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China Company Formation: Here is What Foreign Entrepreneurs Need to Know

Are you an entrepreneur and have been wondering how to get into the lucrative Chinese market? Have you been thinking of expanding your brand abroad but do not know where to start? The answer is right here: China company formation. China has sprung into the second-largest economy on the globe and is expected to surpass the US by 2030, according to the World Bank.

China is the leading manufacturing hub on the globe, boasts of state-of-the-art infrastructure and is the highest recipient of foreign direct investment. It has all attributes of a super offshore jurisdiction for investors, and this is an excellent moment for you to grab the opportunity. This post is a comprehensive guide to help you understand the most important things to know about company registration in China

Why Register Your Company in China? 

  • A large market of more than 1.4 billion. 
  • Diverse market opportunity. 
  • Strategic location makes it possible for companies to reach the neighboring markets. 
  • World-class infrastructure. 
  • 100% foreign company ownership is allowed. 
  • An excellent way to protect your trademark. 
  • China has signed bilateral trade agreements with countries across the globe. 
  • Low taxes, especially for companies located in free trade areas and away from the coastal cities. 

A Closer Look at the Main Types of Companies You can Register in China

As a foreigner looking forward to opening a company in China, the benefits we have listed above are only a scratch on the surface. There are more good things awaiting you for opening a company in China. However, you need to start by determining the nature of the company to incorporate in China. Here are the most common options: 

  • Wholly Foreign-Owned Enterprise (WFOE): As the name suggests, this company allows 100% foreign ownership. It is the most preferred type of company in China for providing the utmost freedom in the running of the enterprise. 
  • Joint Venture (JV): Unlike a WFOE, joint ventures require investors to partner with local Chinese. In addition, the local partner must hold more than 50%, implying that you will have less control over the enterprise. 
  • Representative Office (RO): If you form a representative office, it is considered an extension of another company already running back home. The parent company must be a limited liability company and have been in operation for no less than two years. You should also know that ROs are not allowed to engage in profit-making activities. So, investors prefer them for actions such as market surveys, marketing, and scouting. 

Steps involved in Company Registration in China 

We must indicate that the process can be pretty lengthy and complex because it involves dealing with different companies. The best way to get it right is to work with an agency of experts, such as Primasia. So, let’s check the main steps involved in China company formation.

  • Select the company’s preferred scope. Make sure to check China’s Catalog for the Guidance of Foreign Investment Industries to determine the right scope for your firm. 
  • Prepare all the documents required for company registration. Some of these include pre-approved company name, managerial structure, legal address, articles of association, and the feasibility study.
  • Apply for an approval certificate by submitting all the documents required for company registration to the Ministry of Commerce (MOFCOM) and State Administration of Industry and Commerce (SAIC). 
  • Apply for additional business licenses, where necessary. This is required for companies in food processing, manufacturing, telecoms, and construction. 
  • Register with the Public Security Bureau (PSB) to get the company chops. 
  • Open a bank account and register with the tax bureau

As you can see, the process can be pretty complex, especially for people with no legal or business administration background. However, you can work with Primasia, one of the most respected brands for China company formation. The most impressive thing about Primasia is that they also hold your hand when drawing new market entry strategies, and can further help with payroll management, accounting, and filing tax returns. 

Photo by UX Indonesia on Unsplash

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