With over 1 billion people and its sustained economic growth rates, the People's Republic of China has become one of the world's most attractive emerging markets. It is now the second largest economy in the world. Moreover, China's accession to the World Trade Organization is expected to trigger a further wave of inward investment from foreign companies.
There are two main areas of opportunity for setting up business in China. The first one is for manufacturers or those sourcing goods for export. China's cheap and increasingly sophisticated workforce, excellent shipping and port services have resulted in a diverse array of products at very competitive prices. Secondly, China's rapid economic development has created a growing market for agricultural and industrial raw materials, high tech components, capital goods and professional services.
Establishing a presence in China is still a challenging experience, taking into account the complexities of the operation and the business viability and costs structures. We can help our clients to move smoothly and successfully towards Chinese market. Our integrated approach can ensure that clients make the right choices and can help them through all stages of identifying the best location, operating structure and office etc.
If you are interested and want to make your first step into China, do not hesitate to contact us.
Assistance in finding office space
Setting up offshore/Hong Kong companies as parent of China operations
Establishing either a China representative office, a WFOE, or joint-venture operation
Opening of bank accounts
Book keeping and arranging for audit accounts
Legal services
China has three recognized forms of business organizations available to foreign investors. These are:
A Joint Venture is a business arrangement in which the participants create a new business entity or official contractual relationship and share investment and operation expenses, management responsibilities, and profits and losses.
The Chinese authorities encourage foreign investors to use this form of company in order to gain a familiarity with advanced technology and new management skills. In return, foreign investors can enjoy low labour cost, low production costs and a potentially large Chinese market share. Joint Ventures are sometimes the only way to register in China if a certain business activity is still controlled by the government. e.g. restaurants, bars, building and construction, car production etc.
A wholly foreign-owned enterprise is a business entity formed in China entirely with foreign capital, it is totally under foreign control and does not have any formal Chinese ownership participation. In order that a foreign company could issue receipts and export goods from China, it must be able to legally registered as a local company or a WFOE. A WFOE is set up as limited liability entity and represents separate legal persons and is taxed according to the local legislation.
WFOE's can generally control their own governance through the articles of association and the normal minimum paid up share capital starts from 1 million RMB (approximately USD140,000), however, some provinces offer lower capital requirements in order to attract more foreign investment. Many foreign investors find this type of company attractive because of the full control and 100 percent ownership.
The simplest and most cost effective method of establishing a useful business presence in China is the Rep. Office. The choice for an initial Rep. Office will normally be determined by basic market and product research in China. The high profile cities of Shanghai, Beijing, Guangzhou, and Shenzhen are the most likely choices for the Rep. Office. It should be noted that more than one Rep. office can be established in China by a foreign entity.
A Rep. Office is an entity involved in business activities, which do not result in direct profits being made by the office. They are allowed to operate as partnerships or sole proprietorships in China, as they are not recognized as legal persons. However, they are allowed and encouraged to conduct "indirect operational activities" such as liaison for business purposes, introduction of products, market research and technology exchange. These activities should be preparatory and supplementary activities, market research on the local market, providing business information and supplying sales for the headquarters. The foreign enterprise applying for the Rep. Office must be legally registered in its country of origin for at least 12 months.
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