global Tax Advantages and Disadvantages of Selling to Chinese State-Owned Enterprises December 02, 2020 Disclaimer This post was published more than two years ago, and some information may now be out of date. We want to help you make the best decisions possible—please connect with your advisor or check out our latest resources for the most current guidance. State-owned Enterprises (SOEs) can help international sellers quickly reach a large customer base however, working with a SOE can be much harder than expected. Editor’s note: This blog has been updated as of December 2nd, 2020 for accuracy and comprehensiveness.State-owned Enterprises (SOEs) can help international sellers quickly reach a large and stable customer base in China, however, working with a SOE can be much harder than selling to private enterprises. With over 40 years in existence SOEs have a long established history in China going through a long process of gradual and progressive transformations.Advantages of a state-owned enterprise:SOEs receive financial support from government.SOEs are known for receiving access to favorable policies such as:Tax breaks on certain productsLower interest rates on loans from state-owned banksAccess to a large and stable potential customer base.Disadvantages of a state-owned enterprise:Strict government control and restrictions around general operations and decision-making.SOEs have a strong corporate culture and management tone. Reasons include:Unlike U.S. employees, SOE employees have very little say or input on business related decisions.Management meetings are held to inform employees of decisions rather than to discuss initiatives, brainstorm and strategize as a group.For SOE employees work is very routine, less innovative and success is very much based on your direct supervisor’s opinion of your work rather than specific performance objectives.Strong political influence. Political objectives are important to SOEs because most SOEs are overseen by the State-owned Assets Supervision and Administration Commission (SASAC) who have the final say on all major business decisions.SOEs are required to set up a labor union.Focused workforce. Many employees at SOEs are so focused on making sure their work is flawless that their narrow sightedness is a disadvantage to the company. For SOE workers is it more important to them to avoid making a mistake rather than being innovative.Contact us for more information on selling to China, SOE’s or questions regarding the complexities of international business and tax matters.
