Is China Right for Your Business? Pros and Cons of Doing Business in China

Expanding into China offers businesses a gateway to one of the world's largest and most dynamic markets. Businesses from around the world are drawn by its location, skilled workers, and government support. Around 59,000 new foreign investment enterprises were established in China in 2024, an increase of 9.9% from the previous year.¹

Dealing with China’s political and cultural complexities can be challenging. This is particularly true for small business owners. Additionally, the ongoing trade war between the US and China has created significant uncertainty.

This article looks at the main pros and cons of doing business in China, to help you decide whether it's the right move for your company.

As you expand your business abroad, a Wise Business account can reduce the hassle of managing different currencies. You can receive payments in Chinese yuan and convert the funds to US dollars at the mid-market exchange rate without hidden markups.
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What are Pros and Cons of Doing Business in China?

China is the world's largest manufacturer, accounting for around 30% of global manufacturing output. Its economy, measured by gross domestic product (GDP), grew by 5% in 2024.²

For US businesses looking to expand overseas, China is a popular option. This is because of its low manufacturing costs and vast population of 1.4 billion consumers.

The market is undergoing a transition as the middle class has grown. The economy is increasingly focused on developing technology-intensive, high-value-added production. It also focuses on the domestic services industry. Some low-cost manufacturing has begun moving to neighboring countries like Vietnam. However, China is still attractive for businesses seeking growth and efficiency.

If your business is considering moving into China to manufacture products or sell to customers, you should weigh the pros and cons first. Understanding these factors is essential before getting started.

🔍 In this article:
Pros of Doing Business in China Cons of Doing Business in China Tips for Entering the Chinese Market What are the benefits of doing business in China? Why is it difficult to do business in China? Discover Wise: The Smart Way to Manage International Payments

Pros of Doing Business in China

There are several important advantages to US businesses operating locally in China.

Advanced, Low-Cost Manufacturing

One of the main reasons to operate in China is to capitalize on its lower manufacturing costs. Cheaper production can help increase the profit margins on your products to keep your business competitive. Some businesses set up their own production in China, while others outsource production to a local manufacturing facility.

China’s advanced factories and supply chains enable the production of electronics, textiles, machinery, and more. Unlike the U.S., which has limits on capacity and speed, China can handle high-volume production. This makes it well-suited to businesses seeking to scale up production or reduce costs.

Large, Skilled Workforce

China’s 750 million workers give overseas businesses a hiring advantage. The population is highly skilled and educated, and wages are much lower than in developed countries, allowing employers to access talent to produce goods efficiently. Manufacturing wages in China are 20% of manufacturing wages in the US. While this is higher than just a few years ago, worker productivity has increased as wages have risen and the workforce has become more skilled.³

Expanded Market Access

Manufacturing products in China makes it cheaper and easier to distribute them within China and to other countries in Asia, helping you expand your business further. As China’s economy is set to overtake the US as the world’s largest by 2030, its growing middle class offers major potential for sales growth as more of the population has disposable income to spend.

Trade agreements, investment treaties and double taxation agreements with 29 countries and regions also offer businesses operating in China direct trade advantages.

Government Support and Incentives

The government has implemented policy reforms in recent years to open up market access to support foreign businesses trading domestically and internationally. It has progressively relaxed restrictions since its Foreign Investment Law came into effect in 2020. Its 2025 Action Plan for Stabilizing Foreign Investment further accelerates market-opening reforms.⁴

In this more business-friendly environment, it is easier to register and license a business in China, and there is legislation in place to protect the rights of foreign investors. There are also tax incentives and subsidies to encourage investment in certain industries and regions.

China has more than 2,000 economic development zones (EDZs), as well as free trade zones (FTZs). These offer further tax breaks, lower tariffs and customs duties, and reduced regulation. They also provide land and building subsidies, as well as access to foreign exchange. They also act as gateways to the Chinese market.

Strategic Location and Infrastructure

China has abundant natural resources of raw materials that are essential for manufacturing certain products. It is also close to other resource-rich countries and its trade agreements provide access to regional supply chains.

China’s long coastline has numerous ports that play a key role in global trade. These include Tianjin, Shenzhen, and Shanghai. They provide easy access to international shipping routes for imports and exports. The country is investing heavily in rapidly expanding its extensive infrastructure. These include high-speed rail lines, highways and airports. Its well-developed distribution facilities, shipping and logistics infrastructure support cost-effective and efficient transport. It also supports a range of business opportunities.

Technological Innovation

China continues to make substantial investments in technology. These investments include semiconductor manufacturing, 5G infrastructure, artificial intelligence (AI), and e-commerce.

It is a global leader in product innovation and digitalization. It has become a largely cashless society, driven by mobile payments and e-commerce platforms. China’s close to 1 billion Internet users account for around half of the global e-commerce market. This creates a dynamic fintech sector.⁵ It gives companies exposure to innovative products and services that they can develop in other countries.

Cons of Doing Business in China

Despite the clear benefits of working in China, there are also challenges that business owners need to be aware of before entering the market.

Regulatory and Legal Complexities

China's legal system is known to be opaque and subject to change, especially for foreign businesses. Licenses, customs rules, and local compliance regulations can be difficult to navigate. Regulations may also vary from province to province. This adds another layer of complexity for small business owners unfamiliar with the environment. You may need to hire local legal experts to help, which can also add to startup costs.

Intellectual Property (IP) Concerns

The Chinese government has made improvements to IP protection, but IP theft remains a concern for foreign businesses. Chinese IP laws are not considered to be as strong as in some countries and the legal system does not often enforce them. Counterfeit goods, patent violations, and breaches of trade secrets can hurt profitability. These issues affect innovative products or services.

Cultural and Language Barriers

Language can be a barrier if you do not speak Mandarin or Cantonese, and business culture as well as decision-making processes are substantially different to the US approach. Chinese business culture is far more hierarchical, which extends to meeting etiquette.

Business deals take longer in China and transactions are often based on personal interactions. Building trust and establishing relationships with partners and clients face to face is key, requiring time and cultural sensitivity. Miscommunication can affect negotiations, partnerships, and employee relations. Hiring translators is valuable in preventing this, but you’ll need to weigh the cost against the savings in production and labor costs.

Geopolitical Risks

Tensions between the US and China in recent years have led to the introduction of reciprocal tariffs. It has also led to restrictions on technology and export bans. This has created uncertainty not only for businesses working in the two countries but for companies in their supply chains.

Political changes can quickly affect business operations and profitability. As a small business owner, you may find it harder to manage disruptions than large multinationals. The current US political climate and consumer preferences tend favor products manufactured in the US rather than China.

Government Influence on Business

Unlike in the Western economies, Chinese government officials can actively influence market dynamics. They can also change policy enforcement, and regulatory decisions. Chinese companies in certain strategic industries may be prioritized over foreign-owned businesses. These might receive preferential financial and regulatory support. Some are partially or wholly owned by national or regional governments.

In some cases, businesses have to transfer proprietary technology or establish R&D centers. They might also have to enter joint ventures in China to gain market access. This can affect their international competitiveness.

Currency Exchange and Repatriation

The Chinese yuan (CNY), also called the renminbi or RMB, is subject to government controls. The Chinese yuan (CNY), also called the renminbi or RMB, is subject to government controls. Businesses must comply with detailed reporting requirements. They must receive approval to transfer profits out of China.

Additionally, exchange rate fluctuations between the CNY and USD can affect cash flow and budgeting. A weakening yuan can reduce the dollar value of your revenues. On the other hand, a strengthening yuan can increase the cost of paying Chinese suppliers.

Tips for Entering the Chinese Market

If you’re considering taking your business into China, keep these suggestions in mind:

• Partner with local experts to navigate legal and regulatory compliance issues. This will help to gain cultural insights and build local relationships.
• Conduct thorough market research to understand regional differences in consumer behavior. Use this information to tailor marketing and product development strategies.
• Hire local legal and accounting advisors to ensure your business follows Chinese regulations.
• Develop strategies to protect your IP. This includes registering trademarks, patents, and designs with Chinese authorities. Do this before entering the market.
• Carefully vet potential suppliers or partners. Include clear non-disclosure and non-compete clauses in contracts.
• Consider keeping certain development work in the US.

What are the benefits of doing business in China?

China offers a large consumer market, advanced and cost-effective manufacturing infrastructure. It also offers a favorable policy environment for certain industries. For small businesses that can manage the risks, China offers significant potential for sales growth. This is especially true in sectors like technology and luxury goods.

Working in China can also provide businesses with valuable experience in international expansion. It can give them additional exposure to innovation.

Why is it difficult to do business in China?

Expanding into China can be overwhelming for US small businesses. The regulatory landscape is complex and frequently shifting. The concerns around IP theft can pose a risk to innovative-led companies. Political risks and currency restrictions add further uncertainty. Cultural and linguistic differences can complicate day-to-day operations.

Entering China requires careful due diligence and planning. Businesses must weigh up the pros and cons carefully before making a commitment.

Discover Wise: The Smart Way to Manage International Payments

If you decide to expand into China, a Wise Business account can help you to manage your sales revenues as well as payments to suppliers and employees. You can save money when converting CNY to USD or sending CNY from USD, as Wise uses the mid-market exchange rate with low fees and no hidden markup.

Wise is not a bank, but a Money Services Business (MSB) provider and a smart alternative to banks. The Wise Business account is designed with international business in mind, and makes it easy to send, hold, and manage business funds in 40+ currencies. You can get major currency account details for a one-off fee to receive overseas payments like a local. You can also send money to 140+ countries.

Register with Wise Business 🚀

You can hold multiple currencies in a single account with no monthly fees. This allows you to handle exchange rate fluctuations by waiting for favorable rates to convert funds. You can also set up exchange rate alerts to make this easy.

Wise Business also connects to accounting software. This simplifies bookkeeping and frees up time to focus on running your expanding business.

Read the guide on how to open a Wise Business account

	Editor & Business Expert:
	Panna is an expert in US business finance, covering topics from invoicing to international expansion. She creates guides and reviews to help businesses save time and make informed decisions. You can read more useful business articles on her author profile.

	Author:
	Nicole is a professional journalist with two decades of experience in writing and editing, she has also run her own freelance business for the past five years. Her expertise spans the financial and technology industries, including payment processing and small business banking.

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Sources:
¹people.cn
²stats.gov.cn
³apolloacademy.com
⁴www.gov.cn
⁵statista.com
All sources checked October 2025