Oracle E-Business Suite can be an invaluable asset for organizations who are looking to set up business in China, or who want to streamline their operations in the region. However, implementing Oracle EBS is a project that does not come without challenges.
In order to start gearing up for our upcoming webcast: “Gaining a Foothold in the Asia-Pacific Market with Oracle EBS” (for which you can register here) today our China practice team is bringing you 5 key factors to be taken into account when implementing Oracle EBS in China. Although this piece is specifically written on Oracle E-Business Suite, you will find that much of the information is useful for other ERP systems as well.
The first consideration is what type of legal entity you will be operating. China splits foreign companies into 3 categories:
- Wholly Foreign Owned Enterprises (WFOE): in these companies set up in China, investment is 100% provided by the foreign investor without any Chinese partners
- Processing Trade Firms: import all or part of the raw materials from abroad in gold. Then re-export the finished product, which was processed by Chinese enterprises
- Representative Offices (RO): these are set up by a company who conducts marketing and non-transactional operations. They are easier to establish than branches or subsidiaries, and because of their non-transactional nature, they are also less regulated by the government.
Another point to consider is that there are a number of localizations that could pose a hurdle to companies looking to rollout Oracle EBS to their China practices. One of the most basic requirements that must be integrated into the Oracle E-Business Suite setup is language support, since all local supplier documents need to be in Chinese.
Besides language requirements, there are a number of statutory regulations to take into account. Unlike tax laws in the US, China uses a value added tax (VAT) system for business transactions. This is a circulation tax levied on the added value of each phase of a products typical life cycle, and exacts the deduction phase by phase so that the final tax is equal to the sum of the taxes on each production phase.
Financial statements must also comply with government regulations and be in Chinese currency (RMB). An asset report also needs to be prepared for local government auditing purposes, according to local regulations. All these reports must be in Chinese.
Another issue to consider is time differences across your global instance. For example, if the application server is located in a different time zone than that of China, the date and time that users in China see will be that of the server location and could cause a problem in work calendars, work shifts, and other time-sensitive data.
Finally, there are also a number of other legal requirements that affect specific industries (which can also be embedded in Oracle to meet the obligations). For example, manufacturing firms must be aware of bonded and non-bonded material tracking. Materials and parts imported as bonded must be re-exported after processing, and enterprises may not sell their bonded.
To learn more about this topic, remember to sign up for our free webinar “Gaining a Foothold in the Asia-Pacific Market with Oracle EBS” on June 28th, 2016. Register here.