Creating a Chinese company

Creating a Chinese company

Creating a Chinese company

 

Creating a Chinese Company


Before creating a Chinese company in mainland China, ensure you fully understand whether you need to do this.

Examples of why you might need a Chinese business:

  • Production costs are cheaper in China
  • Chinese government grants available
  • Local Chinese investment available
  • Local Chinese overseas branded services – e.g., coffee shop chain
  • You wish to sell directly to businesses/consumers from within China
  • Chinese government licensing is only available if you have a Chinese company, e.g., ICP certification

You do not need a Chinese business if you are selling into China from a business or e-commerce site located outside mainland China, e.g., Hong Kong, the USA, the UK, etc.

We recommend that you consider creating a Chinese business only after considering all the other options first—see Routes to the Chinese market.

The business rules and regulations in China are changing and evolving, so you must always take local legal advice. Access to China has set up several businesses in China. We listed a few points from our expectations to help start the planning process to create a Chinese business.

  • Find a local agent in your country who can advise and help set up your Chinese business or local trading organisation and who can advise your business on the right approach to trading in China.
  • Be very clear about what trading rights you want in China. There are some restrictions on overseas business trading in China.
  • In creating the company, you must declare what areas of business you are trading in. You must trade in China within your declared trading area or have it changed/updated as your Chinese business develops.
  • Make sure that your brands can be registered in China. Your brand/trading name may already be registered to another company.
  • Check the import requirements of any products you plan to sell in China. Test the import requirements by sending samples of products to Chinese customers.
  • Find and appoint a Chinese General Manager. The General Manager is legally responsible for the Chinese business, which includes all monies in China. The General Manager is legally accountable if the company breaks Chinese rules and regulations. It is not easy for a Chinese person as many overseas business trading methods will need to be adapted for the Chinese business.
  • A Chinese business must be established with declared capital. You can create a Chinese business with one US dollar in capital.
  • Capital can be paid into a company over five years.
  • Businesses are mainly measured in China based on their registered capital and the number of staff employed.
  • A local Chinese bank account will be required to deposit the monies needed to run the business. This can be an international bank name, e.g., HSBC. All international branded banks in China will operate according to Chinese banking rules and regulations, so a local HSBC is a regional Chinese bank for day-to-day trading in China. You cannot control your Chinese bank account from your local country bank branch.

Please note: Online Chinese banking can help manage overseas Chinese banks.

  • Capital can be transferred into China in stage payments over two years. If the capital is not put into the Chinese company according to the agreed payment schedule, which has been filed at the Chinese bank at the outset, your Chinese company can be closed by the Chinese authorities on the advice of the Chinese bank.
  • Different tax rates apply to different types of business.
  • If you are creating a factory in China, understand the local trading rules. Some factories are built for exporting only. You cannot sell your goods to the Chinese market unless you send them out of China first and then reimport them.
  • Land is only leased- 50 years for a business and 75 years for a private apartment or house. Chinese government companies own the land. When a Chinese government company passes from public ownership to private ownership, the 50-year lease rule applies.

The minimum running costs for a shell company in China is about $2,000 per month, including local monthly and annual filing of papers and tax returns.

last modified: September 2018