Tractus in China

Tractus Asia established its Shanghai Office in 1998, prior to China’s ascension into the WTO and the long economic boom that followed

China remains a top priority for our clients assessing trade and investment opportunities across Asia, but the country’s once dominant position as the most attractive investment destination in Asia is becoming increasingly challenged by faster growing Asian economies that provide lower operating costs.

Economic factors have driven companies to assess their China presence, particularly those in export focused manufacturing industries. The rising costs of labor and the increasing costs of regulatory compliance has led companies to confront their China strategy, which was further accelerated by global trade tensions over the previous three years and risk mitigation that arose from COVID-19 during 2020. However, China is critically important for companies competing for future global growth. The world’s second largest economy that is transitioning towards a consumer driven economy through its booming middle class is too important for companies to not have a presence in, leading many to adopt a “China +1” strategy. Tractus continues to help clients navigate their China strategy providing our knowledge and expertise as clients consider market entry, expansion, and exit.

Tractus has extensive experience advising companies on entering the China market as well as developing Outbound Foreign Direct Investment strategy (OFDI) for our Economic Development Organization (EDOs) clients that are seeking to attract Chinese owned companies to their geographies. Chinese companies are more eager than ever to find new opportunities abroad and the central government is actively promoting it and Tractus’ methodology has led to OFDI from Chinese firms in North American geographies.

Tractus China has a proven track record of advising and assisting companies make informed decisions about how to structure and where to locate their investments in China’s complex, challenging and rapidly changing economy. Since 1998, our team in China has grown to 19 professionals and support staff advising our consulting, economic development and Business Inc.ubator® clients.

Strategy & Execution

The Tractus China Team has extensive experience advising our private sector clients across offerings under Strategy & Execution Service Line. Our Teams deep knowledge of government regulations, market dynamics, and trends across all sectors of the economy has helped our clients understand, optimize and implement their strategies in China.

During our over twenty years of advising strategy in China a primary service offered has been advising corporates on the optimal site locations for their investments, acquiring industrial real estate and negotiating competitive investment incentive packages in China. This process has become more complex as the Chinese government has instituted new regulations that include tax generation and investment density requirements that are aimed at attracting higher value-added manufacturing in Economic Development Zones near major metropolitan areas throughout China’s eastern seaboard. Tractus’ China Team has deep knowledge of how these regulations are applied towards foreign investment and applying a detailed methodology to ensure that they do not affect the site-location process.

The Chinese government’s new investment regulations and global uncertainty has also prompted companies to restructure existing footprints, or exit the market entirely. Multinationals that built portfolios of industrial, warehouse and office real estate throughout the country are now considering methods to restructure and rebalance their footprints to be more efficient and competitive. Tractus has advised clients through site-selection and detailed labor dynamic evaluations to determine the optimal scenario to establish a China-focused shared service center that more efficiently manages operations.

China strategy does not require investment to realize success. Tractus’ China Team has worked with clients in sectors from beer, wine, spirits, F&B, automotive, aerospace, med-tech, and countless other sectors to develop the optimal scenario to bring goods to market through trade and sales outsourcing. Our team has helped our clients understand the market opportunity, the regulations and permitting required for product registration, and identify dedicated representative for distribution. Clients have also leveraged the multi-disciplinary and highly experienced China Team to drive sales opportunities through the Tractus Business Inc.ubator® and our offering of sales outsourcing and management services we provide under the Inc.ubator®.

Regardless of the investment strategy chosen, the Tractus China team has the expertise and experience to support our clients with their investment strategy execution from registration of the legal entity, recruiting key management personnel, selection of professional service vendors to managing the design, engineering and construction project management of a new or existing facility.

Corporate Finance

As markets in Asia mature and become more competitive, oftentimes the best strategy for accelerating market entry is to enter into a joint venture or acquire an established firm. While everyone must have a China business strategy, joint ventures and acquisitions in the Middle Kingdom can be deceptively difficult to conclude successfully due to regulatory issues, differences in culture, and expectations of Chinese investors.

The China corporate finance team has developed significant experience structuring private placements and raising funds for companies in a wide range of industries, particularly in the medtech space, from North America.

Tractus China’s corporate finance team has been able to successfully secure growth capital for several early and mid-stage technology firms at valuations significantly higher than might be expected from the more competitive markets in North America and Europe.

Economic Development

Despite trade tensions, China is Asia’s largest destination for exports and a critical market for Economic Development Organizations (EDOs) promoting trade strategies for their member companies, regardless of industry. China is also Asia’s biggest source market for Outbound Foreign Direct Investment (OFDI). In our more than twenty years working in China, Tractus has and continued to represent US, EU and Asian EDOs and IPAs of regions, states and provinces, and municipalities to promote exports as well as identify outbound Chinese investors with an interest in entering these markets.

Tractus’ extensive private sector experience in China provides unique insight into what strategies should be used to attract and retain investors and promote exports as well as policies to implement to promote economic growth. Outbound investment from China is largely financial, with companies seeing joint ventures, opportunities to acquire distressed assets and shares in companies as the preferred strategy to enter markets in North America and Europe. The Economic Development Team in China also provides sector analyses, trade show and trade mission support and representation for economic development and industry trade associations to our EDO clients.