C.i. Process Shanghai

Business registration and Licenses in China

China market entry solutions | C.i. Process Shanghai
 
 
[ Business set-up ]
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China business et-up advisory services

Based in Shanghai since 2003, we help entrepreneurs, SMEs and large international corporations to set up their business and register their company in China.

Advice for the upstream structuring, China legal entities compared and advised for a project. Investment feasibility report draft, business plans, full service for corporate business registration and getting the required mandatory licenses per activity.



China set-up publication
 
  Publication updated on july, 14, 2022      


Why set up a legal entity in China and for what project ?

10 typical goals that worth thinking about a company registration in China :

  1. Expand the domestic distribution and generate profits that can be repatriated overseas

  2. Have a buying or a sourcing office to secure the purchases and ship consolidated LCL/FCL orders

  3. Recruit locally to provide technical support, engineer expertise or equipment maintenance service

  4. Open a commercial company engaged in a domestic wholesale and/or a retail activity

  5. Monitor and facilitate e-commerce online sales on the Chinese market

  6. Set up a service and repair workshop for products sold in China

  7. Set-up a manufacturing or assembly facility so as to offer competitive local prices + CNY invoices

  8. Having a China based warehouse that would support the logistics for your ASIAPAC customers

  9. Services to individuals (B2C) : health services, vocational training, bars, restaurants, etc

  10. Business to business services (B2B) : engineering projects, construction, training, consulting, etc

 

The global context and risks to consider before setup in China

The size of the domestic market and sustained growth are the primary advantages of investing on Chinese soil. Even in the event of a financial crisis (1998, 2008) or ahealth crisis (Covid-19), growth is maintained with recovery plans intended to support employment and activity. Having a business based in China allows for a sustainable and continuous expansion in a stable political environment.

China has long been a low-cost manufacturing base usually referred to as the World Factory. Following the Olympic Games (Beijing, 2008) and the World Expo (Shanghai, 2010), the authorities have continuously implemented business policies aimed at keeping to modernize the country's infrastructure and overall quality.

The regualr increase of land cost and labor costs gradually resulted in partial relocations of some China coast based manufacturing companies. Some moved some or all of the production lines to the inner provinces of China. Other manufacturers preferred to move elsewhere in Southeast Asia. For example, the production relocation for simple lighting products started in the early 2000's.

In line with a strong development, the significant increase of the labor cost and land purchase costs still make it possible to remain competitive compared to those costs in Europe or the United States.

A domestic entity is also a great way to control the operations on the Chinese territory. It is easier to monitor the production, the marketing & distribution matter and the customers relationship. Having a China base also makes it possible to better monitor changes in consumer habits and to continuously observe competitors. With the upmarket move of the local productions, competition surveys in China often indicate that competitors are no longer only foreigners.

The activities of subsidiaries of foreign companies in China has remained fairly constant for several years. On the other hand, the evolution of Chinese laws and regulations on foreign investments has greatly favored the arrival of Small and Medium Enterprises (SME) and individual entrepreneurs.

So as to optimize the set-up of a company which activity may fall in sectors governed by restrictive regulations, it is recommended to conduct a prior regulatory investigation before incorporation. Why ? The authorities of each province have a high degree of autonomy in applying national investment guidelines. This flexibility means that the existence and levels of incentives or advantages are not the same according to the provinces or regions. These differences allow them to offer better investment conditions in line with their development needs. A pre-setup analysis then allows :

  • to compare the investment conditions in different zones or industrial parks
  • to know and compare the conditions of establishing a company in several cities and their districts
  • to assess the customs facilities and tax regimes that could be granted for a particular project
  • to draft several activity hypothesis taking into account fixed costs and variable logistics costs
  • to compare the availability and costs of the human ressources needed
  • to take into account the employees' commuting time to various downtown areas.

Each company is first attached to a municipal and provincial constituency. Thus, changing city or province entails possibly tedious procedures, or even the need to re-register with new formalities and licenses. For example, tax offices (branches of the Chinese tax authorities) and customs are not organized uniformly at the national level. Their respective key performance indicators (KPI) are directly consolidated with the annual economic performances of municipalities and provinces. They engage in open competition. It is therefore cautious to anticipate the context of such a vast country.

 

What legal forms available to establish and develop a China activity ?

3 legal forms allow a foreign company to set-up in China. The following links open a presentation of each of them.

   
Representative office
The Representative or liaison office
sino-foreign joint venture
The sino-foreign joint venture (EJV or CJV)
WFOE company or subsidiary
The fully 100% owned company or subsidiary (WFOE)
   

 

Post-registration services and additional licenses

With our team and network of partners, we also assist our clients with :

  • The search for industrial facilities, storage warehouses of all categories (hazardous products, white rooms, temperature-controlled areas)

  • The search and recruitment of directors, managers, sales team, technicians and engineers for both local Chinese and western employees

  • Accounting services, payroll and tax monthly declarations + annual audits

  • Review or drafting of multi-lingual employment contracts, customer contracts

  • An appropriate handling of intellectual property matters with regard to trademarks and patents

  • Comparisons of qualified service providers for construction work, upgrading of industrial buildings and warehouses, fitting out or office renovation

  • Preparing and handling of China work visa and residence permit

  • Drafting of internal rules in accordance with Chinese labor regulations

  • Advice to subsidiaries managers and coaching of entrepreneurs on business conduct and negotiations

  • The set-up of remote branch offices or retail branches so as to follow the development in other provinces.


Negotiation and resolution of disputes with Chinese administrations

Issues with expired or insufficient licenses for an activity ? Inspections, fines or administrative complications with Chinese customs, health authorities (CFDA and NMPA) or a tax office in China ? Foreign companies that have an office or a subsidiary sometimes encounter major concerns during annual audits or inspections carried out following a denunciation.

Field regulations have changed dramatically since China has become a leading destination for foreign investment. In May 2021, China implemented a stricter regulatory framework for the approval of cosmetic and food products. This regulation applies to both imported cosmetics & food and those produced locally. Business compliance with new regulations is subject to diligently conducted checks and inspections. The increase in competition and the implementation of a public policy aimed at encouraging consumer complaints are leading to ever-increasing numbers of litigations. A special administration (SAMR) is dedicated to the management of these complaints. Beyond the administrative and financial aspects, it is first and foremost the companies image and their brands that is at stake.

We bring our experience in negotiating and resolving disputes with the Chinese administrations and authorities in order to bring optimized results that are not left to good luck only.

 

Negotiate the dormancy status of a company in difficulty

Since March 1, 2022, an update to Chinese business regulations allows a company or subsidiary to apply for a temporary cessation of activity status. This measure is intended to help domestic businesses that are experiencing difficulties due, for example, to the impact of Covid-19 in China. This solution makes it possible to greatly reduce operating expenses in the event of temporary difficult times. Nevertheless, it is subject to prior precautions and specific formalities. Learn more about the legal dormant measures available to a company established in the PRC.




 

why register a company in China?
Our added value for the China set up services
 
Our accreditation and experience in companies set-up, registration & licensing in China
A managing resident for over 25 years in the Chinese world
The complementarities of a Western and Chinese multicultural team
Our networks with Chinese authorities and administrations & recognition of institutional bodies
An extensive knowledge of local practices and cultural codes to conduct serious negotiations
 
 
 
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