How to start a business in China – company formation, manufacturing & trading
China is a global economic power and for that reason more and more foreign investors are looking to China to start their business. The ongoing reform and modernization program, including the adjustment of the legal and regulatory framework of foreign trade and investment, means China is a major market which embraces new business opportunities and challenges. Some of the many advantages of opening a company in China include:
- Welcoming business atmosphere
- Fast growing economy
- Large highly skilled labour
- Low employment costs
- Rapid increase in consumer income
China is an extremely popular choice for those in the high-tech, agricultural, forestry, telecommunication and energy industries, but is equally recognised amongst investors who are looking to trade or manufacture products such as textiles, clothing and footwear, raw materials, metals and chemicals, toys and foodstuffs.
What are the requirements for company formation in China?
The rules and processes vary from district to district but here are the main features of company incorporation in China:
- The two main options for a foreign owned entity are WFOEs and Rep Offices
- Rep Offices are slightly easier to register and operate, but they cannot collect revenue. They are also taxed on a “presumed” profit which is calculated based on the entity’s costs. It is often preferable to register a WFOE for this reason, where a trading entity is not expected to be highly profitable
- WFOEs generally have minimum capitalization requirements, but many of these have been relaxed in recent years, which makes them a more viable solution for smaller investments
- The additional requirements would be the fulfilment of accounting obligations and an annual audit
Where is the best place to set up a business in China?
The Zhizhu High Tech Zone has one of the lowest capitalization requirements of Shanghai districts and has the added benefit of offering free virtual office space – an extremely rare offer in China. As it’s a requirement for WFOEs to have an office in the district where it’s registered, this offer creates the opportunity of deciding where to locate your actual operation wherever you choose in China, while maintaining a corporate base in this favourable district. In terms of where to base an office, our experts can help you find a location in Zizhu Park - home to the Asian branches of some of the biggest companies in the world such as Coca-Cola and Microsoft.
What are the differences in trading in Chinese products or manufacturing in China?
Trading companies that trade in Chinese products are relatively straightforward to set up. If a WFOE wants to actually manufacture their own products in China, a special licence together with investor qualifications and a high level of paid up capital is also required.
For more information on company incorporation in China, how to open a Chinese bank account or manufacturing or trading in China, please call us on 0033 (0)1 53 57 49 10 or email us from our contact page and we’ll be happy to help.