The comprehensive guide of start business in China 2024
With the development of economic globalization, China has become the world’s largest economy. More and more foreign companies have seen China’s vast market and good development prospects. (We had explained the specific reasons why foreigners prefer to start business in China, click here to learn more from another article )
More and more foreigners are coming to start business in China. This article will help foreigners who wants to start business in China, involving the market conduction, registration, financial taxation, intellectual property rights and talent recruitment management issues that confuse them.
Table of Contents
I. Conduct Chinese Market Research
A. Overview of the Chinese Market
B. Research on Chinese Consumer Demand
C. Familiar with Chinese Business Culture
II. Select a Location & City to Start Business
A. Wholly foreign-owned enterprise (WFOE)
B. Joint ventures (JV)
C. Representative Office (RO)
III. Choose a Company Structure/Type
IV. Legal and Policy Guidelines
A. How to register your company and apply business license
1. Conditions for foreigners to register a company in China
2. Procedures for foreigners to register a company in China
3. Notes
B. How Foreign-invested Enterprises Keep Accounts and File Taxes
1.Accounting
2. Tax reporting
3. Matters needs to pay attention
C. Intellectual Property Protection
1. Implement a forward-looking intellectual property registration strategy
2. Strengthen internal management and confidentiality mechanisms
3. Actively protect rights through legal channels
4. Actively participate in industry associations and protection alliances
5. Your intellectual property protection expert in China
V. Talent Recruitment and Management
A. Chinese workers
B. Foreign workers
I. Conduct Chinese Market Research
A. Overview of the Chinese Market
China has a population of 1.4 billion, a huge market size with strong consumer demand. China’s economy continues to grow. In recent years, residents’ income levels have increased, and their consumption capacity has increased. Even after three years of the epidemic, China’s economy has not declined much. After the epidemic, it has returned strongly. Foreign investors have seen this potential and have focused their attention on the Chinese market.
The Chinese government has been actively promoting foreign investment and providing a series of policies and measures to optimize the business environment. Foreign-funded enterprises have good operating policy support in China. Compared with countries such as Vietnam, Indonesia, and Thailand, it is very safe for foreign companies to start business in China.
China has established free trade pilot zones, simplified the procedures and formalities for foreign investment, and provided more tax and subsidy policies.It has abound advantages to start business in China for foreigners .
The competition in the Chinese market is very fierce because there are many excellent companies in China. Therefore, foreign-funded enterprises who want to start business in China ,need to have a deep understanding of the needs and preferences of Chinese consumers in order to provide products and services that meet market demand. This includes studying Chinese consumers’ purchasing behavior, consumption habits, and their expectations for the quality, price, and design of products and services.
B. Research on Chinese Consumer Demand
Before entering the Chinese market, foreign investors should conduct in-depth market research, understand the needs and preferences of Chinese consumers, and grasp market dynamics. Chinese people are thrifty and are used to saving money.
The surplus money of consumer families is mainly used for savings, children’s education, mortgage repayment, travel and medical treatment. With the popularity of smart phones, young people tend to shop online and love emerging technology products, new electronic products, electric vehicle, milk tea, pet economic , etc.
With a deep understanding for Chinese consumer demand ,it will be smooth to start business in China in 2024
C. Familiar with Chinese business culture
Chinese business culture is based on integrity. Chinese people pay attention to integrity and attach importance to the reputation of individuals and enterprises. China takes integrity, innovation, harmony and win-win as its concept. Understanding the characteristics of Chinese people is particularly important for foreigners to start business in China.
II. Select a Location & City to Start Business
Choosing suitable location to start business in China is most important .
China is located in the east of Asia, on the west coast of the Pacific Ocean, between 18° and 54° north latitude and 73° and 135° east longitude. It borders Russia and Mongolia to the north, Kazakhstan, Kyrgyzstan, Tajikistan, Afghanistan and Pakistan to the west, India, Nepal, Bhutan, Myanmar, Laos and Vietnam to the south, North Korea to the east and Japan across the Yellow Sea and the East China Sea
China’s economically developed and business-friendly cities include Beijing, Shanghai, Guangzhou, and Shenzhen, four first-tier cities, as well as the Pearl River Delta, Yangtze River Delta, and Beijing-Tianjin-Hebei industrial circles. These cities have different climates and advantageous industrial belts.
Shenzhen is famous for electronic products and e-commerce, Guangzhou has the title of the capital of auto parts, and Yiwu is famous for its small products with good quality and low prices. You need to combine your own experience and advantages, as well as your hobbies, to determine a city based on the selected industry. If you need to know the specific situation of each city, please click here .
III. Choose a Company Structure/Type
The following guide lead you to choosing suitable company type and start business in China easily .
A. Wholly foreign-owned enterprise (WFOE) :
A wholly foreign-owned enterprise refers to an enterprise established by a foreign enterprise alone, and its ownership and control are completely held by the foreign enterprise. When a wholly foreign-owned enterprise is established in China, it is usually necessary to comply with relevant Chinese laws and regulations and obtain the corresponding approval procedures.
Advantages: Wholly foreign-owned enterprises have greater autonomy and flexibility in operation and management, high decision-making efficiency, and can better adjust and change according to market demand. At the same time, wholly foreign-owned enterprises can give full play to the resources and advantages of their parent companies in the international market and improve the competitiveness of enterprises.
B. Joint ventures (JV):
A joint venture refers to an enterprise jointly invested and established by two or more Chinese and foreign partners, and the investment ratio of the joint venture can be determined by negotiation between the two parties. When a joint venture is established in China, it is necessary to comply with relevant Chinese laws and regulations and sign a joint venture agreement.
Advantages: Joint ventures can fully combine the resources and advantages of the two Chinese and foreign partners, achieve complementary advantages, and reduce market risks. At the same time, Joint ventures can better adapt to the Chinese market environment and improve the market competitiveness of enterprises.
C. Representative Office (RO):
Representative Office refers to the representative office established by foreign enterprises in China. Its main tasks are to conduct market research, promote business development and conduct business negotiations. The representative office does not have independent legal personality.
Advantages: Representative Office can enter the Chinese market more quickly, understand market demand and policy environment, and provide timely market information and support to the parent company. At the same time, the operating cost of the representative office is relatively low, which can effectively reduce investment risks.
IV. Legal and Policy Guidelines
A. How to register your company and apply business license
What are the conditions and procedures for foreigners to register a company in China?
1. Conditions for foreigners to register a company in China
1) Foreign investors must have valid identity documents and other relevant documents, such as passports, residence permits, etc.
2) Foreign investors need to provide proof of legitimate investment sources, such as bank deposit certificates, business licenses, etc.
3) Foreign investors need to choose a Chinese company or individual as a partner to jointly register a company.
4) Foreign investors need to provide information such as the company’s name, business scope, registered capital, etc., and apply in accordance with other conditions stipulated in the Chinese Company Law.
2. Procedures for foreigners to register a company in China
1)Foreign investors need to apply to the local industrial and commercial administrative department for pre-approval of the company name and submit relevant materials.
2) Foreign investors need to formulate the company’s articles of association with their partners and sign relevant documents.
3) Foreign investors need to apply to the local commercial authorities for approval of the company’s total investment and investment plan, and submit relevant materials.
4) Foreign investors need to apply for company registration with the local industrial and commercial administrative department and submit relevant materials.
5) After the company registration is completed, foreign investors need to go through relevant procedures with local tax, customs, banks and other departments.
3. Notes
1) Foreigners registering companies in China need to comply with the Chinese Company Law and relevant regulations and must not engage in illegal operations and illegal activities.
2) Foreigners registering companies in China need to pay relevant taxes and fees in accordance with regulations.
3) Foreigners registering companies in China need to negotiate with partners on issues such as equity distribution and business management model.
4) Foreigners registering companies in China need to do a good job of company accounting and tax management and comply with Chinese financial and tax regulations.
B. How foreign-invested enterprises keep accounts and file taxes
1.Accounting
Within 15 days from the date of obtaining the business license or incurring tax obligations, the company shall set up accounts in accordance with the provisions of Article 22 of the “Detailed Rules for the Implementation of the Tax Collection and Management Law of the People’s Republic of China” and in accordance with relevant national regulations, including general ledgers, detailed ledgers, journals and other auxiliary books.
The company’s daily accounting processing, including making entries and reports, should be based on the actual economic business matters, and ensure the authenticity and completeness of accounting materials such as accounting vouchers, accounting books, and financial accounting reports.
2. Tax reporting
Foreign-invested companies must, in accordance with Article 25 of the “Tax Collection and Management Law of the People’s Republic of China”, truthfully handle tax returns according to the reporting period and reporting content determined by the tax authorities, and submit tax returns, financial accounting reports and other tax information required by the tax authorities according to actual needs.
The tax reporting process generally includes: at the end of the month, copy the invoice information that has been issued and used this month into the tax system; after the financial settlement is completed, fill in, review, and report the tax return; after the tax is reported, print the return form, including the main form and the appendix; submit the return form to the tax authorities within the prescribed period.
Foreign-invested companies should pay special attention to the bilateral tax agreements signed with China to avoid double taxation and enjoy tax preferential policies.
3. Matters needs to pay attention
Foreign-invested companies should ensure the accuracy and timeliness of accounting and tax reporting to avoid omissions and misreporting.
When doing bookkeeping and tax filing, foreign-invested companies should comply with Chinese laws, regulations and accounting standards to ensure compliance with accounting and tax filing.
If they encounter any difficulties in bookkeeping and tax filing, foreign-invested companies can seek help and advice from professional accounting firms or tax authorities.Want to learn more about the laws and regulations governing foreign businesses established in China,click here
C. Intellectual Property Protection
Intellectual property protection has always been an area that foreign-invested enterprises need to focus on when operating in China. China insists on treating domestic and foreign-invested enterprises’ intellectual property rights equally and protecting them equally, so that enterprises can operate with peace of mind and dare to invest. The following are some strategies that foreign-invested enterprises in China can adopt to protect their intellectual property rights and ensure that their business interests are not infringed.
1. Implement a forward-looking intellectual property registration strategy
First, foreign-invested enterprises should adopt a forward-looking intellectual property registration strategy. In China, many intellectual property protections are implemented on a “first come, first served” basis. Therefore, enterprises should apply for patent, trademark and copyright registration in China as early as possible.
This includes legally registering the key technologies, brands and creative achievements of the enterprise to obtain legal protection. In addition, understanding and utilizing China-specific intellectual property rights such as “design patents” is also an effective way to protect the innovative achievements of enterprises.
2. Strengthen internal management and confidentiality mechanisms
Secondly, strengthening internal management and confidentiality mechanisms is very important for protecting the business secrets and technologies of enterprises. Enterprises should implement strict confidentiality agreements, limit access to key information, and train employees on intellectual property protection.
In addition, signing confidentiality agreements with partners and suppliers to clarify the ownership and use rules of intellectual property rights is also crucial to prevent technology leakage and infringement.
3. Actively protect rights through legal channels
In the face of infringement, foreign-invested enterprises should not hesitate to actively use legal channels to protect their rights and interests. China’s intellectual property legal system has been gradually improved, and the protection of intellectual property rights in judicial practice has been continuously strengthened.
Enterprises should cooperate with professional intellectual property lawyers and take legal actions in a timely manner once infringement is discovered, including but not limited to sending lawyers’ letters, applying for administrative protection, and filing civil lawsuits.
4. Actively participate in industry associations and protection alliances
Participating in industry associations and intellectual property protection alliances is also an effective strategy. Through these platforms, companies can not only obtain the latest information and policy interpretations on intellectual property protection, but also exchange experiences with other companies in the same industry, and even get collective support and help when encountering infringement.
5. Your intellectual property protection expert in China
For foreign-invested enterprises operating in China, it is crucial to choose a partner who understands the Chinese market and intellectual property legal environment. Hengxin Huiying focuses on providing professional intellectual property protection services for foreign-invested enterprises.
Our professional team is well versed in China’s intellectual property protection laws and regulations, and can provide your company with customized intellectual property strategic planning, registration applications, rights protection litigation and other full-service.
V. Talent recruitment and management
After foreigners start business in China, they can recruit employees according to law.
A. Chinese workers
To recruit Chinese employees, they must be at least 18 years old and have no criminal record. Salaries must not be lower than the local minimum standard, and five insurances and one housing fund must be paid in accordance with national regulations. Working hours must comply with international labor laws and a 5-day, 8-hour work system.
B. Foreign workers
Foreign companies can hire foreign talents for suitable candidates that are temporarily in short supply in China. Hiring foreign high-end talents of Class A, including scientists, technology leaders, international entrepreneurs, special talents, etc., is in line with the “high-tech shortage” and market demand orientation, and is not subject to age, education and work experience restrictions.
Hiring foreign Class B professional talents, with a bachelor’s degree or above and 2 years or more of relevant work experience, and no more than 60 years old. For innovative and entrepreneurial talents, professional and skilled talents, etc. who are really needed, restrictions on age, education or work experience can be appropriately relaxed. Hiring foreign Class C talents to meet the needs of the domestic labor market and other foreigners in accordance with national policies. In the above three situations, the employer needs to apply to the government for review.
The above is a detailed guide for foreigners who want to start business in China. If you want to know more detailed registration fees, office rental recommendations and cost introductions, as well as the salary costs of recruiting talents in China, you can contact our customer service. Wentchina will guide you step by step on how to start business in China.
Related: Win Your Business in China