China has a prominent international role and it is the world’s second largest economy with a global impact and excellent business relations with most of the countries. Deciding on a business in China is definitely a great choice because there is a plentitude of prolific opportunities for all types of investors in all industries, with small exceptions if there are state-owned affairs. If you are interested in opening a company in China, we suggest you ask our company incorporation agents in China for detailed support and information. Also, we invite you to read about the main reasons that can direct a foreigner to invest in China.
Table of Contents
China has a solid and appreciated economy
Investors from abroad are always interested in those countries with a stable and risk-free economy. The latest improvements, plus the support offered for the economic recovery on a global scale, make China even more appealing to foreigners looking to implement their operations in this country.
A leader in science and technology
Achieving the economic and political goals in China depends on the improvement made in the science and technology sector which is one of the thriving areas in China. There are numerous investors interested in science and technology, research and development in China and who start with small businesses that rapidly become of large interest. The following infographic shows in large lines the main reasons for investing in China:
An excellent transportation system
Noteworthy developments in China’s infrastructure and transport have been made for the past decades. International investors are developing their businesses in China in excellent transportation conditions, particularly those connected to the trading activities. National and international expressways and highways, highly developed railways and excellent air and maritime transportation are simplifying the foreign business connections.
China offers a huge local market
The Chinese market is not only large and highly appreciated on an international scale, but it also offers plenty of business opportunities for domestic and foreign investors looking to expand in sectors like IT, engineering, medicine, agriculture, automotive and many more. A WFOE (wholly foreign-owned enterprise) in China is the suitable business structure for international investors who are interested in having complete ownership in their companies.
The possibility of diversifying the portfolio in China
Because the Chinese market has lots of commodities, the foreign investors gain a clear path for expanded portfolios, reflecting on the huge business opportunities in most of areas of interest.
The free-trade zones in China
Investors from abroad looking for tax reliefs or exemptions for their activities can start a company in China’s free trade zones. One of the most prolific free trade zones is the one established in Shanghai where the currency conversion is tax-free. Opening a company in China’s free trade zones is subject to several conditions for which our company formation agents can offer complete assistance and information. They can also help you register the business for VAT.
China provides a skilled workforce
Taking advantage of a solid and extremely appreciated business climate in China means deciding on the local labor force, skilled and experienced in most of areas of interest. China provides a respected educational system with recognized colleges and universities where there is a complete accent on the English courses for young students, but not limited to these. Hiring Chinese staff means taking advantage of qualified and valued labor force for both medium or large companies in China.
The attributes of the business sector in China
A dynamic economy, a full potential for development, a large and stable market, business connections worldwide and low labor costs are the most important attributes to consider when deciding for business in China. Entrepreneurs can easily set up companies in China, and the WFOE (Wholly-Foreign Owned Enterprise) is the most popular business structure that can meet the needs of the owners and the requirements on the market.
What are the investment laws in China?
The People’s Republic of China on WFOE (wholly foreign-owned enterprise) and Foreign Invested Enterprises in China is the main set of laws observing the foreign investments in this country. Moreover, the applicable laws for nationals, such as the Companies Act, the Commercial Code, or the Competition Law are also available for foreigners willing to open a WFOE in China.
What types of companies can foreigners open in China?
Foreign investors in China can set up WFOEs, joint ventures with Chinese partners, or foreign contractual joint-ventures, in respect with the above-mentioned law and with the improvements which might intervene in the Chinese legislation related to foreign investments. We remind that if you are interested in registering a company in China as an entrepreneur from abroad, our company incorporation agents in China are ready to offer complete information and help, regardless of the business you wish to introduce on the Chinese market. You can also ask for support in registering the company for VAT in China.
New provisions of the Foreign Investment Law in China
In order to eliminate business barriers for foreigners interested in accessing certain industries in China, and to ease the registration process of a firm, the authorities continue to improve the legislation related to foreign investments. In this sense, entrepreneurs won’t need the business approval issued by the Ministry of Commerce, as they can simply register the company. Likewise, even though state-owned companies cannot be sustained by foreign investments, the Chinese authorities want to benefit from the innovative technologies offered by foreigners.
The number one destination for foreign investments
According to a report issued by the United Nations Conference on Trade and Development (UNCTAD), China has surpassed the United States and has become the number one destination for foreign investments in 2014. The country is also at the top in the list of economies that are attractive to multinational companies. Many of them have opened branches or subsidiaries in China in recent years.
China’s potential is focused on a few key elements, among which:
- an impressive internal market;
- a fast growing market;
- affordable labor costs for investors;
- the development of new provinces and thus new opportunities for investments.
All of these factors are important contributors to the amount of foreign capital entering the country. However, investing in China can be a little bit complicated for foreign investors who fear the lack of transparency or the language barrier. These can all be put aside with the help of a team of lawyers in China who can help you navigate through any legal or business issue you may encounter.
Investment opportunities in China
The main investment sectors in China are:
- real estate;
- business services;
- wholesale and retail trade.
Some of the most important foreign investments in China come from countries like: Hong Kong, Singapore, Taiwan, Japan, South Korea, USA, Germany and the UK. The preferred business form is the WFOE, as it allows for complete foreign ownership. China also signed a number of double tax treaties with other countries and bilateral agreements for investments.
Conditions for a foreign company to invest in China
Investments within China made by foreign companies refer to Sino-foreign contractual joint ventures, Sino-foreign equity joint ventures and wholly foreign-owned enterprises (according to the Interim Provisions Concerning the Investment within China of Foreign-invested Enterprises). These have the structure of a limited liability company, according to the Chinese law. Foreign companies must fulfill the following conditions in order to make investments in China:
- have a paid off registered capital;
- started to make profits;
- conducting business operations in accordance to the local law;
- have no track record of illegal business operations;
- amount of investment within China made by a foreign enterprise does not 50 percent of its net assets;
- the Industrial Catalogue for Foreign Investment and the Interim Provisions for Guiding Foreign Investment should be both consulted before making an investment in China.
- foreign-invested companies shall not make investments in the prohibited fields for foreign investment.
Our law firm in China can help international investors with legal consulting on the matter, in order to check all the needed conditions for a proper investment in China.
Updated regulations on investment sectors in China
Foreign industries in China are of four types: the encouraged, the restricted, the prohibited and the permitted ones. Different substantial rules (e.g. tax), restrictions and procedural rules will apply to various categories of industries so that an entrepreneur could understand whether the business which will be carried out is encouraged/discouraged by Chinese government. The foreign investor will consequently know which kind of rules and regulations he/she has to comply with.
Generally, the 2015 version of Catalogue of Industries for Foreign Direct Investment highlights a trend according to which, Chinese market is continuously opening up to foreign companies. In comparison to the 2011 catalogue, the 2015 version emphasizes the fact that the scope of permitted industries has been enlarged. Additionally, the 2015 catalogue also removes 41 industries from the restricted category (such as some mining industries – diamonds, high-aluminum fireclay, barites, phosphorus mines, celestite and szaibelyite, real estate, cross-border transportations) and it is updated for 2021.
Other alterations are related to the encouraged industries by Chinese government – more and more foreign entrepreneurs are emboldened to invest in modern agriculture, environment friendly industries, high technology, new cleaning energy industries, modern service industry. Our Chinese company formation agents can offer details if you wish, as a foreign investor, to benefit of proper legal assistance when making an investment in China.
The category of prohibited industries usually covers the ones that may affect national policy or public security, such as manufacture of tobacco products, gambling, domestic courier service, on-line publishing and Chinese law consultation service (except for those in relation to the impact of Chinese legal environment).
Top 10 business benefits in China
China is a representative business destination and on top of the list of many foreign entrepreneurs who want to expand their portfolios and to enjoy the profits. We present you 10 business benefits to consider when deciding on investments in China:
1. Access to a wide range of markets
China has worldwide connections that facilitate the business for local and international entrepreneurs. The country signed an important number of agreements to ease the trading operations in a fast and reliable manner. The authorities continue to develop the business climate and to improve the existing relations.
2. Simple company formation procedures
Those who want to invest in China should know that the company registration has been simplified in recent years. The incorporation of a business is straightforward and beneficial to overseas entrepreneurs who want to speed up the process and start the activities fast. WFOE in China is the most popular business structure available that comes with many benefits, so if you would like to invest in China, you can consider this structure.
3. China is quite competitive
China surpassed many emerging countries in terms of development and business growth. It is a known fact that entrepreneurs pay attention to the entire climate, where the infrastructure is important. This is a solid benefit offered by China to international investors, alongside workforce, business incentives and more.
4. Appealing start-up costs in China
Compared to other large business destinations in the world, China provides attractive start-up costs to encourage foreign investors commence their operations in this part of China. It is important to make a correct business plan and to control the expenses right from the start.
5. China is stable from an economic and political point of view
Another important aspect considered by an investor refers to the stability of a country. In this direction, the steadiness and strength of the economy and political environment of China will be quite representative when it comes to the country’s advantages. China provides such stability and encourages the attraction of FDIs.
6. The key sectors of China
Manufacturing, IT, tourism, healthcare, engineering, real estate, wholesale and retail are representative sectors in China that host a large number of local and international companies. The reinvested profits lead to other business encouragements that provide stability and confidence in the business field. International entrepreneurs do appreciate the support in China’s main sectors of interest.
7. Representative numbers of China
China is a powerful country from an economic point of view and the following figures sustain the fact that the business direction of China is beneficial:
- The gross domestic product in 2019 – Nearly USD 23.4 trillion.
- GDP per capita – around USD 8,041.
- The unemployment rate in China – around 3.64%.
- The 2020 Doing Business report – China ranks 31st out of 190 worldwide economies.
8. A solid support offered by the experienced workforce
The workforce is important to international entrepreneurs in China. According to latest statistics, China has a young and skilled workforce who activate in the main sectors of the country. Being cost-effective is another big plus for entrepreneurs. You can consider this advantage if you want to invest in China.
9. China’s special economic zones
China has numerous special economic zones that offer a wide range of business benefits. Among these, the ones related to taxation are highly important for both local and foreign investors in China.
10. China is leading the science and technology sector
The developments registered in the science and technology sector are well-known on an international scale. The country is quite representative from this point of view and provides lots of chances to startups and small businesses that can grow quite fast.
Choosing our agents in China
Doing business in China is not complicated if you know your market and understand the direction and targets. In this matter, you can benefit from the support of an experienced team of company formation agents in China. Our specialists focus on professionalism, transparency, confidence, and proficiency when working with clients. We can help in company formation, tax registration, tax planning, licenses and permits, accounting, business consulting, and many more. If you would like to invest in China, you should discuss all the aspects with one of our agents and benefit from complete support and guidance.
If you would like to benefit from complete assistance at the time of company formation in China, we invite you to contact our team of specialists at any time.