Setting up die casting in China using these 7 tips will help you aviod common issues and you will improve your odds of success.
Die casting is one of the most-popular manufacturing practices in the world. It is an easy-to-manage process that creates premium-quality products in a quick and budget-friendly manner.
Of the many nations that have a credible reputation in die casting, China ranks at the top. In fact, in 2015, China supplied 45% of the world’s diecasting needs – 70% of which was supplied to the automobile industry. This number continues to grow at a significant pace every year. Today, the Chinese die casting industry is one of the fastest-growing manufacturing segments in the world, offering highly-competitive services to clients all over the globe.
Many companies today are seeing the advantages of sourcing from China-based manufacturing companies. According to studies, the die casting industry will see a CAGR of 6.13% between 2019 and 2025. The die casting industry has become the largest and fastest growing market is Asia-Pacific, with China leading the way.
So, if you are planning to set up a die casting company, China would be an ideal location for your new business. In this article, we provide the step-by-step process of how you can start a die casting company in China.
Let’s get started.
When the time comes to set-up a die casting company in China, you’ll need to ensure that you have selected the right location. There are specific, mandated special economic zones and manufacturing spaces where resident companies are not only provided access to special tax benefits,but also access to technology and marketing aid by the Government. In addition you’ll be able to keep an eye on your competitors, thereby gaining a better awareness of where you stand in the die casting market.
Some of the best places in China where you can build your new die casting company are:
All of these cities are considered to be global hubs of economy, finance and business– making them world-renowned manufacturing sites. Multiple suppliers, 3PL companies and financial institutions have branches here, presenting you with opportunities to access all the facilities and materials you need. These cities have the added benefit of being port-side cities and have excellent connectivity with other regions of China as well as the overseas markets.
One of the most important things you need to do to set-up your new die casting company is to develop a business plan. This business plan is essential to:
The business plan should contain comprehensive information about your business. The sections you need to include are:
A PEO (Professional Employment Organization) is a specialized body that is very well-versed in the changing labor laws of the market they serve. You have multiple, highly regarded PEOs working in China. These PEOs are very well aware of the labor law requirements and business registration needs, and will work as a liaison between you and the Ministry of Commerce to aid you when you require legal support.
If you want to set-up a die casting company, you’ll need to contact a PEO to identify what general business formation and registration rules apply to you and which legislations apply specifically for your company/industry. The PEO will be able to take you through the entire process of setting-up your die casting business in China and will help you protect yourself from any penalties or fines for non-compliance. They’ll also provide guidance in acquiring the minimum finances and mandatory staff you need to have to set-up a die casting business in China.
Given the end-to-end service they offer, a PEO can be expensive to hire. If you don’t have the budget for a PEO and wish to set-up your die casting company yourself, then you’ll have to:
You can either work in a joint partnership with a Chinese company/entrepreneur, or you can just set-up representative offices. Another option would be that you become a Wholly Foreign-Owned Enterprise (WFOE) or a Foreign Invested Commercial Enterprise (FICE). The WFOE route is the best because it is 100% autonomously owned by you and it offers you extensive flexibility in running your business. You can manage everything yourself without getting involved with a Chinese partner/investor.
This is a step should be completed while you are applying for company registration. The Chinese Government will check your financials, proof-of-funds and tax history– all of which are legally required before granting you permission to start your die casting business.
There are many reputable international banks with branches in China. For example; HSBC, Citibank, Bank of East Asia, Standard Chartered, and DBS Bank. You can also choose one of the well known local Chinese banks for your corporate account, such as People's Bank of China, Commercial Bank of China or Bank of Communications.
The choice of your banking partner should depend on your business objective. If you plan to die cast for solely or majorly Chinese buyers, then a local bank is better since they have excellent partnerships with other local companies. You can get friendly loan terms and have someone local vouch for you with suppliers. But, if you plan to serve the overseas market and only die cast in China, then a global bank with multiple branches all over the world is better. Also check the policies these banks have on loans, remittances and other corporate banking measures.
You will need to open three accounts in the bank:
It typically takes between 5 & 10 days for the bank account to be set-up. You will need to provide your Business License, Registration (or any proof that the registration is in progress),plus the Article of Association and references from an existing bank overseas. You should also share the contact details of the key personnel from your company and provide photocopies of their legal identifiers and contact details.
Of course, some of the bank account creation formalities do vary depending on the structure of your company. You will need to consult the bank where you are opening a corporate account for more information.
While China is comparatively a more budget-friendly location to start your new die casting company, you still need additional capital to move all of your operations overseas. This is where financing comes in.
You have many sources of capital/funds:
Many Chinese banks and international banks in China offer excellent corporate loans to manufacturing companies. In 2020 alone, the cumulative value of loans to manufacturing companies located in China grew to a whopping 1.1 trillion yuan. This is a clear indication that both the banks and the Chinese Government are very keen on promoting manufacturing in the country. Given the current geopolitical tensions where some countries are refusing to get their products manufactured in China, the Chinese Government is making corporate loans more affordable and attractive by giving stellar terms. You can really benefit from these friendly loans.
Angel investors are high net worth individuals who invest in start-ups while taking a certain percentage of ownership in the company in exchange for the funds. They are a great way to get capital. Plus, if you’re savvy about it, you can search for angel investors who have expertise in die casting in China. They can not only give you the funds you need, but they’ll also be able to advise you on your business operations.
This is something you can get from one of your suppliers.
Trade credit is capital/funds that you acquire when you purchase materials on credit. This is a short-term funding technique of which you can make use of when you are in immediate need of monetary resources.
You can also take your new die casting company public and seek funds from the public. You’ll need to list it on the Shanghai Stock Exchange and/or the Shenzhen Stock Exchange in order to be eligible to open an initial public offering.
This is a great way to generate large quantities of cash, particularly if you have a great reputation overseas in the die casting industry.
If you know people in your close circle who can lend you the capital you need, then this is a great way to avoid the high interest rates and expensive commitments like dividends and bond interests.
Your business plan will be necessary when applying for funds. Remember to show detailed financial projections and solid research to show the feasibility of your business in your chosen market.
The technical resources (i.e. equipment, tools, technology, process set-ups and materials) you need for your die casting company will depend on the type of die casting process you follow. While choosing the right machinery for your operations, consider the following:
There are hundreds of qualified material and equipment suppliers for die casting manufacturers in China, and many will offer highly competitive rates on the resources they sell.
Use a globally-reputed China sourcing agent that works with some of the best die casting suppliers in China. They often have teams of highly-experienced sourcing agents who has worked with hundreds of suppliers, manufacturers and wholesalers. The unique expertise allows them to help new die casting companies find the ideal machinery/materials suppliers to match your budget and growth needs. A China sourcing agent's wide network of sellers includes online and offline companies that have a legacy of producing exceptional-quality materials and machinery. A strong China sourcing agent also work with highly regarded Amazon sellers who can provide a vast range of clients the product testimonies they seek.
Once your die casting company is up and running, it’s time to let the world know about you. This is where a website and social media presence helps. You can either hire a specialized website development or social media management company to create your online presence for you. Or, you can take over the entire website creation process for yourself. If you choose to do the latter, follow these steps:
Setting-up a die casting company in China does not have to be complicated. Be sure to follow the above steps and you’ll soon be the owner of a successful die casting company in one of the largest markets in the world.
Sourcing Allies is a team of expert China sourcing agents that has helped western customers manufacture and source products from low-cost regions since 2006.
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