Anyone know about borrowing money and doing business in Asia?

Question

My company has pretty high borrowing costs in the states, we're not an international company but I know the cost of capital is much less in China and Japan......Anyone have an idea about it or know any resources to find out how one goes about it.

Answer 1

u must dump in ur money as a minimum deposit with the country n then register ur company with solid capital.they w'd offer u grace period of 5 years tax free under pioneer status.touch wood if u can't make profit within these 5 years u r entitled to have another 5 years tax free.within these 10 yrs if still unprofitable u better close it n wind up ur business.

Answer 2

Scott T here......my goal is for my company, we're a manufacturing company......to lower our borrowing costs. I'm not an international banker, but here's the skinny. We have a 10 million dollar outfit that could be 15 m. tomorrow if we had the money at a reasonable borrowing cost. It just so happens in the US that money is not cheap as it is in Asia. We do a little bit of international business. I'm just taking a shot in the dark here....we're incorporated in the US and have to borrow from the crappy banks here in the US.

To the 2 guys who responded - you seem to have a great knowledge in this area.....and I'm looking for a start here more than anything. If it's ok to email you....you can send me one at [e-mail] as I'd love to know more about this. Thanks

Answer 3

Your not very clear about what you want answered. Capitalization costs in many foreign countries, including China and Japan reflect the competition for capital available locally. Capital costs in Asia reflect government policies designed to encourage economic development in those countries. If you are wanting to borrow Chinese money for use in your local operations its not going to happen unless you want to sell a portion of your company--a controlling portion most likely--to capital investors in that country. Their willingness to invest in your operations will follow return on investment probabilities measured in YOUR location and therefore, while the cost of the money may be less, so is the probability that they would be interested in plowing it into your company. Further, if you were successful in borrowing money internationally you would introduce exchange rate risks into the uncertainties of doing business and any capitalist in Asia will figure into their investment costs, the costs of recovering a loan gone bad. By the time you had the money available to use in your location, the odds are that the costs of Asian capital would not differ that much from the costs of your local capital.

On the other hand if you are considering moving your operations to Asia you are introducing another set of fiduciary risks which, unless you've had extensive experience in the country you choose, or have a partner with extensive experience, could make the high costs of American capital look cheap. There are other costs to doing business in China, for example, that roughly equalize overall costs. Labor costs in China are much lower but regulatory costs are much higher, especially when you figure in issues of Guanxi and the cost of wining and dining government officials and others who may have a vested interest in watching your business. Add to that transportation costs, lower productivity rates, import and export costs, the complexities of international book keeping, and increased exchange rate risks. You could easily be dreaming of the days when all you had to worry about was the high cost of capital in the states. One should never move internationally based solely on the costs of capital.