Trade Misconceptions – Is China Really Open For Business?

By Michael Jones (michael.jones@tsiglobalconsulting.com)

One of the most common inquiries that we receive at TSI Global Consulting is from companies looking to expand into the Chinese market.  Indeed, it is not hard to see why: China has worked for years to cultivate its image as a business-friendly paradise, and many U.S> companies desire the huge consumer base that lives there .  However, despite wanting you to think otherwise, China is not as open a country for  business as it may seem.  While most businesses will not have any trouble moving their products and operations over to this rising country, not being aware of certain restrictions can lead to severe punishments if your company’s exports do fall under U.S. regulations.

The primary restriction on trade with China is the U.S.’s arms embargo (perhaps this blog should be filed under “How Much Do You Know About Embargoed Countries”?).  Created in 1989 in response to the incident in Tiananmen Square, the embargo itself is a fairly short, straightforward document: it simply states that all licenses for defense articles to be shipped to China are suspended.  However, it has long-reaching applications.  In addition to the explicitly stated ban on exporting defense articles, there is also a regulation known as the “China Military End-Use Rule” which states that certain items on the Commerce Control List which normally do not require a license will require one if and when exported to a military end user or for military end use in China.

The arms embargo is just one of the restrictions on trade with China that the U.S. enforces, and all of these combined create a situation where China is not as “open for business” as we had thought.  While the potential benefits from trade with China are great, exporters should proceed with a “yellow light” of caution and move forward in their operations with the help of a consultant.  Fortunately, TSI Global Consulting is familiar with the complex set of regulations surrounding the China trade giving us the necessary experience to help you expand sales into the China market while remaining in compliance with U.S. export regulations.

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