The Chinese Men's Cosmetic Market: Guangzhou, Hong Kong and ...

company. More information can be found at the SAIC website (State Administration for
Industry and Commerce): http://202.108.90.68/index.html. It is on this state owned
website that the documents required for setting up a limited liability company in China
are found (SAIC). Foreign investors seek ownership of the company’s products and will
distribute them to the market in China. There are several advantages and disadvantages
to this strategy. The parent company will have limited liability but will lose some control
of management decisions. The investors will provide direction on sales of all products
involved. The joint venture or wholly foreign owned enterprise will be considered an
entity under the company’s ordinance. Cost risks will decrease as investors are
responsible for earning revenue, and taxes will decrease for the parent
company. Production will occur in-house eliminating the need for exports to the country.
However, this may impede on production methods as policies vary (Gross).
13
Hong Kong
Entering the Hong Kong market is similar to mainland China. Two other methods
(not stated above) include establishing a branch office and establishing a partnership.
These two options allow for a quick entry as in Hong Kong, the minimal time to
establish a business is six days. “If a company incorporated outside Hong Kong has
established a place of business in Hong Kong, it is required to register with the
Companies Registry within one month of the establishment of the place of business as a
“non-Hong Kong company” under Part XI of the Companies Ordinance. Unlike a
subsidiary, a branch can leverage off the credit rating of the overseas owner. It is not a
separate legal entity from the parent” (Invest HK- The Government of the Hong Kong
Special Administrative Region). Having a branch office requires the parent company to
take full responsibility. The company is required to follow all local policies and will deal
with distribution to the end-users. An advantage to having a branch or partnership in
Hong Kong is the location. Distribution to mainland or the locals will require fewer
exports, hence less cost. In the cosmetics industry, these branches would target locations
such as malls or outlets for selling their products (HKTDC).
The most involved entry method is direct investment into Hong Kong, in which a
person or group of people set up a business within the city. One of the most basic
methods to do this is to set up a sole proprietorship. This is ideal for those setting up
small businesses who do not wish to become involved in the more complicated
paperwork of more complex business structures. Businesses selling cosmetics would
develop an establishment in a local mall, or would setup an outlet on a popular strip in
Hong Kong. A form for business registration is required in Hong Kong. More
information can be found on the Inland Revenue Department Website at:
http://www.ird.gov.hk/eng/tax/bre.htm . The model of sole proprietorship allows for easy
start-up, and decision-making flexibility, but exposes the owner to full financial liability
(HKTDC).
For those who are not willing to expose themselves to the financial risk of setting
up a sole proprietorship in Hong Kong, the option to incorporate a business exists. “Most
of the limited companies incorporated in Hong Kong are private companies limited by
shares.” (Invest HK- The Government of the Hong Kong Special Administrative Region)
Incorporating a company in Hong Kong can easily be done online at: