Should You Start A Business In China Or India?

China and India boast two of the biggest economies on a global scale, making them top contenders for new startup ventures. With a population of 1.4 billion people, China is the world’s biggest exporter and innovator in electric cars, renewable energy and technology.

On the other hand, India’s economy is continuing to grow at a rapid pace. Cities like Pune and Bengaluru have become a hotspot for tech startups while attracting investors from all over.

Both countries offer different opportunities for entrepreneurs so let’s take a look at how they compare side-by-side.

How Startup Friendly Are China And India?

China: The country is highly supportive of startups, with the government providing support through funding, tax incentives and industrial zones. For those wanting to enter the manufacturing or technology markets, starting a business here can be incredibly rewarding. However for sectors like finance and media, local partnerships are required so in those cases, full foreign ownership is challenging.

India: Similarly, India is a very conducive environment for startups. The government launched the Startup India Initiative to make the process of starting and running a business much smoother. Funding opportunities through venture capital and angel investors are also growing, in addition to accelerator and incubator programs.

What Is The Cost Of Living In These Countries?

China: Living expenses will vary depending on the area that you are in. Tier 1 cities including Beijing, Shenzhen and Shanghai, have significantly higher rent and utilities. Labour costs are also higher but still overall competitive when you compare them to other countries. Areas outside of these major cities are generally more affordable.

India: Likewise, areas like Mumbai and Delhi are costly but expenses such as transportation and food are inexpensive. India also has one of the lowest labour costs globally. While outlying areas are even cheaper, the lack of infrastructure in these areas may be a challenge.

Overall, India has the lower cost of living. It is still cheaper to live in India’s major cities compared to China’s tier 1 areas.

Tax Regulations In China And India

China: The corporate tax rate is 25% although it is reduced to 15% for SMEs and tech companies. The country’s Value Added Tax (VAT) rate is a standard rate of 13%.

India: Here, the corporate tax rate is 22% while manufacturing companies will have a reduced rate of 15%. Under the Startup India initiative, new startups will not pay tax for their first three years of operation. VAT will range between 5% to 28% depending on which category the products fall under.

India’s tax rate is slightly lower than China’s and they offer tax relief for new businesses, which is a major drawcard for new ventures.

Will Foreign Entrepreneurs Encounter Language Barriers?

China: Mandarin is the official language and most documentation will be in Chinese. You may find that proficiency in English here is quite limited, so a language barrier is a potential challenge. It’s not uncommon for foreign business owners to work with local translators.

India: English is more widely spoken and is included in government documents. Foreign English speakers will be able to communicate more smoothly here with local residents.

While India has less of a language barrier, it is still very much possible to get around it in China by using translators or even bilingual staff.

Visa And Residency Requirements For Foreigners

China: To apply for a Business Visa, applicants will need to supply an invitation letter from a Chinese business. There are no startup-specific visas available at the moment and permanent residency is challenging to acquire.

India: A Business Visa does not require any invitation letter and is valid for 5 years. It is easier to get permanent residency if you are able to invest around a million pounds.

While India does have more flexibility with visa options, both countries still need to implement more startup-friendly options.

Potential Challenges To Consider In These Countries

China: Regulations here can be incredibly stringent and foreign companies need to adhere to the guidelines set out by the government. These regulations can also change quite quickly with very little to no warning. The country’s digital censorship can also be a challenge, with no access to Google or some social media platforms.

India: Some business processes may be slow and time-consuming particularly in the legal sector while smaller cities have a lot of issues with a lack of infrastructure.

Both countries have some hurdles that you may encounter, while China’s is more regulatory, India’s is infrastructural.

How To Start A Business In China Or India

China: The first step is to choose a business structure and reserve your desired company name in Chinese. You can then submit your application to the State Administration for Market Regulation. Once this has been approved, you can get your business license, register for tax and open a business bank account.

India: Similarly, you can decide between a sole proprietorship, LLP or private limited company as your legal structure. The next step is to register with the Ministry of Corporate Affairs and get your Permanent Account Number as well as your Tax Deduction Number. You can then open a corporate bank account and apply for Startup India, which is optional.