Important Things to Consider When Starting a Business in China

One of the most fertile ground to start a business as a foreign investor is in China. The reason is because setting up, creating, and running a business in China can be a rewarding experience.

In starting a business in China, one needs to plan adequately. These plans involve sorting things like

  • Nature of Chinese Company
  • Location
  • Taxes
  • Corporate banking
  • Compliance with business regulation.

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This article will explore these five crucial factors and how intending entrepreneurs can navigate them.

1. Nature of Chinese Company

There are many forms of the company for anyone that wants to establish a startup in China. Examples are:

  • Hong Kong Company
  • Representative Office
  • WFOE
  • Qinghai Company
  • Joint Venture

These are unique forms of business that have their nature, advantages, and disadvantages. Their cost of maintenance differs; they have distinctive legal liabilities, capital requirements, etc. With these, prospective business owners need to consider the options they have when starting a business. A carefully thought out plan will ensure that the business they eventually go with will help them achieve their goals.

2. Location

When you consider the landmass, China is a vast country. However, few places are favorable for business, like Shanghai, Guangzhou, Beijing, and Shenzhen. Also, these cities come with their peculiarity as well as the pros and cons.

Before you determine where to set up, it is essential to consider things like workforce availability, cost of doing business, weather, government policy, nearness to ports, etc. As a result, one needs to have adequate research on what to expect with such a location. Also, the presence of preferential treatment for a foreign firm from the local government should be considered.

3. Taxes

The tax your company will pay is a factor like the company you have. Different forms of business have their differences, which includes the tax. Make sure to consider the tax rate in each city as well because they differ.

The good news is that there are some cities in China that have low corporate tax rates and individual tax rates as well. A few of them are:

  • Hong Kong
  • Free Trade Zone – Shanghai
  • Qinghai – Shenzhen
  • Torch zone – Zhongshan
  • Hengqin – Zhuhai

4. Banking System

One needs a corporate bank account as one of the requirements to set up a business in China. You might decide to go with a local or an international bank. Interestingly, China is home to 80% of the biggest banks in the world.

A few of the local Chinese banks are:

  • China Construction Bank
  • HSBC (Hong Kong and Shanghai Banking Corporation)
  • Agricultural Bank of China
  • China Merchants Bank

5. Compliance With Chinese Regulations

There are laws in China, and your business needs to comply with the law to have a smooth operation. China’s business regulations should be one of the first things to check before, as it will guide your decision. Many of the Chinese corporate laws change and are usually published in their language. So it’s important to research how to start an LLC or any other type of company before you make any business decisions.

As a result, a foreign entrepreneur will benefit from getting help from local lawyers. They can help with tax, company registrations, accounting audits, employment, etc. Such local experts can be invaluable in making sure that the company stays compliant with business regulations.


Here are five essential things to keep in mind before starting a company in China as a foreign entrepreneur. These tips will go a long way to ensure that you have a smooth time.