China Company Formation: What are the Three Main Steps?

Company Formation
Company Formation

As China’s economic growth continues on an upward trend for the fourth decade in a row, investors are asking the big question: “what is the right process for company formation in the jurisdiction?” Although the administration has been working hard to open the jurisdiction to foreign investors, many still find the process pretty complex. 

The main challenges for foreigners registering companies in China are that they have to deal with multiple offices, and the required documents are complex to prepare. To simplify the process, you should consider working with an agency of experts. This post highlights the three main steps/phases of a China company formation. 

Important Facts about China 

Before looking at the process of registering a company in China, it is important to start by extrapolating key facts. The most notable of these is the country’s large population. According to the 2020 population estimates, China has slightly over 1.4 billion people. So, are you ready to transform this into your market? 

  • China’s GDP (nominal) in 2021 was estimated At USD 18 trillion. This makes it the second-largest economy.
  • GDP growth for 2019, 2020, and 2021 stood at 6.0%, 2.3% and 8.1%, respectively.
  • About 60% of the country’s GDP is contributed by state-owned enterprises, while private and foreign firms contribute the remaining 40%.
  • China has natural resources estimated at USD 23 trillion, with the bulk of them being rare earth metals and other minerals.
  • Foreign Direct Investment (FDI) contributes about ¼ of the country’s GDP. In 2020, FDI stock reached USD 2.947 trillion.
  • The services and industry sectors are the biggest contributors to the GDP of China, making 51.6% and 40.5%, respectively.
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These are only a few facts that you need to appreciate the huge potential that China has for businesses. So, how exactly do you register a company in China?

Register a Company in Only Three Steps 

It is true that company formation in China is complex, but the challenges should not blur your resolve to grow into this huge market. The best way to go about it is working with an agency of experts, which will break down the process in just three steps.” 

Step One: Pre-Registration

Before starting off the process of company registration, you need to get a number of things. These include a lease agreement, carrying due diligence, and selecting a legal representative. Also, it is important to decide the preferred business structure. A wholly foreign-owned enterprise (WFOE) is the most preferred business vehicle because it allows 100% foreign shareholding. You might also want to consider a joint venture (JV) or representative office (RO). 

Step Two:  Incorporation Stage 

Depending on the selected business structure, this stage involves preparing all the required documents, such as articles of association, feasibility study, and company name, and then submitting them to the State Administration for Industry and Commerce (SAIC). With the assistance of experts in company registration, it is easy to employ the Five-in-One system in China that combines several licenses into one to simplify the process. 

Step Three: Post-Incorporation Phase 

This is another crucial stage because it sets the stage for the actual entry of a business into the Chinese market. The main activities of this stage include tax and VAT registrations. Others include social welfare insurance and recruitment registrations. Remember that the agency you select can also help with crafting strategies for entry and laying the foundation for success. 

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China is a country overflowing with potential, but the process of company registration can be complex and discouraging. This post has demonstrated that instead of trying to register a company alone and losing the opportunity for growth in Asia-Pacific, the best idea would be working with a firm of experts. Top agencies, such as Primasia, can assist you with company registration and also other executive functions, such as accounting and payroll management. 

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