Planning and preparation for a new endeavor any place in the world requires preparation of a business case and analysis of the proposition. This is not unique anywhere in the world and should be as thorough as possible to assure business success and profitability. Working in China provides more challenge to preparation of the business case, especially if this is your first project in the PRC. Following normal processes of analysis will produce an appropriate assessment of the proposal. Complications exist in terms of identifying assumptions and thorough understanding of business conditions, costs and potential returns.
By employing due diligence, you will ascertain the appropriate answer to your project proposals and come to the correct conclusion to maximize the probability of business success.
When comparing the venture in the PRC with outside alternatives or importing your product into the PRC, the proper assessment is done on a Landed Cost basis, taking into consideration all taxes, duties transportation and other costs. Of course, if the only option is a joint venture with a local Chinese partner, then it is simply an incremental volume assessment and the fundamental question is whether operating in China produces value to the corporation.
Utility costs will vary from country to country and city to city. What is important to know is there are many surcharges and fees that you will need to include into your business case. Many chinese rates are available on the Net.When you visit, assume that the rates have changed and what the current fees and surcharges apply.
Letter of Intent:
A letter of intent is a document which details a planned business venture in the PRC. It is a legal document which should be prepared by legal counsel. It is the predecessor to submitting a formal Feasibility study to the local government agency for approval of a project.
After thorough preparation and review of your business plan for a new endeavor in the PRC, you are almost ready to begin start-up. But before you do, a Feasibility Study needs to be prepared and submitted to the local government agency for approval of the project. The feasibility Study is a detailed analysis of your project proposal. If you are thorough and detailed in your business case preparation and proposal, the feasibility study is easy to prepare.
The Feasibility Study is part financial document, part legal document, part environmental analysis and part several other things. However, it is very detailed. A little advance work in this area could save serious tie ups in the project timeline.
Obtain a sample template of the Feasibility Study early in your planning stage and incorporate the data requirements into the project's business case phase. As with anything in China, the template may vary from city to city in the PRC.
Helpful Hint: If there is sensitivity to releasing some of the information that is either on the sample template or provided by local government, object to it's inclusion . There easily could be negotiating room to submit the Feasibility Study without it.
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