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)

Basic Steps

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
Registration with City Tax Bureau
9) Setup of Bank Accounts
10) Customs Bureau Registration
11) Capital Verification
12) Business License Update

References

1. Orientation China Guidebook, First Edition, American Chamber of Commerce in Shanghai

2. Types of Business Presence in China, Path to China

3. Register a Company in China: Full registrations, Authority and Timeframe, NSW Chamber

Recommended Reading

How to Start a Business in China – WFOE, China Law Blog

How To Start A Business In China — The Minimum Capital Requirements For A 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

How to understand Guanxi

Whenever you read or hear about China you cannot get around the Chinese word Guanxi (关系).

For non- Chinese it is difficult to understand what this little word really stands for.

The original meaning is “relationship”. But most dictionaries mention that it can also mean “concerning something”, “condition” or “involvement”. And that is where most foreigners have trouble understanding how relationship can also mean “condition”.

Guanxi is used as a term for a personal network. Those networks influence almost all decisions made in China while contracts and agreements are seen as guidelines which can be questioned or changed.

Most foreigners find it hard to believe that Guanxi is not a synonym for the Western term “corruption”. In China they use the word Huilu (贿赂) for this illegal process.

So what is Guanxi, if it doesn´t mean corruption?

Guanxi- Relationships are unlike corruption not based on unions, groups or institutions but are concerning the link between two individual persons. From there on the network can be expanded to the people the other one has Guanxi with.

The dangerous thing about introducing other people to the people you have Guanxi with, is that you could lose your face (honor, credibility) in case the introduced person is not trustworthy or reliable.

This kind of relationship needs a long time to be built up but when established it can be on a very high level. Some of the relationships are based on living together in the same village or because two people were studying in the same university.

But unlike the western definition of friendship or companionship, Guanxi can only exist if the help one gives to the other is equal to the received favor. Eventually you have to “pay back” your Guanxi- Partners.

Time and consistence play an important role in this process which involves work and caretaking. It could be compared to a fire. You have to put wood into the flames to keep it going.

People you have good Guanxi have the skill to know when to get new wood and when it is time to use the fire. That’s why it is very important for Chinese to categorize people as family, friends or foes.

All this is normally unnoticeable for foreigners who are most of the time outside of this very Chinese network.

Interesting enough “Mei Guanxi” which could be wrongly translated as “no relationship” means actually “don´t worry”, “never mind” or “doesn´t matter. So don´t be insulted if someone on the street appears to tell you “We have no relationship”.

Dalian has a total area of 13.8 thousand square kilometers and a population of six million people. There are 10 municipalities and counties, as well as five economic development zones that have been opened to the outside world.

Dalian’s economy is always growing. Its GDP in 2009 reached 441 billion, an increase of 15% year-on-year, surpassing the predicted rate by 1%. Its recorded local fiscal revenue in 2009 was 400.2 million, increasing by 18% year-on-year, and it also reported an industrial added value of 173.3 billion, a 17.5% rise year-on-year. The total investment in fixed assets in 2009 was 327.3 billion, a 30% rise year-on-year. The average per capita income for the urban residents reached 19,090 RMB a year in 2009, with an increase of 9%; net annual income per capita for the farmers was 11,190 RMB, increasing by 14%. In addition, GDP per capita was 73134 RMB (USD10, 708).

By October 2009, there were 13521 foreign-invested companies in Dalian, 4,608 of which have gone into operation. By the end of December 2008, Dalian had utilized foreign capital totaling at 33.14 billion dollars and the registered capital reached 54.56 billion dollars. Currently, big enterprises such as Fortune 500′s Intel, Starbucks, Volkswagen and Bosch GROUP, Toshiba, Panasonic, LG, STX and BT are investing in Dalian.
It is also among the “Best Tourist Cities in China” selected by the National Tourism Administration and the World Tourism Organization.

In March 1999, the National Tourism Administration named Dalian “Capital of Romance”.
Surrounding the city are prime spots to enjoy water sports, while every year it hosts various events such as the Sand Beach Cultural Festival, the International Fashion Festival and the International Beer Festival.
With the Bohai Sea to the west and the Yellow Sea in the east, Dalian is neither too hot in summer nor too cold in winter. The city has more than 60 public squares, including famed Xinghai Square – Asia’s largest city square – and Zhongshan Square in the city’s central business district.

Dalian promotes tourism through the 3S: – sun, sand and sea in summer and springtime climate, sports and shopping in winter. A tourist resort in Lushun district showcases “half of the modern history of China” while Jinshitan resort in the development zone offers the highly regarded Geological Museum of China and attractions called the Golden Coast and Discovery Land.

More than 40 percent of the city is covered by greenery, the equivalent of 11.1 sq m for every resident.
Dalian has been awarded many titles for its environment, including the China Residence Award and the National Environment Protection Model City. It was among the world’s top 500 cities with excellent environment listed by the United Nations.

Ein Sino-Foreign Cooperative Joint Venture ist ein Joint Venture einer chinesischen und einer ausländischen Firma innerhalb Chinas. Die chinesische Firma stellt dabei normalerweise Personal, Landnutzungsrechte und Fabrikgebäude, während die ausländische Firma nötige Technologien, wichtiges Equipment und Kapital einbringt. Dieser Joint Venture Typ basiert auf einer Vereinigung in der Bereiche wie die Kooperationsbedingungen, Einkommen, Eigentum und Vertragsaustrittsbedingungen festgeschrieben sind.

Unterschiede zwischen einem Sino-Foreign Equity Joint Venture und einem Sino-Foreign Cooperative Joint Venture

Es gibt drei Hauptunterschiede:

• Während ein Sino-Foreign Equity Joint Venture immer auf einer juristischen Person und damit in eingeschränkter Haftung beruht, kann ein Sino-Foreign Cooperative Joint Venture in einer juristischen Person oder in voller Haftung bestehen. Letzteres ist weit verbreitet, da die Partner persönlich für sämtliche möglichen Verluste in der Zukunft verantwortlich sind.
• In einem Sino-Foreign Equity Joint Venture werden die Gewinne im selben Verhältnis an die Partner verteilt wie die Kapitaleinsätze während diese Verteilung in einem Sino-Foreign Cooperative Joint Venture gemäß der Wünsche der Parteien verteilt werden können. Letzteres Joint Venture ist somit flexibler.
• In einem Sino-Foreign Cooperative Joint Venture kann neben registriertem Kapital zu kooperativen Konditionen, z.B. Markteintrittsrechte etc. investiert werden.

In China, Volvo Car Corporation’s management team led by Freeman Shen is well established and Volvo Car China has now grown from a national sales company into a full-fledged organisation with its headquarter in Shanghai. Now when we are talking about Volvo Car China Operation, we are talking about a subsidiary in China which includes sales and marketing, manufacturing, purchasing, product development and all other supporting functions.

We have started building the Chengdu plant, and investigations are ongoing for a potential plant in Daqing. It will be extremely important to use the Volvo manufacturing and quality systems in these plants so that we will build the same quality Volvo cars and engines as those being built for Volvo elsewhere.

Our R&D organisation in Shanghai will become the centre for product development, engineering, design and sourcing in China, and an important and integrated part of our global product development network. Our diversified product development team has taken on engineering tasks in new product design and local sourcing as well as supporting global teams in new product and new technology development.

Meanwhile, we are developing and optimising the supply base in China not only for the China plants but also for Volvo Cars’ entire global operation. Currently, it is our priority to hire new staff to work with product development for the Chinese market and support local production and purchasing activities. We will implement the same quality standards as those in Europe and are willing to build a long-term relationship with our suppliers in China. A design center is being located in Shanghai to support the global design team in understanding the market trend in China and the preference of Chinese consumers.

There is also full focus to increase sales in China by strengthening sales and marketing activities, including expanding the dealer network, recruiting and training sales consultants and improving customer experience and satisfaction.

China Growth Plan Progress
We have made lots of progress in China in the past year. Sales increased by 36 per cent, to 21,000 units by the end of June, compared with the same period last year. Our sales network is expanding systematically, with increased interest and enthusiasm from dealers across the country. In the first half of 2011, 11 new dealers joined our sales force and turned the total dealer number to 117 nationwide. We are also working on further improvement of customer satisfaction together with our dealers.

Road ahead
China overtook the United States as the world’s largest car market in 2009, and continued a strong growth momentum in 2011, especially in the market segment where we are competing. In the luxury car segment, the sales boom has provided tremendous opportunities for us. However, our goal of selling 200,000 vehicles per year from last year’s amount of 30,000 vehicles will not be an easy job. This requires lots of hard work, passion for our customers and cars, speed to market and smart thinking from all of us.

Nobody has ever done what we are doing today. We are not just another multinational company in China. Here we are making history together. Facing the market and fierce competition, we need to have a strong sense of urgency and install great courage to achieve our ambitious goals in China.

My colleagues and I are committed to writing a new chapter in China’s auto industry. We will work very hard and smart, with customers, partners and other stakeholders to unlock the tiger of Volvo and regain its glory. Together with our global team, we will make Volvo Cars a most admired brand and one of the most successful businesses in China.

How to purchase a property in China (Ch…

In loose terms, you can think of face as reputation, honor or respect. You could also think of it as public image, particularly through the eyes of one’s close connections.

Face can be given, gained, lost or saved.

It’s easy to lose face. For example, face can be lost through a public insult or public contradiction or by failure to receive the proper level of respect. It is not really the act that causes a loss of face but the fact that the act is public, and there is public humiliation or loss of prestige involved.

Loss of face must be avoided. Sometimes, Chinese go to great lengths to preserve face. It’s acceptable to lie to preserve face. In fact, lying is considered the better option, especially when it is understood that it is being done to preserve face.

You may have noticed how Chinese business people don’t like to say “no” outright, even when that is their answer. This is because saying “no” would cause the rejected party to lose face. By not saying “no” directly they are preserving face.

One good reason for not doing anything that would cause someone to lose face is that it could result in some form of retaliation. The face loser may attempt to regain face by doing something to cause the initial infractor their own loss of face.

Face can be gained through public showings of respect or praise to a third party. See again how the simple act of giving praise isn’t what gives face, it’s the fact it is done publicly or via a third party. Face can also be gained by doing what others cannot do or by being exceptionally knowledgeable or wise.

In China, it is not just individuals that have face, the concept applies to companies and government ministries too. In this case, think of it as the organization’s good reputation that they aim to preserve.

To learn more about mianzi, see the following article which does an excellent job of explaining face in non-business situations from both Chinese and Western perspectives:

http://middlekingdomlife.com/guide/mianzi-guanxi-china.htm

Source: dragonbn.com

1) Look to your current contact base

I think the first place you have to look to build your China network is your current contact base. Take a look through your Facebook and Linkedin accounts and see if your current contacts are doing anything in China. When I first announced on Linkedin that I was doing business in China, I had several contacts who said they knew someone I should meet.

If you attended college, make sure to tap into your alumni network. The Chinese really believe in their alumni network so it is natural for the expat alumni networks take a more important role in China. I think a good alumni network might be the best possible source of building the right contacts in China.

2) Join online networking groups with a China focus

Join online networking sites and, after you join, be active and participate in online discussions. Keep your profile current and actively seek new contacts.

Here are the main online networking groups for China business. Join several if you can.

Dragon Business Network
www.dragonbn.com

The China Business Network
www.thechinabusinessnetwork.com

China Groups at Linkedin
www.linkedin.com

China Groups at Xing
www.xing.com

3) Join a chamber of commerce

I think joining a chamber of commerce is a must. Chambers really do a great job of providing seminars. And their networking opportunities are unparalleled.

Here’s more information on chambers of commerce in Shanghai: www.dragonbn.com/articles/3

4) Attend live networking events

Attend networking functions organized by private networking groups like FC Club (www.FCclub.com), OK Deal Club (www.Okdealclub.com), Oriented (www.oriented.com) and Next Step (www.nextstepshanghai.com). Many of these events are held at fashionable drinking venues. What a great way to meet contacts and have a good time.

Though not billed as business networking events, local get-togethers like ShanghaiExpats.com’s Wednesday Beer Mixer and weekend coffee meetings are also good for making contacts.

Various chambers of commerce also organize events.

Here’s a link to the most complete, up-to-date list of in-person networking events in China:www.dragonbn.com/events

5) Reach out to government organizations

Relevant government organizations in your country, such as ministries of trade and technology, are generally easily approachable. More importantly, key staff at these organizations, such as trade officers, tend to have a great number of contacts they can help you meet.

6) Join business associations or industry groups

Most major cities around the world have business associations or industry groups with an interest in China. One example is the Vancouver Business Network Forum (www.vbnf.com) in Vancouver, Canada.

7) Socialize

I met some great contacts while watching football games at expat bars like Malones and the Big Bam Boom in Shanghai.

Ask consultants

Be sure to touch base with market entry consultants, lawyers and accountants that deal with foreigners. These service providers are helpful for meeting the right connections.

9) Join expat centers

Join expat-oriented groups such as Community Center Shanghai. Expat communities are highly integrated — knowing one person means you will be introduced to several others.

10) Get an MBA or EMBA

Go get an MBA or EMBA. I have met a lot of people who got their MBA in China who said the contacts they made at school made their MBA worth it.

Source: www.dragonbn.com

“You have to be a leader, not a follower…timing is everything,” said Huang Xiaoqing, generalmanager of China Mobile’s Research Institute, in an interview with Xinhua.

With more than 600 million subscribers, the mobile giant, which is both listed in Hong Kong andNew York, is pushing for China’s home-grown 4G standard, known as TD-LTE, or ”TimeDivision-Long Term Evolution,” to be a globally accepted standard.

The technology is expected to provide faster broadband wireless services to meet theexplosive future demand in data communication that the current 3G network is unable todeliver, Huang said.

“Demand for mobile communications, especially for mobile internet, is rapidly growing, totallybeyond our expectation and forecast,” he said.

The TD-LTE network is believed to be ”ten times lower in price and ten times better inperformance” than the current 3G service, he added.

The upgraded version of TD-LTE, or TD-LTE-Advanced, is now among the three international4G standards accepted by the UN’s International Telecommunication Union(ITU). The othertwo are LTE FDD and WiMAX, which are dominated by Europe and the United States,respectively.

Currently the company has arranged large-scale TD-LTE trials in six Chinese cities and set upa demonstration network in Beijing. It has also developed a TD-LTE mobile network in Taiwanwith the local Far EasTone Telecommunications for testing purposes.

According to Huang, telecommunication operators worldwide are seeking a single and unifiedglobal standard and tend to agree to the LTE standard.

China Mobile joined with seven other operators to form Global TD-LTE Initiative(GTI) at theMobile World Congress in Barcelona in February, he said.

The GTI now has 22 members, including telecommunication giants like the UK’s Vodafone,Japan’s Softbank, and Axiata from eastern Europe. Currently, trial networks of TD-LTE havebeen established in 29 countries.

Goldman Sachs is also optimistic about TD-LTE’s future. In a report released late June, theinvestment bank said TD-LTE is becoming the global solution for unpaired spectrum due to its3G inter-operability, large data capacity, and leverage of the LTE FDD system.

The report expects China Mobile, Bharti (India), and Softbank to launch TD-LTE services inlate 2012 or 2013, which would cover nearly 2.7 billion people, or 39 percent of the world’stotal population, in the three countries.

China is leading the global promotion of the TD-LTE standard, therefore, tests on the networkare fully open, said Cao Shumin, vice director of the Telecommunication Research Institutionunder with the Chinese Ministry of Industry and Information Technology(MIIT).

The test site at the MIIT institution has gathered not only domestic cell phone manufacturersbut also multinational tycoons like Motorola, Ericsson, and Nokia Siemens Networks.

The LTE FDD network, which is promoted by European operators, is seen as a strongcompetitor to TD-LTE. But as the two technologies are based on the same LTE system, theyare able to share R&D results and subscribers at a global level, Cao said.

The company is also pinning hope on the 4G technology to gain back its high-end subscriberslost to China Unicom and China Telecom in the 3G business.

China Mobile, whose 3G network technology isn’t supported by the iPhone, has announced itwill work with Apple on a TD-LTE-type iPhone.

Currently, China Mobile’s iPhone users can only run their device on the 2G mobile network.

But the Chinese government has not given a clear timetable for the commercial launch of TD-LTE.

Miao Wei, minister of the MIIT, said in April that China plans to commercially promote the TD-LTE technology nationwide within three to five years.

The government has only issued the 3G licenses in 2009, with China Mobile getting the self-developed TD-SCDMA standard.

“The regulator is afraid that China Mobile is becoming stronger, gaining more market share and monopolizing the market,” Huang said.

China Mobile had 611 million subscribers by the end of May, of which 32 million were 3Gusers. China Unicom had 22.1 million 3G users in May, while China Telecom came in third with19.7 million.