10 Steps to Open a Foreign Invested Company in China

10 steps to open a foreign invested company in China.
Opening a foreign invested company in the Chinese market can seem, and can become, over complicated. Normally is advisable to avoid taking this path alone, especially without a good Chinese language proficiency and without network. The business environment for Western-leaded companies is unique, it is more complex and controversial than any other country.

Don’t be scared, based on 20+ year experience working and living in China, I can tell there a lot of good firms that can support your registration process. Of course, you’ll choose the most appropriate one according to your case, background, project, and budget.  As partner of S. J. Grad Finance & Tax Advisory, I saw many big failures in China, due to both a scarce level of shared information and  a low level of commitment

10 Steps to Open a Foreign Invested Company in China (normally defined as WFOE or FICE depending on the business scope).

I assume you already went through the strategy definition, you defined a 3 to 5 years business plan, and analyzed in detail your set-up costs. Also, I hope you already made a comparative analysis on the most appropriate location to set-up your company (China is huge: if one area can mean quick profits, another one can mean bad infrastructures, be careful when choosing your location).

1.      Submitting your Chinese name for pre-registration (approved by SAIC)

2.      Register and obtain the Approval from the Ministry of Commerce (MOFCOM)

Once the MOFCOM approves your documents, you will obtain the record certificate for foreign investment. As you get your Record Certificate, apply to obtain the Business License (issued by SAIC), which is the most important document to keep.

3.      Choose your Business Scope

The Business Scope is fundamental to determine the activities you can and cannot carry out in China. It should be as much detailed as possible, as it will be important also to determine your tax profile. Keep in mind that some industries are encouraged, and some are prohibited to foreigners.

What happens if your business scope says you’re a trading company and you are instead producing components? Troubles, lots of troubles!

4.      Sort out your documents to obtain the Chinese Government Approval

These documents include:

o   The Chinese name of the company, which first need to be pre-registered (to choose the brand name for your Chinese entity visit www.daxueconsulting.com);

o   New company legal address (which should be appropriate to your business scope and cannot be an office shared with another company);

o   Company organizational chart;

o   Article of Association (it also explains your intentions on company profit repatriation);

o   Registered Capital amount (note that today there is no registered capital threshold to open a new company);

o   Feasibility Study (especially for manufacturing companies).

This list could vary according to your business scope and location.

5.      Register with the Public Security Bureau (PSB)

With this registration you should obtain the company chops, which are vital for your operations. Chops in China have the same value of the signature in the West. Without your chops, you cannot validate any contract.

6.      Register with the State Administration of Foreign Exchange (SAFE)

This can allow you to open your Foreign Currency Capital Account (USD, EUR, etc.), which can be opened in a foreign bank or in a Chinese local bank

7.      Open your Company Basic Bank Account & Foreign Capital Account: Inject your capital

Ask your advisor about details of opening a RMB basic account and foreign capital account to inject your registered capital and recover some start-up expenses (i.e. decoration costs, rent, consulting expenses). To set-up both the RMB basic account and capital account, the legal representative must go to the bank to verify his/her identity.

8.      Register at the Tax Bureau & Set-up your tax machine

Register the company basic operating and financial information such as accountant and CFO verification, tax category registration and invoice application (which also need be approved by the Tax Bureau).

9.      Hire an Accountant and a Cashier

10.  Draft the Staff Handbook for your Chinese staff
This may defend yourself from any possible controversy.

Depending on your industry and documents accuracy, the process generally takes from 3 to 6 months.

Before starting, call us to understand more about the company registration process.