- By actively easing out of the restrictions on foreign company registration in China. as seen in the reduced Negative List from 151 items in 2018 to 117 in 2022, with additional strides in automotive manufacturing and foreign shareholding ratios. Setting up or divesting a company in China remains complex due to bureaucratic processes and local regulations.
- In 2023, the establishment of foreign-invested enterprises surged by 39.7%, reaching 53,766, signalling sustained confidence in China’s market. Yet, multinational corporations face growing uncertainty and regulatory scrutiny, prompting considerations of staying or withdrawing. Despite challenges, China remains an attractive investment destination, driven by promising industry growth and transformation.
- This blog delivers detailed insights on foreign company registration in China. Tetra Consultants offer a range of services to seamlessly register company in China, guiding you through the evolving landscape of China’s market dynamics and regulations. Gain comprehensive information and expert assistance for a successful venture in the vibrant Chinese business environment.
Business structures viable for foreign company registration in China
Foreigners can set up three company types in China, including Wholly Foreign-Owned Enterprises (WFOE), Sino-Foreign Cooperative Joint Venture (JV), and Representative Offices (RO).
Wholly Foreign-Owned Enterprises (WFOE)
- Wholly Foreign-Owned Enterprise, is a 100% foreign-invested limited liability company with independent operations. Representing nearly 60% of foreign-owned businesses, it stands as the most prevalent business type, embraced by major corporations like Apple, Amazon, Oracle, and General Electric.
- While setting up a WFOE poses higher risks due to increased investment requirements and potential market unfamiliarity for foreign companies, its popularity persists for compelling reasons. WFOEs offer complete ownership, allowing conversion of RMB income into USD and remittance of profits overseas. This structure grants foreign enterprises unrestricted control over internal operating structures, making WFOE the preferred choice despite associated challenges.
- There are various statutory requirements which are as follows:
- A WFOE must have at least one shareholder, whose details must be filed to the State Administration for Market Regulation (SAMR).
- Shareholders can be individuals or legal entities, but they cannot be companies incorporated in Mainland China.
- The Board of Directors should consist of at least three directors, with one of them being the Chairman.
- Shareholders and Directors can be of any nationality except Mainland Chinese and can reside anywhere in the world.
- A WFOE must appoint a company secretary, who is responsible for maintaining the company’s statutory records and ensuring compliance with relevant laws and regulations.
- A WFOE must have a registered office address in Mainland China, which serves as the company’s official address for legal and administrative purposes.
Sino-Foreign Cooperative Joint Venture (JV)
- A Joint Venture (JV) involves shared investment and ownership between a Chinese and a foreign partner, proportionate to their respective investments. JVs are a prevalent business type, constituting over 35% of the one million foreign enterprises in China. Notable examples include SAIC Volkswagen, SAIC General Motors, and BMW Brilliance.
- In simplified terms, JVs usually do not enforce mandatory registered capital requirements for foreign investors, but a minimum capital investment ratio of 25% is expected. JVs enjoy regional benefits, like a 15% reduction in corporate income taxes for those in Shandong’s designated development zones. Partnering with a Chinese counterpart in a JV opens avenues for marketing, business connections, brand strength, and investment support, enhancing the overall business landscape.
Representative Offices (RO)
- A Representative Office (RO) serves as a liaison entity established by a foreign-invested enterprise in China, acting on behalf of the parent company. Although ROs lack recognition as independent legal entities, they are permitted to engage in non-direct business activities such as liaison work, product promotion, market research, and setting up bank accounts. Unlike entities conducting standard operations, ROs cannot generate profits or transfer money abroad.
- ROs offer a market-entry option with fewer initial risks, commonly used by foreign enterprises to explore the Chinese market, establish connections, and assess viability before full-scale market entry. Investment and registration for ROs in China have no capital limits. However, enterprises must adhere to recruitment regulations through government-approved HR agencies and establish offices in government-designated foreign-related office buildings. RO licenses are initially for three years, with the option for unlimited extensions.
Process for foreign company registration in China
Step 1: Choose company name and structure
- Select the company type for the establishment, be it a Wholly Foreign-Owned Enterprise (WFOE), Sino-Foreign Cooperative Joint Venture (JV), or Representative Office (RO). Tetra Consultants offers name reservation services, assisting in securing your chosen business identity as part of the initial setup process.
Step 2: Comply with pre-requisites
- There are various pre-requisites for foreign company registration in China to follow which are as follows:
- A WFOE requires at least one shareholder, with details filed with the State Administration for Market Regulation (SAMR).
- Shareholders, individuals, or legal entities must not be companies incorporated in Mainland China.
- The Board of Directors should comprise a minimum of three directors, including a chairman.
- Shareholders and Directors, of any nationality except Mainland Chinese, can reside globally.
- A WFOE must appoint a company secretary
- The WFOE must have a registered office address in Mainland China.
Step 3: Prepare all necessary documents
- Tetra Consultants streamlines the incorporation process by assisting in the preparation and submission of vital documents for operational approval. Our services cover securing approval for the proposed company name, obtaining a valid registered office address, notarizing passport/business certificate photocopies, and drafting a comprehensive business plan. We provide support in detailing registered capital and total investment, facilitating the setup of a Chinese business bank account, and guiding the company in tax and social security registration post obtaining a business license. Trust Tetra Consultants for seamless incorporation with expert legal document drafting for foreign companies in China.
Step 4: Submit the documents to the appropriate authorities
- Tetra Consultants takes charge of submitting the necessary documents to the relevant authorities, ensuring a smooth incorporation process. We navigate the regulatory landscape by liaising with key entities such as the Ministry of Commerce, State Administration of Industry and Commerce, State Administration of Foreign Exchange, State Administration of Taxation, General Administration of Customs, State Bureau of Quality and Technical Supervision, and National Bureau of Statistics.
- Trust us to handle the intricate procedures, guaranteeing that your documentation meets the requirements of each authority, expediting the approval process for the seamless establishment of your foreign company in China.
Step 5: Secure a registered office address
- Tetra Consultants facilitates the acquisition of a crucial registered office address in China, serving as the official legal and administrative hub for your company. We ensure compliance with regulatory standards, providing a solid foundation for your operations and contributing to the seamless establishment of your foreign company in the dynamic Chinese market.
Step 6: Obtain a business license
- Tetra Consultants streamlines the process of obtaining a business license in China, handling applications with relevant authorities like the State Administration for Market Regulation (SAMR). Depending on the business type, we secure specific certificates, such as a comprehensive “5 in 1” business license from the local Administration of Industry and Commerce (AIC). Trust Tetra Consultants for expert services in acquiring business licenses, trade permits, and even offshore financial licenses tailored to your business needs.
Step 7: Open a business bank account
- Tetra Consultants streamline the process of opening a business bank account, providing efficient corporate bank account opening services. Our expertise ensures businesses can have a fully operational bank account within four weeks of incorporation, facilitating seamless financial transactions and operational functions. Trust Tetra Consultants for prompt and reliable support in establishing your business’s banking foundation.
- Tetra Consultants stands as a reliable guide for foreign companies navigating the intricate landscape of registration in China. With a comprehensive approach, we streamline the process, from document preparation and submission to securing licenses and opening bank accounts. Our expert services extend to offering valuable insights into regulatory nuances, ensuring a seamless and efficient registration process. Trust Tetra Consultants to be your strategic partner, facilitating a successful and compliant entry into the dynamic Chinese market.
- Contact us to know more about foreign company registration in China. Our team will revert in 24 hours.