Doing business in China is a unique and valuable opportunity that many foreign investors have taken advantage of since China opened its doors to foreign trade and investment in 1978. There are various reasons why foreign companies set up subsidiaries in China: abundance of skilled talent, competitive labor costs, a booming consumer market, constant innovation, integrated supply chains, and a strategic position for tomorrow’s world. Establishing a Chinese entity also provides foreign companies doing business in China with an official legal presence in the country. This gives them a higher level of credibility, making it a lot easier to establish and maintain trustful business relationships with local Chinese partners and customers.
Representative offices, wholly foreign owned enterprises (WFOEs) and joint ventures (JVs) have been the primary foreign investment structures for entry into the Chinese market for quite some time. This still remains the case, but in order to provide foreign-invested enterprises with more equal treatment compared with Chinese domestic companies, China enacted the new Foreign Investment Law, effective on 1 January 2020. Under this law, foreign enterprises registered after 1 January 2020 will no longer be governed by specific laws, such as former WFOE Law and the Sino-Foreign Equity JV Law, which apply only to foreign enterprises, but rather the Company Law, Partnership Enterprise Law and other relevant laws and regulations, on par with Chinese domestic companies.
While this has created a more favorable and convenient environment in China for foreign investment, it should be noted that foreign investment is still restricted or prohibited in certain industry sectors, which are specified in China’s frequently updated foreign investment Negative Lists. Furthermore, although Chinese corporate laws have generally become more and more transparent, the regulatory landscape has become increasingly complex for foreign companies to navigate such that the risk of non-compliance is now greater than it was in the past. Hence, it is important for foreign investors entering the Chinese market to choose a law firm that understands both their position and needs, can provide step-by-step guidance on the company establishment process, and assist with the necessary submissions of applications and documentation to the relevant authorities.
If you are interested in setting up a company in China, feel free to get in contact with us to set up an initial conference call. This would allow us to conduct a preliminary assessment of the feasibility of your investment plans, provide you with more information on the company establishment process and documentation requirements based on your plans, and estimate our workload and fees accordingly.
In the meantime, by clicking on the links below, you will find more information on the main types of entities or companies that foreign investors typically establish for the purpose of entering the Chinese market.