If you need to open a subsidiary or a trade office in China, the process can be very long and complicated. It is becoming easier as China opens up, but there are still many hurdles to overcome.
It’s important to approach the process very deliberately and carefully. These are a few things that can get you started. To complete the deal, however, it is important that you have proper consultation to navigate the process to a successful conclusion.
As we reported earlier, China is opening up many markets and making it easier for businesses to register. Their new “One Window, One Form” system is going into effect soon, and it will streamline the process.
There are still many hurdles which have to be overcome, however. There are many kinds of businesses that are still not allowed as wholly foreign-owned entities (WFOE).
How does it fit into the plans?
China operates under a five-year plan, which outlines all of the businesses that are deemed critical for the continued development for the nation. The current five-year plan is a good place to start for an understanding of what kind of businesses they are encouraging and, in some cases, even allowing for the first time.
For example, financial services are still not allowed to be wholly foreign owned, but starting in 2018 they are allowed to be a majority foreign-owned. Each such entity is approved on a case-by-case basis. The same is true in many areas that involve import-export trade.
One thing that many US based businesses do not understand is that in China all businesses have to be approved before they can operate. This includes many details, right down to a signed lease for your office. It’s important to have a Chinese address before you even begin the registration process.
For that reason, it’s critical that you have connections in place in China. It’s very rare that entrepreneurs start out with a WFOE simply for practical reasons. Your Chinese business partners are going to be critical to the process of securing approval for your operation.
Managing the details
Once you have the connections and you are sure that your business fits in with the current state of approvals, it’s still vital that you consult with an attorney experienced with investment in China. The process is always complicated and you will need additional resources.
The entire process requires patience and dedication, but the rewards are many. Knowing just where you stand is a critical first step.