Starting a business in China in 2024 presents a unique blend of opportunities and challenges. As the world’s second-largest economy continues to grow, many entrepreneurs are looking eastward for expansion. “China is not only a manufacturing hub but also a huge consumer market,” says Tim Cook, CEO of Apple. Jack Ma, founder of Alibaba, adds, “If you’re still poor at 35, you deserve it! But if you’re poor in China at 35, you’re not seizing the opportunities.” Companies like Tesla have also made significant investments in China, with Elon Musk stating, “China is the future.” However, navigating the complex landscape of Chinese bureaucracy, culture, and market preferences requires careful planning and execution. This article aims to guide you through the essential considerations for starting a business in China in 2024.

Should I Start a Business in China?

This is a question we frequently hear from our clients, and unfortunately, there’s no one-size-fits-all answer. Every situation is unique, and each company has its own set of preferences, requirements, and needs. For some, launching a business in China is a logical step, while for others, it may not make sense at all. In this discussion, we’ll delve into the pros and cons of registering a company in China for the years 2023 and 2024.

Advantages:

1. Having a Chinese company allows you to open both a corporate and personal bank account in China. This is crucial for setting up company accounts on Alipay and WeChat, two payment platforms that are essential for conducting business in the country;

2. Establishing a Chinese company also enables you to directly engage with Chinese consumers, issue invoices, hire local staff, maintain a physical office, and perhaps most importantly, sponsor your own work visa as a company executive;

3. China stands out as one of the few countries that allow foreigners to register a company with full ownership and sponsor their own work visas without requiring any capital injection. This is a significant advantage for small to medium-sized businesses and entrepreneurs who may not have access to large amounts of capital to start and operate a business;

4. A Chinese company also allows you to export directly from China and claim up to a 13% VAT refund. The Chinese government encourages the export of domestically produced goods by offering VAT refunds, which can be a significant benefit for trading companies. This allows them to remain competitive by maintaining factory prices while relying on VAT refunds as a source of profit;

5. A Chinese company allows you to open seller accounts on various Chinese e-commerce platforms, such as Alibaba, AliExpress, 1688.com, Tmall.com, Taobao.com, and JD.com, among others;

6. Having a Chinese company provides you with a legal foundation for conducting business in China. With your own Chinese entity, you’ll have the same legal rights as local suppliers and factories. Should any company try to take advantage of you, you can readily take legal action. This is a significant benefit compared to operating a business in China with a foreign company, which would make pursuing legal remedies in China both costly and time-consuming;

7. A Chinese company can pave the way for a Chinese green card. If you employ yourself under a Category A work permit and maintain it for 4-5 years, you’ll be eligible to apply for permanent residency in China, as long as your company remains active at the time of application;

8. A Chinese company also allows you to establish official pages for your business on Chinese social media platforms like Weibo, WeChat, and Baidu. This enhances your credibility as a business within the Chinese market;

9. A Chinese company enhances your credibility with foreign clients. Having an office in China under your own company name, as evidenced by your name on the Chinese company license, speaks volumes about your trustworthiness. This is in contrast to those who operate through agents or partners in China;

10. A Chinese company is particularly advantageous when entering into partnership and agency agreements with large Chinese corporations. Chinese WFOEs (Wholly Foreign-Owned Enterprises) and FICEs (Foreign-Invested Commercial Enterprises) are limited liability companies. When negotiating with major companies in China, they often require some form of local liability, which your Chinese company can provide;

11. A Chinese company is beneficial when directly engaging with the Chinese government on various projects. Similar to other countries, bidding for government projects and tenders usually requires a locally registered company;

12. A Chinese company allows you to seek local investment for your business and startups. Being a limited liability company, it assumes liability on your behalf, thereby gaining the trust of local investors;

13. There are many other advantages to owning a Chinese company when doing business in China. These benefits can vary depending on the specific needs and circumstances of each business, company, and entrepreneur.

Now, let’s discuss some of the disadvantages of registering a company in China:

1. Bureaucracy: Red tape is still prevalent in many government departments, making the timeframe for company registration in China longer than in other countries. The entire process usually takes between 4-6 weeks to complete.

2. Limited Business Sectors: Not all industries are open to foreign ownership. In some restricted sectors, such as airlines or media companies, a Chinese partner is mandatory;

3. Foreign Currency Control: While RMB transactions can be conducted freely through online banking, foreign currency transactions require special permission from the bank, which should be obtained separately, and it usually takes around 2 weeks to get it;

4. Cultural and Language Barriers: Living and doing business in China can be challenging due to language and cultural differences. If you’re not willing to adapt to local customs or learn the language, you’ll likely find it difficult to succeed;

5. Political Environment: Some individuals mistakenly assume that they’ll have the same rights as in their home country, forgetting that they’re in a different jurisdiction with its own laws and political climate. This lack of flexibility can make life challenging;

6. Consumer Preferences: Chinese consumers have distinct tastes, requiring companies to localize their products and services. Failure to do so has led to the downfall of some businesses that were unwilling to adapt;

7. Other Disadvantages: Just like the advantages, there are other disadvantages that are specific to each business, company, and entrepreneur. It’s crucial to evaluate your own situation to determine if the Chinese market is right for you.

For more insights and personalized guidance, reach out to us at JR & Firm LLC. We specialize in company formation and bank account opening services in China and other countries. Contact us at contact@jrandfirm.com or +8613040688804 (available on Telegram, WeChat, and WhatsApp).

JR & Firm LLC is also the proud owner of an international logistics company, JR International Logistics LLC. If you’re seeking a reliable logistics partner to transport your goods from any location worldwide to any desired destination, we invite you to explore our services. Please click here for more information.

1. What is the first step if I want to register a WFOE?

The first step towards registering a WFOE in China involves contacting a professional consultancy firm, such as JR & Firm, and signing a service agreement. In theory, the founders could handle the process themselves. However, since it requires an in-depth understanding of the company registration system and proficiency in Mandarin Chinese, it is generally more practical to hire a professional company to prevent potential mistakes during the process.

2. I have signed a service agreement with JR & Firm to register my WFOE, what's next?

After signing an agreement with our clients for WFOE registration in China, we issue a formal invoice. At this stage, we anticipate that our clients will make a payment for the service, allowing us to commence the process.

3. I have paid JR & Firm for the WFOE registration service, what should I do next?

Upon receiving full payment for the WFOE registration, we provide our clients with a detailed questionnaire. This document requests all the necessary information about the company, business activity, founders (shareholders), and executives (including the company director and supervisor). We request that our clients complete the questionnaire and return it to us via email.

4. What should I prepare for the WFOE registration questionnaire?

1. Company Name Choices: In China, WFOE names should follow this structure: [Place of Registration] + [Chosen Name] + [Business Direction] + Co., LTD. For example, Shanghai Silk Road International Trading Co., LTD, or for a consultancy company: Shanghai Silk Road Consulting Co., LTD. An alternative structure is: [Chosen Name] + [(Place of Registration)] + [Business Direction] + Co., LTD. For example: Silk Road (Shanghai) International Trading Co., LTD. Please note, in China, a company’s Chinese name is considered its main name. If our clients know Chinese, we ask for name choices in both Chinese and English, following the above structure. If not, English name choices will suffice, and we will select a corresponding Chinese name based on similar sounds. Avoid city, country, and historical names, as they’re typically disallowed. Also, we discourage direct translations of the English name due to high likelihood of them being taken. We recommend selecting similar-sounding Chinese characters to avoid delays. The Chinese name does not need to have a specific meaning, as meaningful characters are often taken.

2. Company’s Legal Person (Company Director): The legal person is an individual and cannot be a corporate entity. Please prepare their full name (as on the passport), a copy of their passport (not ID), along with their address, phone number, and email address.

3. Company’s Supervisor: The company supervisor is a separate individual from the company director, meaning they cannot be the same person. Please provide their full name (as on the passport), a copy of their passport (not ID), and their address, phone number, and email address.

4. Company’s Shareholder(s): Shareholders are the owners of the company and can be both individuals or corporate entities. Both the company director and supervisor can be shareholders. There can be up to 50 shareholders. Whether an individual or corporate shareholder, full information is required: full names, contact details, address, and either passport copies (for individual shareholders) or a full set of company documents (for corporate shareholders).

5. Company’s Business Activity: What products and/or services does the company plan to sell? Please prepare a detailed list.

6. Company’s Registered Capital: The registered capital is the amount the founders plan to invest in the company over a span of 30 years or more. The amount varies depending on the activity and place of registration. We recommend $300,000 for international trading companies and $100,000 for consultancy companies, as examples. The registered capital amount is usually suggested by the local government.

7. Full Contact Details for All Involved Executives and Shareholders: We need the complete contact details for all executives and shareholders. This includes addresses, emails, and phone numbers.

5. I submitted the WFOE registration questionnaire to JR & Firm via email, what's next?

Once we receive the completed WFOE registration questionnaire, we review it carefully and follow up with our clients accordingly. If there’s any missing information, or if the company requires additional permits or licenses based on its planned products or services, we will inform the client. If everything is in order, we prepare the application documents, attach our clients’ documentation, and submit the WFOE registration application. The estimated waiting period for feedback from the government on the registration application is approximately 10 business days. Please note that timeframes in China are approximate due to government bureaucracy.

6. How long does it take to get my WFOE license after the registration application is submitted?

Once the WFOE registration application is submitted, the government generally responds within 10 business days. If approved, they will issue the company’s structural documents, which the founders (shareholders) and executives (director and supervisor) are required to sign with a black gel pen and mail back to us (Note: In China, only black gel pens are acceptable for signing legal documents; other colors and ballpoint pens are not accepted). We then submit the signed documents to the company registrar and await the business license. The waiting period for the business license is roughly 10 business days unless expedited service was purchased. With expedited service, a business license can be obtained within 2-5 business days. Contact us for more details about the expedited service.

7. Great, I have obtained my WFOE business license, what is the next step?

Once we secure the WFOE business license, we will contact our clients and the bank to schedule an appointment to open a corporate bank account for the company. Please note, the company director must be present in China to open a corporate bank account and their citizenship should not be among the countries sanctioned in the bank’s system. Alongside being present, the director needs to provide a Chinese phone number linked to their passport and a second person’s passport and phone number linked to this second person’s passport. This second person can be anyone in China (provided their citizenship isn’t among the sanctioned countries) with a Chinese phone number. This requirement is due to the banks’ need to issue online banking devices that require two people’s information. Legally speaking, this second person doesn’t have any rights or obligations regarding the company’s finances or bank account. While this might seem unusual, it remains a requirement, so we advise clients to identify such an individual in China before opening a bank account. The bank account opening process takes around 5-6 hours, and we recommend our clients exercise patience during this process.

8. I have my WFOE bank account opened, what is the next step?

After your WFOE bank account is opened, we’ll proceed to contact the customs department to initiate the process for the e-port device (if you’re registering an international trading WFOE focused on import/export. Note that e-port isn’t required for consultancy or other types of companies). This process typically takes about 5 business days, and we’ll mail the e-port device to our clients once it’s secured.

9. I have obtained my e-port device, are there any other steps to be completed before I start my companyโ€™s operations?

Yes, following the acquisition of the e-port for the WFOE, we’ll register the company with the tax department. This process generally takes around 14 business days, and it requires the company director to visit the tax office in person for ID verification.

10. After the WFOE tax registration, are there any other steps involved before the company becomes active?

Indeed, the final step in the WFOE registration is the foreign currency permission application. This process typically takes around 7 business days and necessitates a visit to the relevant government department. After securing the foreign currency permission, the WFOE can commence its operations.

On the whole, the complete process for WFOE registration can span anywhere between 4 and 8 weeks. As we mentioned earlier, all timeframes are approximations due to the inherent unpredictability of government bureaucracy. Although these factors are beyond our control, we will do our absolute best to expedite the process.

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Jasur Mavlyanov, an experienced entrepreneur and legal expert, has built a notable career in international business, with a focus on China. With over 13 years of experience living and working in China, Mavlyanov has acquired valuable insights into the Chinese legal system and business environment.

As an entrepreneur, Jasur founded JR & Firm LLC, a company dedicated to providing legal services to global clients entering the Chinese market. His leadership has helped the firm become a reliable partner for businesses navigating the complexities of Chinese regulations and laws. READ MORE about Jasur.

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