How to Start a Company in China in 2024: A Complete Guide

In Q3 2024, China's GDP reached RMB 94.97 trillion, growing 4.6% year-on-year. 

As one of the world's largest and fastest-growing economies, the country offers a massive consumer base with over 500 million in the middle class, whose purchasing power continues to rise. It is also a leading hub for manufacturing and technology, making it an attractive destination for those looking to start or expand their businesses.

With ongoing trade reforms, China is becoming even more open to foreign investment. However, the complexity of its regulatory landscape and the nuances of the local business culture may make it challenging for newcomers.

This guide will walk you through the key steps to successfully start a company in China, helping you navigate those challenges.

Understanding the market dynamics of China through thorough market research is essential before launching a business there. The Chinese business environment is unique, with a combination of government regulations, local competition, and cultural nuances that can shape your success.

Here’s a quick overview:

• Strict Regulations: The Chinese government plays a much larger role in business affairs, with rules and regulations that are often more detailed and restrictive than those in many other countries. As a result, you will need to navigate more bureaucratic steps before launching your business. It’s best to make sure you have the resources necessary to get through the red tape. Partnerships with locals can help mitigate these challenges.
• The Negative List: China maintains a "Negative List" of sectors restricted to foreign investment. Some restrictions, such as those on manufacturing, have recently been lifted. However, it’s always important to check if your industry permits foreign businesses before investing.
• Challenges with Local Brands: Local brands have strong customer loyalty, making the market very competitive. You’ll need a clear plan to stand out.
• Business Practice and Language Barrier: China values relationship-driven business practices, so fluency in Chinese and strong connections are crucial. Trust and long-term partnerships are at the core of success.
• Investment Challenge: Raising investment can be difficult, as Chinese investors may be cautious about foreign entrepreneurs. Demonstrating long-term commitment to China is essential for gaining local support.
• Consumer Trends and Opportunities: Ecommerce is massive in China, with platforms like Alibaba, WeChat Pay, and Douyin (TikTok). A growing middle class drives demand for foreign brands and luxury goods.

The next step is to decide where you want to start your business. Location is extremely important for starting any business, but this factor is especially important in China, where economic development varies widely between cities.

There are a total of 21 free trade zones in China, each with its advantages and disadvantages. More established free trade zones, such as Shanghai, are very popular for low local taxes, but are highly competitive, making it harder to secure top talent and affordable office space. 

On the other hand, less developed and newer free trade zones may have higher taxes, but often feature more relaxed regulations and more affordable office spaces.

The location that’s best for your business depends on the type of business you run and the specific needs of your business. Service-based businesses may operate outside free trade zones, as they’re less affected by regulated commodities.

Popular Locations 

Below are the top locations to consider. 

• Shanghai – China’s financial hub, renowned for its high GDP, international port status, and business-friendly environment, including the Shanghai Free Trade Zone with tax benefits, simplified customs, and easier foreign investment.
• Beijing – The capital city and China’s political, cultural, and scientific centre, ideal for establishing a business in a well-connected, modern metropolis.
• Guangzhou – Known for housing the largest port in southern China, Guangzhou plays a key role in facilitating trade, particularly with the Philippines, Malaysia, Singapore, Vietnam, and Thailand. 
• Hangzhou – Known for its ease of doing business and a range of new technological mechanisms.
• Shenzhen & The Greater Bay Area—Shenzhen claimed the top spot in a 2024 ranking of Chinese cities' business environments. It is generally the first choice for tech startups and foreign investors, especially because it is in the Special Economic Zone (SEZ), which offers market-friendly policies, R&D subsidies, and a strong tech talent pool.

To simplify your market entry and operational setup in China, one efficient step is to hire a Professional Employment Organization (PEO) or Employer of Record (EOR) to test the market and manage your workforce without having to set up a local entity.

A PEO is a company that manages HR tasks for your business, such as benefits and payroll. An EOR takes this a step further by being the official, legal employer of your workers in China, handling employment contracts, taxes, and other requirements. 

China’s labour laws can be complex for foreign businesses, and engaging a PEO or EOR helps ensure compliance with local regulations. Companies often consider these services before setting up a local legal structure because they enable quick hiring and market testing in China.

Once you're ready for a long-term presence, you can set up a legal structure based on your goals.

In China, there are several legal structures available, each with its own tax and legal benefits.

If you’re a foreigner looking to establish a business, you’ll likely need to create a Foreign Invested Enterprise (FIE). FIE is a broad term that refers to a business entity formed and registered in China where a foreign investor holds partial or full ownership. One of the most popular options is the Wholly Foreign-Owned Enterprise (WFOE).

Let’s take a look at the common legal structures.

• Wholly Foreign-Owned Enterprise (WFOE): A WFOE is a fully foreign-owned business established without any Chinese investment. It is the most widely adopted legal structure for foreign companies in China because of its flexibility. WFOEs can engage in a broad range of business activities and are authorised to hire both foreign and local employees across the country.
• Joint Venture (JV): A limited liability company formed between a foreign and a Chinese entity, commonly used to enter China’s restricted sectors. Both parties share ownership, profits, and risks in a jointly managed entity, typically lasting 30 - 50 years, with possible extensions for advanced technology transfers. JVs offer a lower upfront investment than a WFOE. 
• Foreign Invested Partnership (FIP): A structure formed by foreign and Chinese investors, either by creating a new partnership or acquiring equity in an existing one. Unlike JV, FIP is not a separate legal entity, meaning the owners are personally liable for its debts.
• Foreign Invested Commercial Enterprise (FICE): A type of FIE that operates as a commission agency (earning a fee for selling goods), or engages in wholesale, retail, and franchising (licensing a brand for a fee).
• China Representative Office (China Rep Office & RO): A representative office (RO) in China functions as a local presence for a foreign company. However, it is restricted from generating revenue, issuing invoices, or participating in trade activities.

Next, determine your Minimum Registered Capital (MRC). The MRC is the minimum amount of capital that shareholders are required to contribute to the company, and it serves as a guarantee to the Chinese government of the company’s financial capacity to operate.

The 2014 revision of the Chinese Company Law eliminated statutory minimum capital requirements for most legal entities, except for regulated industries such as finance, securities, education, insurance, and banking.

However, it’s best to set a capital that covers at least one year of operating costs. This is typically RMB 30,000 for multi-shareholder companies, RMB 100,000 for single-shareholder or service-sector companies, and over RMB 500,000 for FICE to meet VAT compliance.

The full capital does not need to be paid upfront, but a payment schedule must be outlined in the company’s Articles of Association. According to Article 47 of the latest  Chinese company law revision, shareholders of an LLC must pay their subscribed capital in full within five years of the company’s establishment.

When starting a business in China, you’ll need to gather several important documents for registration with the relevant authorities. Below is a list of the most common information and documents required:

• Approved Company Name: You will need an approved company name by registering your business through the State Administration for Market Regulation (SAMR) self-declaration system. The SAMR may reject names it considers inappropriate. Most companies operating in China are required to create a Chinese name unless they are a well-known international brand like Apple or Nike.
• List of Shareholders: Provide a list of the main shareholders who hold the majority of the company’s shares. Ensure that these individuals are legally permitted to hold shares in China.
• Organisational Structure: Outline your company's structure, including details of the board of directors, supervisors, general manager, and legal representative.
• Identification Documents: Submit the passports or IDs of the shareholders, legal representatives, finance managers, supervisors, liaison persons, and the investor’s controller.
• Articles of Association: This document outlines your company’s business scope, management structure, and profit-sharing methods. 
• Registered Capital and Total Investment: Registered capital refers to the funds allocated to your company’s operations. The total investment includes the registered capital plus any additional investments or loans from third parties, such as banks.
• Business Address: Provide the official address of your company, including the phone number and email address where authorities can contact you. A proof of address may also be required.
• Business Plan: A clear and comprehensive business plan is essential. It should include your goals, strategies, a feasibility study and a budget that demonstrates the viability of your company. The authorities will use this document to assess whether you have enough funds to cover operating expenses. If they are not convinced, your registration may be rejected.
• Your parent company's registration certificate or business license, if applicable. This often needs to be translated and notarised.

Once the necessary documents are ready, the next step is to register your selected entity with the Ministry of Commerce (MOFCOM).

After securing a certificate from MOFCOM, you can apply for a "5-in-1" business license with the local Administration for Industry and Commerce (AIC) within 30 days. The "5-in-1" business license consolidates multiple registrations, including:

1. Business License: Certifies company registration, allowing operations, invoicing, and hiring.
2. Organisation Code: A unique company identifier for official use and further registrations.
3. Tax Registration Certificate: Registration with the local tax authority for tax filings.
4. Social Security Registration Certificate: Verifies registration for employee social security contributions, particularly required for WFOEs.
5. Statistical Registration Certificate: Confirms registration with the statistics office, requiring monthly reports on financial and employee data.

In China, every business is required to have an official seal, also called a company chop, which is round and features the company’s name in Chinese. 

This seal holds the same legal authority as a signature, and without it, contracts cannot be legally validated in China. To acquire your official company chop, you must register with the Public Security Bureau (PSB) in your area after successfully registering with the Administration for Industry and Commerce (AIC).

Trademark registration is crucial for protecting your brand identity in China. 

Without registering your corporate patents, copyrights, and trademarks, there is no formal protection for your intellectual property in China. Therefore, it is essential for foreign companies to register their IP as soon as they begin conducting business in China.

You can apply with the China National Intellectual Property Administration (CNIPA) in person or online. 

Lastly, you need to open a business account in China to separate your business transactions from personal ones. 

Having a dedicated business account is crucial for staying organised. It also plays a key role in ensuring accurate accounting and simplifying management during tax season. Ultimately, it helps ensure compliance with local regulations. 

The process of opening a business account may vary depending on the economic zone or region where your company is registered, as different areas in China may have specific requirements and banking regulations.

For a WFOE, the cost typically ranges from RMB 10,000 to 50,000. However, the cost can rise to RMB 100,000 if you engage a large international firm. 

Additionally, you'll need to consider your minimum capital requirement, which usually starts at 30,000 RMB. This amount doesn't need to be paid upfront and will depend on your business type and entity choice.

The company registration process in China typically ranges from 20 days to 3 months, depending on factors like the type of business, entity, location, and the applicant’s nationality. 

Foreign-invested enterprises (FIEs), including WFOE, generally take 1 to 6 months to complete the necessary steps, including obtaining business licenses, registering for taxes, opening a bank account, and registering with the State Administration of Foreign Exchange (SAFE). 

The process takes longer for businesses with specific or more complex requirements. For example, Manufacturing WFOEs need to submit an environmental evaluation report, and Trading WFOEs must complete customs and commodity inspection registration, which can delay the timeline.

It is entirely possible for a foreigner to incorporate a company in China. While there are language barriers and regulatory challenges to overcome, these obstacles are manageable with local partners and the right resources.

The most popular structure for foreign entrepreneurs is the Wholly Foreign-Owned Enterprise (WFOE). This structure grants full ownership and operational control to foreign investors, allowing them to conduct business independently without the need for a local partner.

However, establishing a WFOE is time-consuming, often taking several months to complete due to the need for regulatory approvals and paperwork. In some sectors, foreign ownership is also restricted, so you will require partnerships with local companies. In such cases, a Joint Venture (JV) with a Chinese partner may be necessary.

Starting a business in China presents significant opportunities, but the regulatory landscape and a strong language barrier can be challenging to navigate. For many entrepreneurs, Hong Kong is an appealing alternative.

Hong Kong is a Special Administrative Region (SAR) of China that operates under a unique "one country, two systems" framework. This allows Hong Kong to maintain its own legal, financial, and business systems, which are distinct from mainland China. 

As a result, it offers a business-friendly environment with low taxes, straightforward regulations, and a quicker setup process. Additionally, its strong international trade connections make it a popular choice for companies aiming to access both the Chinese market and the wider Asia-Pacific region.

If you're seeking a simpler, more flexible way to expand into Asia, Statrys Hong Kong company creation service can help you establish a Hong Kong company and apply for a multi-currency business account (subject to approval) within 5 days, all 100% online.