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China s fast growing economy and its integration into the global economy have been a dramatic economic development. During the past decade there has been a large increase of Swedish companies entering the Chinese market. Therefore it has been of great interest to study this area. This thesis explores Swedish SME s established in China, and how they have used their business network to overcome institutional barriers. This thesis also has the objectives of giving a description of the general procedures of setting up a business in China, and to prepare other firms that have plans on entering the Chinese on what the most common obstacles there are when setting up a business in China.