China is a country that cannot be overlooked on the map of foreign investments destinations. China has the second largest economy in the world as of 2013 and the country’s large size and potential for development are two of the main reasons why foreign investors choose to open a business in China.
The country encourages foreign direct investments and there are several policies for small and medium sized companies and firms that focus on protecting the environment and using energy effectively. There is also an important focus on rural areas that can benefit immensely from foreign direct investments.
Our law firm in China can help you open a company and offer you valuable information about the trade and investment policies in the country. Because the country offers many possibilities for investments and development, foreign investors should be informed and have clear business plans and targets.
Our lawyers in China invite you to watch a video about opening a business in the country:
Starting a business in China
A wholly foreign owned enterprise (WFOE) is a company in China owned by a foreign investor. Its capital is provided solely by a foreign entrepreneur and it can use foreign currency, machinery, equipment and proprietary technology. The profits made in China by this foreign company can return abroad.
While some industries in China are regulated so that foreign investors are restricted or prohibited, other industries like new technology and equipment, the development of new products or energy preservation encourage and sustain wholly owned foreign enterprises. This type of Chinese company is the equivalent of the limited liability company.
Other types of companies in China are:
- joint ventures,
- equity joint ventures,
- cooperative joint ventures.
Foreign investors in China can also open a representative office, a partnership enterprise, or a Hong Kong/Shanghai Free-Trade Zone company. The minimum share capital for a company in China can depend on the type of company, as well as the business field in which it operates. For example, there is no mandatory minimum share capital for WFOEs operating in the business consulting sector.
The Wholly Foreign Owned Enterprise in China
The Wholly Foreign Owned Enterprise is the most popular business form among foreign investors in the country. It is essentially a limited liability company that can be used for various commercial purposes. It has independent legal personality from its founder’s and benefits from 100% foreign equity. This company operates according to its Articles of Association and also by observing the Company Law and the WFOE Law. This limited liability company must receive approval for operation from the Ministry of Commerce and it must be registered at the State Administration for Industry and Commerce.
Our law firm in China can help you incorporate, register and manage a Wholly Foreign Owned Enterprise.
Other information regarding business formation in China
China is opening more towards foreign investments and one step for encouraging new business ventures is the formation of the Shanghai Free Trade Zone in 2013. This zone has no necessary minimum share capital for companies and offers a simplified business incorporation procedure.
China has signed a large number of double tax treaties which are advantages for foreign companies planning on expanding their operations in China through a branch or other business form.
Our lawyers in China can also give you detailed information about the taxation laws for Chinese companies and the applicable taxation regime for foreign companies in China. Every company must register at the local and national tax offices within 30 days after its incorporation in order to be a recognized as a taxpayer in China.