What are the different kinds of Chinese companies?
As you probably know, China is an amazing market and quite incredible! If you decide to target this market you will face great opportunities but also some threats. But before starting anything you should analyze your market and see what you should do.
One of the first things to do is to decide what kind of company you want to build (if you decide to set up a company in China), This choice can come from different reasons but let’s see the different possibilities you have.
Why do you start a business in China?
There are different reasons to start a business in China. The main ones are:
- You want to be close to your clients
- With your sector/business you need to be in the country you are targeting
- Legal issues
- This market offers you some great advantages
Even for these reasons it is not easy to do business in China. Indeed, even the World Bank ranked China at the 68th position in the world for ease of doing business. It is not very good but China is improving every year.
What are the different solutions to start a company in China?
- Representative office: it is one of the easiest to open but you will be very limited in what your company can do. You cannot manufacture products, import or export products and receive payment from Chinese clients. This option will be logical for companies that do not carry out direct business.
- Joint venture: less restrictions than a representative office but you can only do restricted business like software as a service form. Moreover, you will need a Chinese partner that will control/manage the company with you. That can bring more risks because you are losing some control of your company.
- WFOE: can be owned to 100% by foreigners and will be totally Chinese. The process is getting a bit more difficult / long but at the same time getting easier as well. There are different kinds of WFOE:
Consulting WFOE: that offers only services
Manufacturing WFOE: you can manufacture and trade products
Trading WFOE: trading products in specific business scope
How do you set up a company in China?
If you want to set up a company in China for doing business, you will have to hire a consultant or a company to help you. The process can be quite difficult and long. Moreover, the language can be a problem as well. What are the tips to open a company:
- Choose the business scope and structure that will fit your business
- Have all your documents in order
- Apply for the approval
- Register and open a bank account
What is your next step?
After seeing the main solutions to set up a company in China, the best advice is to hire a consultant to help to you to decide what kind of structure you will need for your business because it is never easy to do it on your own. Moreover, it is not easy to say which solution is the best one. It will depend on your needs and the type of business you want to undertake. If you have any question about this do not hesitate to contact us.