China, an emerging superpower, needs no introduction. China is one of the handfuls of countries in human history that have achieved what China has. Economically, China is the most stable and flourishing country with a hardworking population of nearly 1.5 billion people.
By area, China is the fourth largest country. The annual GDP of the country soars to around 15 trillion USD. China is neighbored by 14 countries; Vietnam, Afghanistan, Pakistan, Bhutan, Myanmar, Nepal, India, North Korea, Mongolia, Russia, Kyrgyzstan, Kazakhstan, Tajikistan, Laos, and North Korea.
Types of business structures in China
In order to invest in China, businessmen and investors should be aware of the structural requirements of various formats. China’s corporate structures are different from Western countries, and attributes and characteristics also differ from the usual.
| S# | Type of business structure | Local name | Min. paid-up capital required |
| 1. | Wholly-Foreign-Owned Enterprise (WFOE) | Wàishāng dúzī qǐyè | $15,500 (or more) |
| 2. | Joint Venture (JV) | Hézī qǐyè | $20,000 |
| 3. | Partnership Enterprise (PE) | Héhuǒ qǐyè / Yǒuxiàn héhuǒ qǐyè | No paid-up capital required |
| 4. | Limited Liability Company (LLC) | Yǒuxiàn zérèn g | $32,000 |
WFOE
A WFOE is a form of limited liability company dedicated to foreign owners/investors. It can be owned by single or multiple foreign owners who can conduct their business locally.
Joint Venture
Joint Ventures are often created to achieve a particular set of objectives that a single company is unable to achieve on its own. Two or more companies, corporations, or states share capital and other resources to form a new company. Once the objectives are accomplished, a JV may be dissolved or continued to obtain new objectives.
Partnership Enterprise
An often-preferred choice for law consultants and other service professionals is a Partnership Enterprise (PE). In a partnership, two or more individuals share their experience, skills, and investment to achieve a commercial goal. Partners in the business are personally responsible for any debts or losses arising from the business.
Limited Liability Company (LLC)
An LLC is a formal business setup that is subject to various regulations and rules by the state. This business format provides the owners with personal protection against debt and losses. The company is responsible to compensate for such events from the company’s assets.
Cost involved in the registration process of a company in China
The costs associated with the registration process vary depending on the size, nature, and location of the business.
Here are a few costs that may be budgeted.
Company name registration
This is the first step in the registration process and involves submitting the proposed company name to the Administration Industry and Commerce (AIC) for approval. The cost of name registration is usually between $1.5-$8.
Business license registration
After the company name is approved, the next step is to apply for a business license with the AIC. The cost of the business license registration varies depending on the registered capital of the company and may cost up to $150.
Legal fees
In cases where legal advisory services are required to assist with the registration process, additional legal fees of up to $3,000 can be expected. The cost of legal services varies depending on the complexity of the company structure and the lawyer’s experience, etc.
Government fees
There are several government fees that must be paid during the registration process, such as stamp duty, certificate fees, and tax registration fees. The total amount of these fees is usually between $155-$310.
Other costs
Other costs associated with registering a company in China may include office rental fees, deposit fees, and translation fees. These costs vary depending on the location and size of the company.
Cost of conducting business in China
The government’s policies pertaining to business in China are conducive to progress. Investors are encouraged by providing tax exemptions, relaxed import duties, export benefits, etc. The overall cost of doing business in China is very competitive, here are a few costs that are most likely to be incurred.
Labor costs
China’s labor costs have been rising in recent years, although they are still relatively low compared to many developed countries. Wages and salaries vary depending on the industry, location, and skill level of the workers.
Taxes
China’s tax system is complex, and the tax burden can be significant for businesses. Some of the taxes that businesses may be subject to include corporate income tax, value-added tax, and social security contributions.
Real estate costs
Real estate costs can be high in major cities such as Beijing and Shanghai, although they are generally lower in smaller cities and rural areas. The cost of office space, factories, and warehouses can vary significantly depending on the location.
Infrastructure costs
China has made significant investments in infrastructure in recent years, which has improved transportation, communication, and logistics. However, businesses may still face additional costs for transportation, utilities, and other infrastructure-related expenses.
Regulatory cost
Doing business in China involves complying with various regulations and requirements, which can be time-consuming and costly. Some of the regulations that businesses may need to comply with include environmental regulations, labor laws, and intellectual property laws.
Other costs
Other costs to consider when doing business in China may include marketing and advertising expenses, import/export fees, and the cost of hiring local staff or consultants.
Advantages of doing business in China
Chinese products have a global presence. Most companies, belonging to any country, have their production line in China. Factors such as cheap energy, low labor costs, availability of resources, access to markets, and highly-skilled labor are a few advantages that Chinese companies enjoy.
Other advantages are:
Access to a large and growing market
China has the world’s largest population, and its economy has been growing rapidly over the past few decades. By registering a company in China, businesses can access this huge market and take advantage of the opportunities it offers.
Favorable government policies
The Chinese government has implemented a number of policies aimed at attracting foreign investment and supporting foreign businesses. For example, the government offers tax incentives, subsidies, and other forms of support to foreign companies that invest in certain industries or regions.
Lower labor and operating costs
Labor and operating costs in China are generally lower than in many developed countries, making it an attractive location for manufacturing and other labor-intensive industries.
Strategic location
China’s location in Asia makes it an attractive hub for businesses that want to expand into other markets in the region, such as Southeast Asia, Japan, and Korea.
Access to skilled labor
China has a large pool of skilled workers, particularly in industries such as technology, engineering, and manufacturing. By registering a company in China, businesses can tap into this talent pool and benefit from the expertise of local workers.
Ease of doing business
Although China’s business environment can be complex and challenging, the government has taken steps to simplify the registration process and reduce bureaucratic hurdles for foreign investors.
