China company registration

DOING BUSINESS IN CHINA IN 2017


Since 2003, Healy Consultants Group PLC has been efficiently and effectively assisting our foreign Clients with a spectrum of international business services including i) business registration in China ii) business license with the State Administration of Industry and Commerce iii) corporate bank account opening in China iv) China visa strategies for foreign employees v) business support and guidance to investors and vi) office rental solutions.

  • Benefits and problems

    Benefits of China company registration

    China business registration - advantages, disadvantages, best uses

    1. Our Clients looking to establish in China should expect to record high sales as the local market benefits from:
      • The world’s second largest economy with a GDP of US$17.6 trillion in 2016 and the largest population in the world with a population of approximately 1.4 billion inhabitants;
      • Access to customers in other large markets in Asia due to China’s proximity to emerging economies including India and Pakistan;
      • A growing demand for sophisticated goods and services as a result of a rising Chinese middle class;
      • Getting access to increasingly competitive and futuristic Chinese technology, research and science, both in technologies and personnel.
    2. Our Clients often relocate some operations of their manufacturing business to China because:
      • Even though the average wages in China have steadily risen in recent years, they are still lower compared to other western countries;
      • Reduced operations cost due to the availability of considerably cheap equipment, raw materials and ready suppliers for various industries;
      • US companies registered in China can reinvest income generated in China into the business without tax implications in the US;
      • Chinese companies importing equipment and goods from other countries enjoy huge import duty concessions from the Government;
      • Heavy industry businesses have access to affordable electricity and water for their commercial and industrial use;
      • Read more on the pros and cons of setting up a manufacturing company in China.
    3. Setting up in a Chinese export processing or industrial development zones is beneficial because:
    4. Our Clients setting up in China will enjoy access to other beneficial aspects to their new businesses including:
      • Access to a considerably large trained and qualified labor pool;
      • Availability of various sector specific incentives and grants to assist startups;
      • Availability of a massive service industry with a myriad of shipping agents, banks and financial institutions;
      • Access to more than 100 double taxation avoidance treaties that can minimize withholding taxes on dividends remitted abroad.

    Problems with China company registration

    1. Starting a business in China can be a complex process taking up to 4 months to complete because:
    2. Our Clients running a business in China will face Government-related difficulties including:
      • Monthly reporting obligations such as i) financial statements, ii) sales tax reports and iii) payroll reports;
      • Pre-approval requirements by the Government before a foreign subsidiary can repatriate their earnings abroad;
      • A borderline draconian regulatory environment that exerts laws prohibiting use of certain superlatives in advertising;
      • Rampant counterfeiting due to poorly enforced copyright laws that risk businesses losing millions in stolen intellectual property.
    3. The Chinese Government can be termed as somewhat discriminatory to foreign investors because:
      • Equity restrictions apply for foreigners in certain lucrative industries such as banking, telecommunications, automobile and finance, and require joint ventures with locals;
      • Foreigners are also prohibited from investing in certain sectors such as education, entertainment, technology, and media;
      • The Government also tends to favour the local companies and Chinese nationals over foreigners in commercial disputes.
    4. China’s language and culture can be an impediment to doing business for foreign entrepreneurs because:
      • Business documents in China are written in standard mandarin and can be challenging to foreigners who don’t understand the language;
      • Less than 1% of the Chinese population speak English fluently, consequently there could be a communication barrier when dealing with local customers;
      • During the Chinese New Year, businesses in China slowdown to a halt for at least one week for the celebrations thereby hampering business operations;
    5. Our Client should expect to suffer steep operation costs doing business in Shanghai, Beijing and coastal parts of China because of:
      • High office rental costs in main Chinese cities like Beijing and Shanghai with rents up to US$1,300 psm per annum;
      • Income taxes including i) 25% corporate income tax, ii) 17% value added tax, iii) 13% custom duties and iv) personal income tax rate of up to 45%;
      • Our Clients should watch out for hidden or extra costs as the Government requires hiring of local consultants prior to proceeding with certain projects;
      • Importing second hand equipment can be costly due to the inspection and cleanup costs in order to meet Chinese customs requirements.
  • Best uses for a China company

    1. China is an excellent location for the formation of a company with manufacturing operations because of:
      • Easy access to, and availability of raw materials, equipment and manpower;
      • Availability of several tax incentives for manufacturing companies;
      • Access to a dense network of suppliers with excellent market proficiency.
    2. China is also a perfect jurisdiction for setting up a trading company to take advantage of the large market size and strong consumer base.
SummaryTax resident LLCFast business setup solutionFree zone LLCRepresentative office
Best use of company?All purposesClose a customer deal nowGlobal tradingMarketing & research
How soon can you invoice Clients/sign sales contracts?3 months1 month2 months3 months
How soon can you hire staff?4 months1 month3 months4 months
How soon can you sign a lease agreement?1 day1 day2 months1 day
How long to supply corporate bank account numbers?4 months1 month3 months4 months
How long to supply company registration / tax numbers?3 months1 month2 months3 months
Corporate tax rate on annual net profits?25%25%25%around 10% on expenses
Limited liability entity?YesYesYesNo

See full table

Government grants available?YesYesYesYes
Government approval required for foreign owners?YesYesYesYes
Resident director/partner/manager/ legal representative required?NoNoNoNo
Minimum paid up share capital?US$1US$1US$750,000US$1
Can bid for Government contracts?YesYesYesNo
Corporate bank account location?HSBC ChinaICBC ChinaChina Construction BankDBS China
Can secure trade finance?YesYesYesNo
VAT payable on sales to local customers?17%17%17%No sales allowed
Average total business set up engagement costs?US$16,650US$46,810US$16,650US$18,650
Average total engagement period?5 months8 months4 months5 months
Accounting and tax considerationsTax resident LLCFast business setup solutionFree zone LLCRepresentative office
Statutory corporate tax payable?25%25%25%around 10% on expenses
Legally tax exempt if properly structured?NoNoNoNo
Group HQ tax incentives?YesYesYesNo
Must file an annual tax return?YesYesYesYes
Must file annual financial statements?YesYesYesYes
Must appoint an auditor?YesYesYesYes
Access to double taxation treaties?YesYesYesNo
Withholding tax on payments to foreign owner / parent company?10%10%10%0%
Company RegistrationTax resident LLCFast business setup solutionFree zone LLCRepresentative office
Resident director/partner/manager/ legal representative required?NoNoNoYes
Minimum number of shareholders/partners?111parent company
Maximum shareholding for foreigners?100%100%100%100%
Minimum statutory paid up share capital?US$1US$1US$750,000US$1
Security deposit to be kept with Government?NoNoNoNo
Shelf companies available?YesYesYesNo
Time to incorporate a new entity?3 months1 month2 months3 months
Can easily convert to a PLC?YesYesYesNo
Public register of shareholders and directors?YesYesYesYes
Can have preference shareholders / partners?YesYesYesNo
Business ConsiderationsTax resident LLCFast business setup solutionFree zone LLCRepresentative office
Good entity for trademark registration?YesYesYesNo
Can secure an import and export license?YesYesYesYes
Sponsorship by a local citizen required?No
Our Client needs to travel to China for business set up?No
Temporary physical office solutions available?Yes
You need a local resident as bank signatory?No
Can be wholly foreign owned?Yes
The entity will likely be regulated by?SAIC
Minimum number of directors/managers?1
Monthly GST reporting to the Government?Yes
Must sign an office lease agreement during incorporation?Yes
Shareholders & directors documents to be attested/translated?Yes
Each foreign director needs a personal income tax number?No
Foreign non resident director needs a work permit?No
Maximum number of staff allowed?No maximum number for any entity
Expatriate to local staff ratio?None
Can secure residence visa for business owner?Yes
Other useful information
What will be included in my customer sales invoice?Click link
This country has signed free trade agreements?Yes
This country is a member of WIPO/TRIPS?Yes
This country is a member of the ICSID?Yes
Average custom duties suffered?12.47%
Government foreign investment approval required?Yes
Average monthly office rental? (US$ per sq m)US$ 10
Minimum statutory monthly salary?US$ 300
Average monthly US$ salary for local skilled employees?US$509
US$ deposit interest rate? (1 year average)0.20%
Overseas remittance currency controls?Yes
Banking considerations
Multi-currency bank accounts available?Yes
Corporate visa debit cards available?Yes
Quality of e-banking platform?Good
Crowd funding available in this country?Yes

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Healy Consultants’ video guide on China company registration

Contact us

For additional information on our company registration services in China, please email us at email@healyconsultants.com. Alternatively please contact our in-house country expert, Ms. Chrissi Zamora, directly:
client relationship officer - Chrissi