Reduce Overheads in China – Close your China Office
- Why should I close my office in China?
- How to close an office in China
- Why investors can’t close their office in China and walk away?
- What are the advantages of closing my offices in China?
- Why use an outsourced purchasing office in China
- So, what are the ways to cut costs in China?
- Over to you…
Covid and price rises are now causing many firms to look at their purchasing process in China. Many are wondering if it is now time to look at closing down their purchasing offices in China.
The fact you’ve typed a question that led you to this blog means you’re probably having a good long think about this and are exploring other options to cut your costs in China.
I’m not going to soften the blow here, but the world is starting to move away from China, and you will soon need to make calls about keeping a sourcing office opened in China.
If you think about it, it makes sense, as many more countries offer better value than China.
Why should I close my office in China?
There are many reasons why firms are considering closing their China purchasing offices.
The many reasons are:
- Reduce Overheads – China has become too expensive to source specific products.
- Transport and Freight costs from China are now costly
- Staff and office costs in China have become very costly
- There are shifts in consumer behaviour to move away from products made in China
- There are trade tensions with China and other countries such as the US and Europe
- Other countries have replaced China as a low-cost producer of goods business, impact of
While companies are shifting away from China, many will still need to buy some goods from China but lower their costs and risks.
Many firms are looking at switching away from owning their own purchasing company to using a professional outsourced purchasing company in China.
How to Close an Office in China: Step-by-Step Process
The official closing of an office in China usually takes six months to one year or longer if issues are found.
The following steps must be done.
1. Employee termination
The office must decide on the process to terminate the local employees.
2. Tax audit
The office must apply to the tax bureau for tax clearance and tax deregistration. The office must hire a local Chinese certified public accountant (CPA) firm to audit its accounts for three years.
3. Tax deregistration
The office will then submit the three-year tax clearance audit report and other documents to the tax bureau. Any unpaid taxes may be sought before a tax deregistration certificate can be issued.
4. Deregistration with SAFE and customs
The office will then need to deregister with the Chinese customs and the State Administration of Foreign Exchange.
5. Deregistration with SAMR
The step is to officially deregister the office with the local branch of the SAMR.
6. Bank account closure
The last action is to close the bank account. If the office needs to move money out of China will need to apply for approval from the bank.
Why investors can’t close their office in China and walk away?
If a company is not properly closed in China, its registered investors may face civil and criminal liability.
Apart from fines and penalties, individuals related to the company may be prevented from leaving China.
Others may be barred from entering China or prevented from setting up any companies in the future.
What are the advantages of closing my offices in China?
There are two main advantages:
- Reduce overhead costs in China.
- Increase the opportunities to source goods in new countries.
Why use an outsourced purchasing office in China?
Many firms are seeking to reduce their costs in China but want to retain control. That is why many are using outsourced China purchasing services from professional providers.
Let’s be clear, these providers are not sourcing agents.
They focus on managing your purchases and suppliers in China and bring in added value such as Quality Control Inspections and risk reduction services.
The benefits of using an outsourced purchasing service provider include:
- Save Money – No overheads, staff costs or office expenses.
- Monthly fees charged for services when used.
- The Freedom to find suppliers in new countries.
- Complete services such as purchase contracts, quality control, price negotiations, logistics coordination etc.
- Have a Fully trained professional staff to manage your suppliers in China
So, what are the ways to cut costs in China?
There are three main areas where costs have dramatically increased in China
1. Overhead Costs
2. Product Costs
3. Transport Costs
Many firms purchasing a lot of products from China are now finding cheaper suppliers in other countries.
Many now want to reduce their overhead costs (staff & offices) in China. Some are using professional outsourced China purchasing companies.
Other firms do not want to use sourcing agents as they are too expensive and have become too risky for these firms.
Switching to professional outsourced China purchasing companies enables many firms to reduce the costs of their products in China.
Transport costs can be reduced by tapping into the bulk discounts which many professional outsourced purchasing companies in China can provide.
Over to you…
If you are looking to reduce your overheads in China or would like to chat about exploring new sourcing strategies for China, please contact me.
All our discussions will be in strict confidence. I’m here to help you explore all your options.
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Or at the following numbers:
(Europe/ Rest of the World) +353 1 885 3919
(North America) +1.518.290.6604
Or email me Aidan Conaty
tcichina.co.uk | think China, think TCI