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Blog 5 things to consider when starting a business in China

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5 things to consider when starting a business in China

by Bobby Lee | 18 November 2015

5 things to consider when setting up a business in ChinaStarting a business in China

Setting up, starting and successfully running a business in China is a rewarding experience that many foreigners from all over the world come here to try their hand at.

Getting started on this side involves planning and deciding on most of the things a normal business in the West would need to such as:

  • Type of China company
  • Location factors
  • Taxes
  • Corporate banking
  • Compliance with the law
In this blog I intend to run entrepreneurs through 5 things to consider when starting a business in China. Let's jump right in!  

1) Type of China company

Foreigners looking to set up shop on the Mainland (and Hong Kong) have a healthy amount of business vehicles to choose from such as a:

  • WFOE (click here for everything you need to know about WFOE set up)
  • Hong Kong Company (click here for more on whether opening a HK company is necessary for doing business on the Mainland)
  • Representative Office (click here for more on what a China rep office is)
  • Joint Venture (click here for the pros and cons of setting up a JV in China)
  • QianHai Company (click here for more info on setting up a company in Shenzhen's QianHai zone)

All of the different business vehicles mentioned above have their own unique set of advantages and disadvantages, different legal liability, maintenance costs, registered capital requirements, compliance requirements etc. so it is imperative that prospective business owners carefully weigh out their options when setting up this side. This will ensure that the type of company chosen will provide one with the most suitable platform to achieve their business goals in China.

 

2) Location

China is a massive country with a few prominent place for doing business the likes of Beijing, Shanghai, Guangzhou and Shenzhen. Much like the different types of companies, each of these cities come with their own pros and cons. Things such as the cost of labour, running costs of the business, proximity to container ports or a FTZ (free trade zone) and even the weather will influence one's decision on where to set up. It is necessary to do your homework regarding these various location factors and what kind of preferential treatment foreign companies can expect from the local government.

Alternatively, business owners can look at setting up a business offshore such as in Hong Kong to use it as a stepping stone for doing business on the Mainland. Registering a business here is less complex than doing so within the Mainland, and HK enjoys comparatively low tax rates. 

Click here for more on the costs behind setting up a Hong Kong company!

 

3) Taxes

This is another one of those things that is intimately connected with the type of company that one chooses to register, as each business vehicle varies from the next. It is important to consider the tax rate as each cities or area differs. China has a plethora of cities or areas to choose from that enjoy both low individual tax and corporate tax rates. Some of these areas include:

  • QianHai - Shenzhen
  • Hong Kong
  • Hengqin - Zhuhai
  • Torch zone - Zhongshan
  • Free Trade Zone - Shanghai

 

4) Banking

Setting up a business in China requires one to set up a corporate bank account. This will involve deciding whether or not to set up an account in a local bank or an international bank. 4 of the 5 biggest banks in the world are Chinese! Some of the local banks in China include:

  1. China Merchants Bank 招商银行
  2. ICBC 中国工商银行
  3. HSBC (Hong Kong and Shanghai Banking Corporation)
  4. Agricultural Bank of China 中国农业银行
  5. China Construction Bank 中国建设银行

List of all the Chinese banks here.

 

5) Compliance with the law

As with any other place on Earth, ensuring that one's business is compliant with the law should be at the top of the list when doing business in China. It is a country that at times is infamous for its unclear corporate legal laws and their changes, most of which are first published in Chinese. 

Foreigners would benefit greatly from enlisting the help of local experts/lawyers when it comes to company registration, tax and accounting audits, employing local employees etc. to ensure they stay up-to-date with any significant changes, and above all else, that their enterprise is compliant with the law.

 

Have Your Say...

Have you started a business in China recently? Which company type did you go for?
What were some difficulties, and what did you find manageable?

Are you planning on opening up here soon and have questions?

Let us know your experience or issues by leaving a comment below this post please.


 

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Topics: Running a business in China

Bobby Lee

Bobby Lee

Helping make China companies easy since 2007 as a Senior Consultant

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