Key Takeaways
1. Even in the wake of Covid-19 lockdowns years after the start of the pandemic, China represents a massive investment opportunity for international investors looking to diversify their portfolios.
2. Whether you are looking to start your own business or seek investment opportunities in China, there is no shortage of innovation in China.
3. While some sectors in China have taken a battering in recent years, that doesn’t make China “uninvestable”; it means that those without experience on the Chinese market should seek professional help before committing to long-term business decision.
4. These insights come from many years spent in Mainland China, as Horizons has unmatched business and employment expertise in the country. If you are interested in expanding in China, contact us today.
China is an attractive market for some of the world’s largest conglomerates. In the last few years, China has established a niche for itself regarding national and economic issues, making many entrepreneurs and established companies race to the country.
There are over one billion people in China. It has a fast-growing economy that is also rated as the second largest in the world. It is also the largest exporter and importer of goods in the world. Furthermore, the company offers affordable and reliable technology, as well as a highly productive workforce. All of these factors make China a powerful country to do business in. This is why most Fortune 500 companies have a presence in the country.
China has many thriving sectors, including agriculture, manufacturing, oil and gas, automobile, pharmaceutical, and tourism. China is currently promoting certain small business opportunities.
If you are considering opening a business or expanding your business to China, these opportunities may help you generate impressive income while allowing you to enjoy a low profile. Here are some of the most promising business ideas and investment opportunities in China currently.
Please note: This article does not contain investment advice. Horizons is sharing anecdotal insights based on what we have seen generate success in China. If you seek genuine investment advice, please speak to a certified investment professional.
Hire in China in 12 hours with Horizons EOR services.
Best Small Business Ideas in China
Rounding out the list of the best small business ideas in China for 2022 are:
1. Automation Control Products
The number one small business in China is a technology company that sells industrial automation control products. Marketing similar products may yield the results that you want. Consider this option if you are looking for a new business opportunity.
2. Supplemental Education?
Previously, the supplemental education market in China was huge. After-school private tutoring services were one viable option. Another was providing online classes to students and workers. These classes are important in China, which prides itself on having a strong educational system.
It is customary for many students to continue their studies after the end of the traditional school day to gain a competitive edge. Because online classes were convenient and accessible to more people, it was a viable option for many and was an in-demand opportunity for businesses.
However, due to regulation, the supplemental education market has been reduced. While supplemental (“after-school”) education was a popular and lucrative industry, new regulations passed in August 2021 made so-called “edtech”, or online teaching platforms, comply with a specific and strict set of regulations; it also banned any supplemental education targeting pre-school aged children, and set limits on supplemental education for children aged 6-15. Finally, existing “subject training institutions” (teaching English, Math, and other subjects) must also comply with a strict set of regulations, and no new subject training institutions are permitted to form. Naturally, this wiped out many companies large and small by more than 83% nationwide and has made the supplemental education space less attractive as the barrier to entry is much higher.
However, not all hope is lost– a different category of supplemental education called “quality education training courses” are less regulated and (for now) is permitted to form. This category covers subjects like music, art, sports, and other non-core subjects; and these courses are permitted to be taught in English. For those looking to start a supplemental education business and become a private GCSE maths tutor, talk to a professional about “quality education training schools”; but for foreign individuals interested in opening an English training center or something similar, this is no longer possible.
3. Import and Export
Small businesses that involve trading are often successful because they help create additional business opportunities across the globe. Because China is the largest exporter and importer of goods in the world, it is easier to create a profitable importing and exporting business in the country. This has been doubly true since the border situation became more complicated in 2019. Companies in need of goods are seeking trustworthy partners based locally to receive and qualify samples of desired goods, make factory visits, etc.
If you have not yet launched a business and are looking for ideas, this is one to consider.
4. Pharmaceuticals
The pharmaceutical industry in China is massive and highly profitable. Furthermore, in China, businesses often have access to cheap labor and raw materials. However, selling pharmaceuticals in China requires businesses to acquire the proper license.
Forbes China has previously listed a pharmaceutical company in its list of top 10 small businesses in the country, so it might be an industry worth considering if you are willing to go through the regulatory red tape.
5. Health Products
Environmental concerns, more access to health information, and the presence of new diseases and illnesses have made current generations more concerned about their health than previous generations.
Health product businesses may include herbal goods, supplements, and skincare products. In China, there are many small health products businesses. Some successful businesses focus on women and the beauty industry while others appeal to both genders.
6. Ecological Environment Construction
The world has taken notice of more environmental concerns and China has followed suit. It is encouraging businesses that are taking an eco-friendly approach and constructing ecological environments, such as afforestation projects, seeding plants, and garden landscape engineering. More businesses in Shanghai have been focusing on waste in recent years. With Shanghai city’s push for proper garbage sorting and waste disposal, some businesses see an opportunity in the city’s move to be more green.
Companies that provide technological research on ecology are also in demand.
7. Direct Marketing
Direct marketing is one of the best opportunities for small businesses because it is reliable and has relatively little overhead.
It requires that businesses be able to communicate well and develop key connections with customers to be successful. Some businesses focus on helping international businesses communicate effectively to the Chinese market, while other businesses focus on helping Chinese businesses communicate effectively to international markets. Both business focuses can be lucrative.
8. Internet Access
Not all consumers in China have or can afford to have internet access in their homes or businesses. However, many people still need this access. Operating a small-scale internet business is a simple way to participate in the Chinese economy while not having to invest substantially into it.
9. Food
Food production: When deciding on which business initiative to pursue, it is important to consider needs so that you can opt for a safer option when available. Everyone needs food, but with a population exceeding 1.35 billion, China is in particular need of this resource.
Food (restaurant): Alternatively, many people come to Shanghai to live their dream of opening a restaurant or bar, both local Chinese and foreigners. Shanghai for example has the most coffee shops in the world. The locally-owned F&B sector in China is a powerhouse, and in most cities, the owners form a tight-knit community.
Best Investment Opportunities in China
There are also certain sectors that are prime for investment in China including:
1. Manufacturing of Household Commodities
China is one of the largest producers of household commodities. They are often cheaper than the products produced in other countries, allowing them to be more competitive. Consider starting your own household commodities manufacturing company.
2. Online Stores
China’s access to advanced technologies allows it to be a source of thriving online shops. There are several advantages to investing in this type of business in China, including that you do not have to keep all of the products that are offered in your shop in China.
You do not have to invest in inventory. Instead, you can make agreements with manufacturers in which you list their products on your shop and sell them to your customers for a markup.
3. English-Language Schools
Since English is often the language spoken by business leaders around the world, many Chinese professionals are trying to increase their English-language skills. You can open a school that teaches professionals how to speak English, especially in business settings.
This type of business requires minimal capital investment and you may already have the skills necessary to run a successful business of this nature.
[UPDATE 2022]
Again, the English-language teaching sector has taken massive hits over the last few years; while we may not see the optimism in English-language schools anymore, someone with a high risk tolerance might make a tactical choice to invest in schools offering “quality education training courses”.
4. Domestic Shipping Companies
Another investment opportunity is to invest in a haulage business, which transports goods by road or rail. It includes transporting ore, coal, and supplies. Since China is a country with some of the highest volume of goods in the world. In such a massive, diverse country, populated by avid consumers, goods need to move constantly across the country. There is little that is more important in a country of this size than a greased supply chain. This ensures that your investment might continue to pay off even in traditionally uncertain times.
5. Mobile Phones and Accessories Businesses
With its ready access to technology, a productive workforce, and cheap raw materials, China has revolutionized the mobile phone industry. China offers cheaper mobile phone and accessory options in comparison to some of the overpriced goods of this nature elsewhere in the world.
Having this type of business can be a highly profitable business venture when done correctly. The key to success with this type of business is partnering up with businesses outside of China to whom you can supply mobile phones and accessories. Cheap accessories that you may be able to sell include batteries, chargers, battery banks, cases, memory cards, and USB cords.
6. Electronics and Gadgets
China also produces other electronics and gadgets.
Investing in an electronics manufacturing company or factory can allow you to get or make the products more cheaply, which can then be sold abroad at more affordable prices.
7. Jewelry or Diamonds
Gold and silver plated jewelry are popular in China and other parts of the world. China has a vibrant jewelry ecosystem, not just for gold and silver, but also for pearls, jade, and other precious stones.
Connecting with industry insiders and experts in the jewelry industry in China is not so difficult, and could lead to interesting business opportunities.
8. Fashion Accessories
Bags and shoes are some of the most important accessories around the world and the production cost in China is not high.
If someone invested in a fashion accessories business in China, it is reasonable that those goods could be sold in developed and developing countries alike.
Conclusion
China has ample opportunities for small business and investment. Regardless of which investment vehicle you choose, it is important that you launch your business in an efficient and compliant manner.
Horizons can advise you of the regulatory schemes in place and inform you of the guidelines you must meet, whether that means a minimum capital investment or a necessary license to conduct the type of business you are considering in China.
We can also get you a local workforce without the need for you to open a local entity through our China Employer of Record services so that you can have people working on the ground as soon as you are ready to launch your business. Contact us today for a free consultation on your hiring project.
Frequently asked questions
Many people invest in China, and many people have made successful investments in China.
The decision for whether to invest in China depends on your risk tolerance. There are many well-known risks to investing in China; they are distinct from the risks of investing in other markets, for example the United States.
Wherever you choose to invest, there will certainly be risk. It is up to you as an investor to (1) know the risks, (2) understand the risks, and (3) decide if the potential upside would be work the risk.
Most important, however, is remaining compliant with relevant investment and tax laws, both in China and your home country. We recommend speaking with a investment and tax professional if you intend to invest in China stocks, ETFs, or businesses.
For those who want to invest in the Chinese stock market because they lack the contacts or proximity to China to invest in or start businesses in China, there are options. Here are the three primary methods to invest in China stocks:
- Invest in American Depository Receipts (ADRs) and Chinese A-Shares
- Each ADR represents a share or a fractional of a Chinese share. Talk to your US broker to know more about ADRs.
- Invest through a market maker or affiliate firm
- Most Chinese companies are listed on the Hong Kong Stock Exchange, the Shanghai Stock Exchange, or the Shenzhen Stock Exchange. Check with your broker if they allow foreign investment and have the ability to facilitate purchases on these exchanges.
- Purchase mutual funds or ETFs that track Chinese stock exchanges
- By purchasing mutual funds or ETFs of the above exchanges, you can diversify your portfolio and get exposure to foreign investment without a significant amount of time spent actively managing your portfolio.
Before investing, it’s important that you do your own research to know which method of investment suits you best, as well as which companies would be worth investing in. Finally, before making any decisions consult a professional who is qualified to give investment advice.
