Setting up a company in China is not a simple matter. You will need to hire a China-based law firm or business consulting firm to guide you through the process. (Ref. 1)
The level of difficulty in setting up your company depends on your industry. The reason is that China encourages foreign investment in certain industries while discourages it in others.
There are several different registration classifications for foreign companies doing business in China. You will need to decide which one best suits your needs. The main classifications are Wholly Foreign Owned Enterprise (WFOE), Joint Venture (JV), Representative Office and Partnership Enterprise (PE).
A Wholly Foreign Owned Enterprise is a business that is 100% owned by a foreign company or companies. These are often established in Special Economic Zones. Only businesses in certain industry categories are allowed to set up as a WFOE. A WFOE requires a minimum capitalization, can generate income, pays tax in China and can repatriate profits. (Ref. 2)
A Joint Venture is a partnership between a foreign company and a local partner. A Joint Venture may be appropriate if WFOEs are not permitted in your industry classification.
A Representative Office is easier to set up than either a WFOE or JV. It costs less and does not require capitalization. However, Representative Offices may not engage in trade, receive fees for service, sign contracts or directly generate income. They are typically used for market research, promotion, and establishing or maintaining China business contacts.
A Partnership Enterprise is a new classification that came into effect March 1, 2010. It allows partnerships between foreign companies and individuals, and Chinese companies and individuals. (Ref. 2)
It typically takes 4 to 6 months to register a WFOE or JV, depending on scale and industry. (Ref. 3)
A number of government offices are involved in the process including the Ministry of Commerce or its subsidiary, the Local Industry and Commerce Administration Bureau, the State Taxation Bureau, the Local Taxation Bureau, the Foreign Administration Office of Police, the Bank, the Foreign Exchange Administration Bureau, the Public Security Bureau, and the Customs Office. (Ref. 3)
Here is an outline of the basic steps to setting up a WFOE or JV in China. (Ref. 1) The process is simpler for Representative Offices.
1) Name Approval
2) Approval to Establish Company
3) Registration of Business License
4) Filing and Carving Seals
5) Enterprise Code Certification
6) Statistics Bureau Registration
7) Foreign Exchange Approval
8) Registration with City Tax Bureau
9) Setup of Bank Accounts
10) Customs Bureau Registration
11) Capital Verification
12) Business License Update
1. Orientation China Guidebook, First Edition, American Chamber of Commerce in Shanghai
2. Types of Business Presence in China, Path to China
How to Start a Business in China – WFOE, China Law Blog
Setting Up a Representative Office in China, Export.gov, US Department of Commerce, International Trade Administration
How to Form a Representative Office in China, China Law Blog
8 Must-Knows about Business Set-up in China, NSW Business Chamber
Starting a Business in China, International Finance Corporation, World Bank Group
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