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Increasing number of American companies are setting up their own presence
in China in order to source products or services directly from China or
enter the Chinese market rather directly. Nevertheless, given the foreign
nature of complex local policies, regulations and overall business environment
in China, it is so critical to be proactive and fully prepared before you
take the strategic move to set up your company's own presence in China.
Business set-up in China is a big project by itself, which requires financial
and time commitments, business management knowledge and China expertise.
Identifying a competent agent to manage the complex process will be a cost
and time effective way to avoid potential pitfalls. Amlink International
can help you by either providing business consulting services or through
this website, providing comprehensive information and resources on how to
set up a business in China. Here are key points one should and must know
before starting the process of setting up a business in China.
 There
are several options to set up a local presence in China. Foreign entity's
China presence may be in the form of a wholly owned foreign enterprise,
an equity joint venture, a contractual joint venture firm, a representative
office or a local representation by a third party such as local secretary
services and local representation companies.
The business
scope should be clearly defined for the China presence. China National Development
and Reform Commission (CNDRC) may prohibit or restrict, permit or encourage
business setup based on your business scope. It is important to carefully
define the business scope that is to be permitted or encouraged to set up
business in China.
It is
important to select the right location for your China operation. Although
in general China central government has abandoned its preferential tax rate
for foreign invested companies starting January 1, 2008, some cities, especially
certain industrial parks,
still offer some local tax benefit and financial assistance for foreign
investors.
There
is a minimum registered capital requirement for any business setup in China.
Different types of business will bear different requirements. However, such
requirements could be flexible. In some case, local Industry and Commerce
Administrations may decide on your minimum registered capital based on their
judgment of your business scope and operation scale. You should find out
the specific requirement for your business setup before taking further
actions in case they require an amount exceeding your financial resources
available for setup business in China.
You should
fully understand employer's responsibilities and liabilities in China. China
just issued a new labor law in year 2007, clarifying several key issues
such as employment contract, redundancy, etc. Without preliminary knowledge
of this law, you may end up spending a huge amount of time and money terminating
the contract with under performing employees, as the structure of the contract
was wrong. You also need to be aware of the mandatory employee welfare and
benefits so as to include such cost in the budget.
You should
conduct thorough due diligence and credit check on joint venture partners
if the business is to be set up in a joint venture format. China has some
sort of the business culture to show people's wealth and status by driving
luxurious cars, wearing prestigious watches and owning an impressive factory.
So your business partners in China may look financially viable and well
connected but actually live on bank loans and personal debts.
You should
plan to develop a comprehensive local business and human resources management
system. It may be a tough job to recruit the right employees in a foreign
country without local assistance. It is even tougher to effectively manage
the local business and staff in a foreign country. A sound and robust employee
management system will encourage the engagement and commitment of local
staff and avoid potential risks. You may include reporting and communication
policies, staff training, performance assessment, remuneration, career management
and employee management manual in the system.
Authorities in
China relating to registering business >
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