entry & Growth

2011

Copyright @ 2011 The JLJ Group. All rights reserved.

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FIVE SERVICE LINES ASSISTING START-UPSThe JLJ Group – Solutions for China Entry & Growth

One-stop service provider assisting companies to enter & grow in China

Consulting

Market Research & Consulting

Set–up advisory, Corporate Formation, site location

Executive Search & staffing solutions

HR Payroll Outsourcing; social benefits, etc.

FDI Recruitment HR Services

Div

isio

nF

ocu

s

Tax & Accounting

Corporate tax and general accounting services


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JLJ CHINA ENTRY & GROWTH MODEL

Research

• Investigate the market • Establish a presence in China • Grow in the China market

Entry Growth Client’sStages

JLJ Services

• Market Research & Assessment

• Market Strategy Consulting

• Regulatory Environment Analysis

• Partner Search & Due Diligence

• Location Search

• Market Research & Assessment

• Market Strategy Consulting

• Regulatory Environment Analysis

• Partner Search & Due Diligence

• Location Search

• Entry Strategy Consulting

• Location Selection

• Corporate Formation

• Human Resource Planning & Setup

• Tax & Accounting Planning & Setup

• Entry Strategy Consulting

• Location Selection

• Corporate Formation

• Human Resource Planning & Setup

• Tax & Accounting Planning & Setup

• Market Research & Analysis

• Management Consulting

• Human Resource Management

• Market Research & Analysis

• Management Consulting

• Human Resource Management

Market Research & Consulting ▪ Corporate Formation ▪ Accounting

▪ Recruitment ▪ HR Payroll Outsourcing


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Foreign Companies

OUR FOUR-CATEGORY TEAM

1. Western Professionals

• Need professional services• Used to International standards

• International cultural, education, experience• Experienced first-hand cultural shock

• International/Chinese education & experience• Speak both cultural “languages”

• Used to local business practices• Drive results “the Chinese way”3. Chinese Local Managers

2. Chinese Returnees

China business environment / Chinese Gov’t Bureau

• Fast changing and bureaucratic, requires local knowledge…


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1) Consulting Services

2) Legal Setup / Corporate Formation

3) Headhunting for executive team

4) Payroll and Accounting Outsourcing

FOUR KEY AREAS JLJ CAN HELP COMPANIES IN CHINA


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Investor search especially important for small startups with innovative technolgies or ideas

Similar methodology for other partner search projects

Step 1:

Preparation

Step 3: Introductory

Meeting Setup

Step 3: Search Execution

Initial Scan In-depth study of potential partners

Step 2:

Project Setup

• Identify criteria for potential investors

• Scan market for potential investors meeting initial criteria

• Contact investors to discuss potential project, gauge interest on investors side

• Conduct business due diligence on investors

• Target most promising potential investors and set up face-to-face meeting

• JLJ attends initial meeting to provide support

Ongoing JLJ analysis

• Work with client and understand background of products, types of funds needed, etc.

ASSIST IN IDENTIFYING VC/ANGEL INVESTORSConsulting – Case Study (I)


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MAPPING SYSTEM AND IDENTIFYING PARTNERS TO COMMERCIALIZE TECHNOLOGY

Consulting – Case Study (II)

Company X

Technology Testing

Platform

Foreign Incubator / Gov. Org.

State Owned

Company?

Technology Successful

Technology Unsuccessful

The “China Scale” can be massive; small companies may need support from larger firms to commercialize technology


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DETERMINING LEGAL SETUP CRUCIAL STEPComparison of Legal Setup Options

Incorrect legals setup can lead to lost time and money in the mid-long term as well as possible fines from the government

Entity

Business Activities*Tax

Treatment

Registration Process

Import ExportDomestic Commercial Activities

Service Activities

Manuf. / Assembly

Min. Reg. capital**

Duration of entity#

Potential future expansion†

Reg. Com-plexity

Rep. Office N/A 1 Year

Services WFOE 30,000 30 Years

Manufacturing WFOE

30,000 30 Years

Int’l Trading WFOE

30,000 30 Years

FICE 30,000 30 Years

FICE - Manufacturing

30,000 30 Years

(*) Denotes business activities from which revenue can be generated(**) Figures in RMB; reflects minimum as required but does not guarantee approval(#) Represents maximum duration of approval by the government

= Ideal = Prohibited


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Shenzhen

Xuzhou

Yangzhou

WuxiLiyang

LOCATION OF COMPANY SETUP IMPORTANTExample: Analysis of Key Competitor Locations of Company X

Looking at key customer locations and even competitor locations important; customer base and supply chain established

ShanghaiSuzhou

JIANGSU

GUANGDONG

Source: JLJ analysis based on multiple sources including company websites

Competitor Competitor

CompetitorCompetitor

Competitor


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JLJ (HUIJIE) ABLE TO FILL KEY ROLES OF COMPANIES BEGINNING CHINA OPERATIONS

The “right” leadership at the start can make a difference in the success or failure of a company in China

Foreign Management(Located Overseas)

Team Member Team Member Team Member Team Member

Who will be your China GM?


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ACCOUNTING & HR SERVICES ALLOW COMPANIES TO FOCUS ON CORE BUSINESS

Outsourcing allows experts to take care of peripheral business processes

CORE BUSINESS

Technology

R & D

Sales & Distribution

Assembly

Etc…

Peripheral Business Peripheral Business

HR Services Tax & Accounting

• Labor Contract

• Visa (foreign staff)

• Payroll

• Social Benefits

• …

• Tax registration

• Tax compliance

• Book keeping

• FS generation

• …


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EMPLOYEE COST CALCULATION

Employer’s share of social benefits

Employee’s social benefits

Employee’s taxes

Net salary

Employer's total expense

Gross salary

Net salary

0

Add 1,329=44.3%

3,000

2,314.45

Subtract 669=22.2%+3

Subtract 16.55

Components Example

Employer’s and employee’s share of social benefits and individual income tax

4,329

The “right” leadership at the start can make a difference in the success or failure of a company in China

EXAMPLE


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SEVERAL KEY STEPS FOR COMPANIES’ SUCCESS

Understand the market

(Research)

Setup Proper Legal Entity

Have the right Leadership in

place

Focus on Core

business

1. Have the right vision and plan2. Invest appropriately

3. Choose the right partners


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FUNDING ALWAYS AN IMPORTANT FACTOR

APEC may be able to asist through special funds in key areas as well as provide other incubation services


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Shanghai OfficeSuite 603-605

Oriental Center

699 Nanjing West Road

Shanghai, 200041 China

Tel: +86 21 5211 0068

Fax:+86 21 5211 0069

Beijing OfficeSuite 2002, Building 1

Blue Castle International Centre

3 Xi Dawang Road, Chaoyang District

Beijing, 100026 China

Tel: +86 10 6582 0268

Fax:+86 10 6582 0251

THANK YOU FOR YOUR ATTENTION!

China Offices:

[email protected] www.JLJGroup.comShanghai • Beijing • Boston • Milan


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WHAT ELSE CAN WE DO? Examples

Provide basic advice on various China-related issues such as:• China market entry & growth strategies• Regulatory updates relevant to foreign investments• Market trends in key industries

Share experience & expertise at events

Contribute relevant articles to print/online publications

Provide regular information and updates of developments in China

Host delegations visiting China

Launch joint research projects on specific topics/industries in China

Coordinate meeting for trade missions or delegation

…


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JLJ PARTNERED WITH SEVERAL CHAMBERS AND ORGANIZATION


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BUSINESS REGISTRATION FLOW CHARTCorporate Formation

Company’s Chinese Name Approval

Approval to Establish Company

Registration of Business License

Stage I: Licensing

Filing and Carving Seals*

Foreign Exchange Approval

Open RMB & Foreign Currency Bank Accounts

Capital Verification

Statistics Bureau Registration†

Enterprise Code Certification**

Registration with Tax Bureau

*Official company stamps required for many business and banking transactions in China **Equivalent to a personal identification number for the licensed company •† This process can be completed at any stage following foreign exchange approval and registration with the tax bureau

Stage II: Post-

Licensing

Update Business License

Stage III: Post-

Capital Injection


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Social benefitsBasic Urban scheme Rural scheme

RMB Company Employee Company Employee

Pension insurance 1,615 - 12,111 20% 8% 20% 8%

Unemployment insurance 1,615 - 12,111 1% 0.2% 1%

0%Medical insurance 2,422 - 12,111 9%+1% 2%+3 1%

Workplace insurance 1,615 - 12,111 0.5% 0% 0.5%

Maternity insurance 2,422 - 12,111 0.8% 0% 0.8%

Public housing fund 960 - 12,111 12% 12% 12% 12%

Total 44.3% 22.2% 35.3% 20%

EMPLOYER REQUIRED TO PAY SOCIAL BENEFITS

• Average salary of 2009 Beijing: RMB 4,037/month

• The contribution cap base is 3 times the average salary – RMB12,111

The JLJ Group Solutions for China Entry & Growth 2011.

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