The People’s Republic of China has seen a magnanimous economic growth in the past decade taking its rightful place as the world’s 2nd largest economy. China is a key player in the world of manufacturing, electronics, semiconductors, automotive, construction, shipping and engineering. Chinese businesses are aggressively competing in the global market with the tremendous back-support of the massive Chinese manufacturing industry that makes up almost half of the economy.
A WFOE (Wholly Foreign Owned Enterprise) is a Limited Liability Company wholly owned by a foreign investor. For doing business in China it is one of the best business setup structures available to foreign companies, the WFOE structure is designed in alignment with China’s path towards opening up the economy by granting access to businesses and industries. Predominantly the WFOE’s are preferred for setting up manufacturing operations, without partners in China.
The Foreign Invested Partnership Enterprise (FIPE) is an unlimited liability business entity which has been introduced in March 2010 allowing the investors, business partners and young entrepreneurs to directly invest & operate business entity in Mainland China with no minimum registered capital. FIPE is becoming more popular among young entrepreneurs as this scheme does not require a registered capital while allowing the FIPE entity to hire employees, issue invoices, collect payments, and apply for work & residence in Mainland China.
The Representative Office (FRO) can be established by the foreign companies & businesses to engage as business liaisons in permitted activities in China. The FRO is allowed to operate according to the scope of business specified by State Administration of Industry and Commerce (SAIC) and allowed to carry out permitted activities. The FRO is not permitted to engage directly in business operations, cannot issue invoices nor receive payments, therefore, is it not considered a form of Foreign Direct Investment (FDI) in China.
A Joint Venture is a business arrangement which allows the participants to create a new business entity or official contract relationships and share the investment, operational costs, management responsibilities, profits and losses. The Chinese authorities have encouraged foreign investors to make use of this company form to gain exposure to sophisticated technology, new business partners, and efficient management practices. In return mutually, foreign players can rejoice the low labour costs, low production costs and enjoy a potentially larger Chinese market share.
However joint ventures are the only way a foreign entity can operate in certain fields of business where the activity is controlled by the government, i.e., restaurants, bars, construction, vehicle production, cosmetics, etc.
In recent years, China has been open to investment from foreign investments and businesses by allowing them to operate in the Mainland with a carefully curated set of rules and regulations. Before starting a business in China know the outline of the processes that are required for Chinese business licensing, business incorporation and company formation.
The Hong Kong Company (HKC) is the official name for the company set up in the Hong Kong Special Administration Region which lies on the eastern side of the Pearl River Delta. Starting a company in Hong Kong has wide-range of advantages as it follows corporate law strongly based on the British Legal System, by setting up a business in Hong Kong a company can benefit from the low-tax rates, streamlined setup processes, a transparent legal system, and efficient local regulations with special rules for foreign businesses.
As Hong Kong has lesser restrictions and lower taxes on businesses, it has become a favourite destination of companies that are seeking for a gateway to China Mainland along with its unparalleled role as the major trading centre and gateway to China.
The other special economic zones in China are:
The Shanghai Free Trade Zone (FTZ-Shanghai) is China’s first official free zone established in 2013, it is the pilot project of the Chinese government to entice international investors and businesses to set up their operations in Mainland China. The Shanghai Free-Trade zone covers about 120 sq. kilometres offering one of the best in class infrastructure in China with office spaces, excellent connectivity to rest of China by a network of high-speed superhighways and railways, world-class port facilities at Port of Shanghai.
Registering your company in the Shanghai FTZ entitles you to several benefits from the government including tax exemptions. The Shanghai FTZ is complemented by Waigaoqiao Free Trade Logistics Park, Waigaoqiao Free Trade Zone, Pudong Airport Comprehensive Free Trade Zone, and the Yangshan Free Trade Port Area which jointly provides the logistics and trading partners operating for businesses operating in Shanghai Free Trade Zone.
High-tech zones are zones that are approved by the State Council and the PRC National Government to accelerate the growth in the region by focusing on specialised industries and providing them with investments, & incentives. Currently there are 169 high-tech zones located in 31 provinces in China.
Before starting a business in China, Hong Kong, or Macaw it would be prudent to know that it will be an uncomplicated process if you have a good Chinese language proficiency and networks. However, forming a company in China can be very tedious if you are unfamiliar with the Chinese legislation and legal system as the requirements are unique for different kinds of Chinese businesses.
If you are keen on setting up business operations in China, we are happy to support you with the China business registration process based on the scope of business, background, project, market analysis, accounting & tax services, China business incorporation services. Contact us for any further information on starting a Chinese business and China company registration services.