Guide to Doing Business in China

According to the World Bank’s Doing Business report, which assesses 190 countries and cities, the result shows that China has ranked among the top 10 economies in the world with the fastest pace of business environment reform for the second year in a row.
The report ranked China 78th in 2018 and moved up to 31st in 2020, indicating that the business environment has made significant improvements in a short period of time.
At the same time, China has shown that it is committed to continuing to improve its business environment by putting in place a new Foreign Investment Law on January 1, 2020. This law will further open China’s market, encourage and protect foreign investment, and improve regulatory transparency.
Doing business in China is not as difficult as you might think. This page serves as a comprehensive guide to doing business in China, and we will help you understand what is involved in investing in China.

Why Choose To Start A Business In China?

To further promote foreign investment in China, China’s Foreign Investment Law, which was officially implemented in 2020, stipulates that foreign-invested enterprises enjoy the same treatment as domestic enterprises in terms of government funding arrangements, land supply, tax, and fee reductions, qualification licenses, project declarations, etc. The entry into force of this new law solves several obstacles that foreign-invested enterprises had to face in doing business in China in the past.
In addition, China’s Special Administrative Measures for Foreign Investment Access, or “Negative List,” prohibits and restricts foreign investment in certain sectors. To further open up the China market, the 2019 negative list has removed restrictions in certain sectors. For example, a joint venture with a China partner is no longer required in oil and gas exploration. In the meantime, foreign ownership in some financial sectors, like securities, futures, and life insurance, will go from 51% to 100% in 2021.

Other Advantages of Doing Business in China include:

Demographic Dividend – China has a large population and a large market with a variety of industries booming.
Huge labor force – China has a workforce of close to 900 million people, which is an advantage and has the potential to contribute to the country’s unparalleled economic development. Further, China has devoted itself in recent years to shifting labor resource advantages into a sustained increase in productivity levels.
Subsidies from the China government – the China government encourages “mass entrepreneurship”, and so, there are investment funds, cash subsidies, and incubators being set up across the country to promote the industry.
Relatively complete business ecosystem – China has the advantage of low-cost labor and a large market. It has continued to open up its market in recent years and attract talent and technology. For instance, the booming e-commerce in China has further optimized the business environment.

What Enterprises Does The China Government Provide Subsidies For?

The China government has been increasing its industrial subsidies for the purpose of fostering domestic industries and maintaining employment, especially for automotive and electronics companies. In the meantime, local governments in China also offer different types of subsidies to businesses. These include export tax incentives for businesses with foreign investments and special subsidies for certain businesses and industries in order to boost the local economy and deal with employment problems.
On the other hand, the China state government launched the Made in China 2025 Strategic Plan in 2015, which aims to nurture high-tech companies through government subsidies and make China a global leader in areas such as robotics, information technology, and clean energy. In response to policies encouraging innovation and entrepreneurship, China municipalities are also subsidizing R&D investments in sectors such as information technology, life science, and smart manufacturing, as well as similar companies, in order to build innovative cities.

How Do You Start a Business in China?

1. Prepare a business plan

Choose the type of business you want to start and make a formal business plan that includes a business summary, company description, market analysis, organization and management, services and products, marketing and sales, capital needs, financial projections, etc.

2. Conduct prior market research

Research, evaluate, and think about the reliability of your business plan, and research in detail your company, products, market, and competitors. Whenever possible, focus on data rather than generalities.

3. Register Company

The first step to officially starting a business is to register your company with the China Industry and Commerce Bureau. You must decide the type of company first. The most common types of foreign-invested companies are Sino-foreign joint ventures, Sino-foreign contractual joint ventures, wholly owned foreign enterprises, and foreign-invested companies limited by shares.
In the whole registration process, there are many documents that need to be prepared and details that need to be paid attention to. Entrusting a trusted agency can make the process easier and smoother, saving you valuable time.

4. Set up office and recruit staff

You will need a company address in China, so you must find a suitable location to set up your office. You will also need to hire employees. If you are unfamiliar with China, hiring may not be an easy task, but 3E Accounting is experienced in this area, and we can help you with this. For more information, please click on the HR recruitment service in China (Link).

5. Tax filing

The State Administration for Industry and Commerce (SAIC) of China has strict requirements for company audits and tax filings, and once your company starts operating, you must do your accounts and file taxes. Foreign companies must be audited before submitting their annual financial reports.

Let 3E Accounting assist you in doing business in China!

There are many advantages to doing business in China, and with professional business registration services, you can streamline the process of setting up your company in China. Let us help you through the entire process. Please contact us to learn more about our company registration service packages.