Since 2003, Healy Consultants Group has been efficiently and effectively assisting our foreign Clients with a spectrum of international business services including i) China business registration; ii) business license with the State Administration of Industry and Commerce; iii) corporate bank account opening in China; iv) China visa strategies for foreign employees; v) business support and guidance to investors and vi) office rental solutions.

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China business setup summary

• Benefits and problems

  Benefits of China business registration

  

  1. Our Clients looking to establish a company in China should expect to record high sales as the local market benefits from:
     • The world’s second largest economy with a GDP of US$14.24 trillion in 2019 and the largest population in the world with a population of approximately 1.34 billion inhabitants;
     • Access to customers in other large markets in Asia due to China’s proximity to emerging economies including India and Pakistan;
     • A growing demand for sophisticated goods and services as a result of a rising Chinese middle class;
     • Getting access to increasingly competitive and futuristic Chinese technology, research and science, both in technologies and personnel.
  2. Our Clients often relocate some operations of their manufacturing business to China because:
     • Even though the average wages in China have steadily risen in recent years, they are still lower compared to other western countries;
     • Reduced operations cost due to the availability of considerably cheap equipment, raw materials and ready suppliers for various industries;
     • US companies registered in China can reinvest income generated in China into the business without tax implications in the US;
     • Chinese companies importing equipment and goods from other countries enjoy huge import duty concessions from the Government;
     • Heavy industry businesses have access to affordable electricity and water for their commercial and industrial use;
     • Read more on the pros and cons of setting up a manufacturing company in China.
  3. Setting up in a Chinese export processing or industrial development zones is beneficial because:
     • Availability of over 50 Export Processing Zones (EPZs) and more 100 Industrial Development Zones;
     • Access to excellent infrastructure and better transportation access;
     • Considerably lower corporate income taxes and tax holidays;
     • Subsidized custom duties and various tax credits and incentives and a 24-hour customs clearance service;
     • Examples of EPZ’s and Industrial Development Zones available in China include:
       1. Beihai export processing zone;
       2. Changshu export processing zone;
       3. Dalian export processing zone;
       4. Chongqing Fengdu industrial park;
       5. Singapore Suzhou industrial park;
       6. Anshan High-Tech Industrial development zone.
  4. Our Clients setting up in China will enjoy access to other beneficial aspects to their new businesses including:
     • Access to a considerably large trained and qualified labor pool;
     • Availability of various sector specific incentives and grants to assist start-ups;
     • Availability of a massive service industry with a myriad of shipping agents, banks and financial institutions;
     • Access to more than 100 double taxation avoidance treaties that can minimize withholding taxes on dividends remitted abroad.
  5. China has been positively ranked in the 27^th position (out of 137 countries) in the Global Competitiveness Index 2017-2018 edition. This is majorly due to the nation’s i) high technological readiness which has further led to higher penetration of ICT services and an increased FDI as well as ii) large market size which provides the Chinese firms with a wide market to expand into;
  6. The double tax treaty between Cyprus and China includes a tax sparing credit clause, which allows Cyprus-based subsidiaries of Chinese resident entities involved in IT, pharmaceutical and financial services industries to claim 100% of their Cyprus taxes from their corporate tax payable in China. This credit is applicable even if their Cyprus subsidiary is exempted from paying taxes in Cyprus, due to the double tax treaty. This would allow Chinese subsidiaries in Cyprus to save up to 10% net off their total taxes payable, making Cyprus an attractive location for Chinese companies to set up their subsidiaries.

  Problems with startng a business in China

  1. Starting a company in China can be a complex process taking up to 4 months to complete because:
     • Depending on province, the minimum paid-up share capital required ranges from US$15,000 to US$140,000;
     • Companies with foreign shareholding must go through a rigorous pre-approval process involving at least 4 state agencies;
     • Companies must prepare a feasibility study that must be approved by the State Administration for Market Regulation (SAMR);
     • Company incorporation process involves more than 10 procedures taking at least 10 working days to complete.
  2. Our Clients running a business in China will face Government-related difficulties including:
     • Monthly reporting obligations such as i) financial statements; ii) sales tax reports and iii) payroll reports;
     • Pre-approval requirements by the Government before a foreign subsidiary can repatriate their earnings abroad;
     • A borderline draconian regulatory environment that exerts laws prohibiting use of certain superlatives in advertising;
     • Rampant counterfeiting due to poorly enforced copyright laws that risk businesses losing millions in stolen intellectual property.
  3. The Chinese Government can be termed as somewhat discriminatory to foreign investors because:
     • Equity restrictions apply for foreigners in certain lucrative industries such as banking, telecommunications, automobile and finance, and require joint ventures with locals;
     • Foreigners are also prohibited from investing in certain sectors such as education, entertainment, technology, and media;
     • The Government also tends to favour the local companies and Chinese nationals over foreigners in commercial disputes.
  4. China’s language and culture can be an impediment to doing business for foreign entrepreneurs because:
     • Business documents in China are written in standard mandarin and can be challenging to foreigners who don’t understand the language;
     • Less than 1% of the Chinese population speak English fluently, consequently there could be a communication barrier when dealing with local customers;
     • During the Chinese New Year, businesses in China slowdown to a halt for at least one week for the celebrations thereby hampering business operations;
  5. Our Client should expect to suffer steep operation costs doing business in Shanghai, Beijing and coastal parts of China because of:
     • High office rental costs in main Chinese cities like Beijing and Shanghai with rents up to US$1,300 psm per annum;
     • Income taxes including i) 25% corporate income tax; ii) 17% value added tax; iii) 13% custom duties and iv) personal income tax rate of up to 45%;
     • Our Clients should watch out for hidden or extra costs as the Government requires hiring of local consultants prior to proceeding with certain projects;
     • Importing second-hand equipment can be costly due to the inspection and clean-up costs in order to meet Chinese customs requirements.
  6. Our Client should expect longer time period to secure a bank account number / e-banking token from local banks because of:
     • Stringent requirements including bank forms to be “stamped” by i) company chop and ii) company’s legal representative chop. Failure to do so might cause the banks to return the forms and will not process our Client’s application;
     • That said, the bank will only consider an application form to be “complete”, provided i) required information is filled properly and ii) included both the chops mentioned above;
     • In certain cases, banks might request to directly deal with our Client to clarify account / application-related issues before to process our Client’s application.
  7. China has been ranked poorly at the 110^th position (out of 180 economies) in the 2018 Index of Economic Freedom. The Chinese economy still has state-owned enterprises that dominate the financial and other sectors of the economy with its guiding ideology of “Socialism with Chinese Characteristics” thereby impeding a dynamic business environment in China.

• Best uses for a China company

  1. China is an excellent location for the formation of a company with manufacturing operations because of:
     • Easy access to, and availability of raw materials, equipment and manpower;
     • Availability of several tax incentives for manufacturing companies;
     • Access to a dense network of suppliers with excellent market proficiency.
  2. China is also a perfect jurisdiction for setting up a trading company to take advantage of the large market size and a strong consumer base.
  3. China is an excellent platform for foreign investors because:
     • With a population of 1.34 billion people (as per September, 2018) and the rise of the middle class, China-incorporated companies get an access to the world’s most important markets and have the opportunity to offer the Chinese economy with a range of their goods and services;
     • The Chinese economy is gifted with a large and high-quality labour force, giving an additional edge to the employers hiring for their newly incorporated companies in China.