Starting a business in China: How and where to start

Right now, small and medium sized entrepreneurs can operate in the P.R.C. more confidently than ever. The Chinese government has committed itself to the protection of foreign partners’ investments, profits and legal rights. These guarantees protect against nationalization and uncompensated takings. If you want to start a business (aside from merely setting up a representative office) there are three basic vehicles: (1) wholly foreign-owned enterprise; (2) joint equity venture; and (3) cooperative venture. Whether you want to start an import-export store, boutique shop, hotel, restaurant, or establish a representative office, you must become familiar with relevant operating requirements.

As you can imagine, the new era has brought about a substantial amount of new regulations. The World Bank’s Doing Business Report provides a great starting point for newcomers to the P.R.C. The report provides a generalized framework, providing fees and time frames; but nevertheless, professional help should be consulted.

Should you choose to “go it alone,” your main ally will be the State Administration of Industry and Commerce’s (SAIC) website. There you can find English translations of highly useful laws on advertising, consumer protection, and business associations (incorporation law). It is a good idea to become familiar with these primary sources before you seek counsel. The more you know, the better you can communicate your precise needs to Chinese professionals.

SAIC is where you will obtain your business license. You will need preapproval of your business name, which usually takes around two weeks for a decision. You will need to open a Chinese-based bank account, subject to a minimum capital deposit. (The requisite funds and percentages required by each foreign partner or shareholder depend on what business vehicle you have chosen). Although it is possible to complete these initial steps without professional assistance, P.R.C. law mandates a verification report prepared by a Chinese auditing firm.

Further requirements include registering with the local statistics bureau, police station, and taxing authority. Recent developments in social insurance have also obligated foreigner business owners to enroll with local career service centers and welfare centers, before hiring any Chinese nationals. These procedures can be tricky at first, but you should not feel discouraged. They are testament to the bright economic future of foreign direct investment in the P.R.C. AsiaBridge Law can help you ease through each step, comfortably and confidently.