Investors may establish enterprises or offices in China. Foreign investment should be in line with China's industrial developing policies and concrete requirements in China. The project proposal will be submitted for examination and approval before the enterprise is to be formed. Each different form has different characteristics, especially the ownership, import & export of products, and the rights of domestic sales, etc.

- Foreign Joint Venture / Cooperative Venture
- Foreign Wholly-Owned Enterprise
- Processing factories in form of Compensation Trade, Processing and Assembly on Order and Leasing.
- Foreign investors may setup Representative Office (RO) in the main cities in China (mostly in ShenZhen, GuangZhou, Shanghai and Beijing) for business connection, products introduction, marketing, technology exchange and consulting services. However, direct business activities in RO are not allowed.

Teamed up by accounting and marketing professionals, we specialise in the areas of financing, taxation and business planning... We can be of assistance to clients to set up their business in China.

Our aim is to always provide a comprehensive service to our clients and we tailor our services to their individual requirements. If you find above helpful, please get in touch.

 

Wholly Foreign-Owned Enterprise (WFOE)  Download Details (PDF English version )
A wholly foreign-owned enterprise is a business entity formed in China entirely with foreign capital. It is totally under foreign control and does not have any formal Chinese ownership participation. For a foreign company to be able to issue receipts and export goods from China, it must be able to legally registered as a local company or a WFOE. A WFOE is set up as limited liability entity and represents separate legal persons and is taxed according to local legislation.

WFOE’s can generally control their own governance through the articles of association and the normal minimum paid up share capital starts from 1 million RMB (approximately US$140,000), however some provinces offer lower capital requirements in order to attract more foreign investment. Many foreign investors find this type of company attractive because of the full control and 100 percent ownership.

WFOE PROCEDURE

Documents Required:

- Bank Statement of the Credit
- Project Proposal (purpose, business scope, period, investment amount, among others)
- Certificate of Registration and Testimony
- Statement on the Products and Technologies
- Duplicate of Confirmation Letter of the 3 Applied Company Names
- Report on Feasibility Study
- Memorandum & Articles of Association
- A Name list of the Board and Senior Executives
- List of Equipment to be Provided (if any)
- Passport or Residential Card of the Legal Person
- Lease Agreement or Purchasing Contract of Company Premises
- Lease of the office or factory
- Authorization Documents for the Board and Senior Executives
- Other Documents (relevant authorities may require additional documents as per specific cases)

Setup requirements:

Authorized capital:

Besides, to prevent the certificate of approval from becoming invalid automatically, the first installment shall be made with no less than 15％ of the total amount within 90 days from the day when the business license is issued.

Joint Venture (JV)
A Joint Venture is a business arrangement in which the participants create a new business entity or official contractual relationship and share investment and operation expenses, management responsibilities, and profits and losses.

The Chinese authorities encourage foreign investors to use this form of company in order to obtain exposure to advanced technology and new management skills. In return, foreign investors can enjoy low labour costs, low production costs and a potentially large Chinese market share. Joint Ventures are sometimes the only way to register in China if a certain business activity is still controlled by the government, for example restaurants, bars, building and construction, car production, cosmetics etc.

PROCEDURES OF THE PEOPLE’S REPUBLIC OF CHINA FOR THE REGISTRATION AND ADMINISTRATION OF CHINESE-FOREIGN JOINT VENTURES
(Promulgated by the State Council on and Effective as of July 26, 1980)


Article 1.
In accordance with the provisions of the Law of the People’s Republic of China on Chinese-Foreign Joint Ventures, these Procedures are formulated in order to carry out the registration and administration of Chinese-foreign joint ventures and to safeguard their lawful operations.

Article 2.
A Chinese-foreign joint venture that has been approved by the Foreign Investment Commission of the People’s Republic of China shall, within one month after approval, register with the General Administration for Industry and Commerce of the People’s Republic of China.

The General Administration for Industry and Commerce of the People’s Republic of China shall authorize the administrative bureaus for industry and commerce of the provinces, autonomous regions and municipalities directly under the central authority to handle registration procedures for Chinese-foreign joint ventures within the areas under their jurisdiction, and business license shall be issued after examination and approval by the General Administration for Industry and Commerce of the People’s Republic of China.

Article 3.
A Chinese-foreign joint venture that applies for registration shall present the following documents:


(1) The document of approval issued by the Foreign Investment Commission of the People’s Republic of China;
(2) Three copies each of the Chinese and foreign language texts of the joint venture agreement and contract signed by the parties to the joint venture and its articles of association; and

(3) A copy of the business license or other documents issued by the competent department of the government of the country (or region) from which the foreign joint venturer(s) come.

Article 4.
When a Chinese-foreign joint venture applies for registration, it shall fill out three copies each of a registration form in Chinese and a foreign language. The main items of registration shall be: the name of the venture, the address, the scope of production and operation, the form of production and operation, the registered capital and the proportion to be provided by each party to the joint venture, the chairman and vice- chairman of the board of directors, the president and vice-presidents or the factory manager and deputy factory managers, the number and date of the document of approval, the total number of staff and workers and the number of staff and workers of foreign nationality.

Article 5.
From the date it is issued its business license, a Chinese-foreign joint venture shall be regarded as formally established, and its legitimate production and operation activities shall be protected by the laws of the People’s Republic of China.

Unregistered enterprises shall not be permitted to go into operation.

Article 6.
A Chinese-foreign joint venture shall, upon presenting its business license, open an account with the Bank of China or a bank approved by the Bank of China and register with the local tax authorities for the payment of taxes.

Article 7.
When a Chinese-foreign joint venture desires to move to a new site, change its line of production, increase, decrease of assign the registered capital or extend the contract period, it shall, within one month after approval by the Foreign Investment Commission of the People’s Republic of China go through procedures for registering the changes with the administrative bureau for industry and commerce of the province, autonomous region or municipality directly under the central authority where it is located.

When there are changes in other registered items, they shall be reported in writing at the end of the year to the administrative bureau for industry and commerce of the province, autonomous region or municipality directly under the central authority where the joint venture is located.

Article 8.
When a Chinese-foreign joint venture registers or modifies its registration, it shall pay a registration fee or a fee for modification of registration, the amount of which shall be stipulated by the General Administration for Industry and Commerce of the People’s Republic of China.

Article 9.
A Chinese-foreign joint venture, upon the expiration of the contract period or upon termination of the contract before the date of expiration, shall go through procedures for nullifying its registration by presenting the document of approval, issued by the Foreign Investment Commission of the People’s Republic of China, to the administrative bureau for industry and commerce of the province, autonomous region or municipalities directly under the central authority where it is located and, after examination and approval by the General Administration for Industry and Commerce of the People’s Republic of China, hand in its business license for cancellation.

Article 10.
The General Administration for Industry and Commerce of the People’s Republic of China and the administrative bureaus for industry and commerce of the provinces, autonomous regions and municipalities directly under the central authority have the right to supervise and inspect the Chinese-foreign joint ventures within the area under their jurisdiction. Violators of these Procedures shall be given a warning or a fine in accordance with the seriousness of each case.

Article 11.
These Procedures shall go into effect on the day they are promulgated.

(The English translations are for reference only)




Representative Office (Rep. Office)
The simplest and most cost effective method of establishing a useful business presence in China is the Rep Office. The choice for an initial Rep office will normally be determined by basic market and product research in China. The high profile cities of Shanghai, Beijing, Guangzhou, and Shenzhen are the most likely choices for the Rep office. It should be noted that more than one Rep office can be established in China by a foreign entity.

A Rep. Office is an entity involved in business activities, which do not result in direct profits being made by the office. They are not allowed to operate as partnerships or sole proprietorships in China as they are not recognised as legal persons. However, they are allowed and encouraged to conduct ‘indirect operational activities’ such as liaison for business purposes, introduction of products, market research and technology exchange. These activities should be preparatory and supplementary activities, market research on the local market, providing business information and supplying sales for the headquarters.

Documents required

Applicant companyˇs

- Certificate of Incorporation
- Membersˇ Register
- Directorsˇ Register
- Last filed return to Company Registry
- Last filed return to Tax Department
- Company / business profile and reason of setting up RO
- Minutes of Board Meeting to setup RO
- Minutes of Board Meeting to authorize Chief Representative
- Bank reference letter


Chief Representativeˇs

- Passport copy
- Photos
- Resume
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6. Introduction to procedure of establishing a FIE in China

6.1 Step 1 1. Name Reservation
A foreign investor should first seek approval for the FIE’s intended Chinese corporate name from the State Administration for Industry and Commerce (“SAIC”) or a duly authorized lower-level Administration for Industry and Commerce (“AIC”). Under current PRC law, the corporate name of a FIE has four mandatory components: (1) the  locality, (2) the trade name, (3) the industry and (4) the form of the company, such as, “Co., Ltd.” at the end of the
name. The AIC approves the proposed FIE name with the exception of FIEs with the following names that require SAIC approval:-
i) Names prefixed with such words as “Zhongguo <<中国>>” or “Zhonghua <<中华>>” (both
mean “China”) or “Guojia <<国家>>” (State) or “Guoji <<国际>>” (International); and
ii) those names without a locality component.

Registration of a proposed FIE’s trade name offers the foreign investor a degree of legal protection to exclusively use the name.2
Upon approval from the AIC, the FIE will be issued with an <<企业名称核准通知书>>, which reserves theFIE’s name for six months, during which time the foreign investor must apply for its Business licence so that the name does not become void.

6.2. Project Verification and Approval

Save and except certain local variations, the foreign investor shall then seek project verification and approval from the National Development and Reform Commission
(“NDRC”)3 or from the local-level Development and Reform Commission (“DRC”).4
NDRC verification and approval is required for FIEs that fall within the “encouraged” and “permitted” categories with a total investment of more than US$100 million, or for FIEs that fall within the “restricted” categories with a total investment of more than US$50 million.5 Initial applications should be made to the provincial-level DRC, which will conduct a preliminary examination and then forward to the national-level NDRC for approval.

Provincial-level DRC verification and approval is required for FIEs that fall within the “encouraged” or “permitted” categories with a total investment of between US$30 million and US$100 million, or for FIEs that fall within the “restricted” categories with a total investment of below US$50 million.
Local-level DRC verification and approval is required for all other FIEs whose amount of total investment does not exceed the above thresholds.
NDRC/DRC approval is in the form of a Project Approval Letter <<项目核准函>>. In order to obtain a Project Approval Letter the FIE should take the following steps, the exact sequence of which may vary depending on the location. Additional steps may be required for certain
industries:

6.2.1 Submit a Project Application <<项目申请 报告>> to the NDRC for verification and
approval If necessary, the NDRC will distribute a copy of the Project Application to the department-in-charge of the relevant industry for their opinion.

6.2.2 Obtain a Land Use Opinion <<用地预审意见>>
The Ministry of Land and Resources (“MLR”) or its local counterpart is responsible for ensuring that the proposed site complies with general policies and regulations on land-use in China.

To obtain a Land Use Opinion, the foreign investor must submit the following documents to the MLR or its local counterpart: (1) an application form, (2) a report containing information such as details of the project and site; and the amount and type of land used.

6.2.3 Seek Environmental Impact Assessment (“EIA”) Examination and Approval <<环境
影响评价审批>>

Examination and Approval of the EIA will be conducted by the State Environmental Protection Bureau (“SEPB”) or its local counterpart, which will be responsible for the FIE’s compliance with the relevant laws and regulations concerning environmental protection.
The foreign investor must submit an EIA “document” to the SEPB or its local counterpart. Such EIA document must be prepared and issued by an EIA agency certified by SEPB. The form of such EIA “document” will depend on the level of the potential environmental impact as follows

6.2.3.1 where the potential environmental impact is considerable the foreign investor must prepare a full report, which the SEPB may approve within 60 days;

6.2.3.2 where the potential environmental impact is “light” the foreign investor must prepare an “EIA report “, which the SEPB may approve within 30 days; and

6.2.3.3 where the potential EIA impact is “very light” the foreign investor must file an EIA form, which the SEPB may approve within 15 days.

The SEPB shall notify the foreign investor of its approval in writing

6.2.4 Obtain a <<建设项目选址意见书>><<规划意见书>>
To apply, the foreign investor must submit a Project Application together with the EIA examination and approval letter issued by the SEPB to the Administration of Planning <<规划行政主管 部门>>.

6.3. Document Approval
The Ministry of Foreign Trade and Economic Cooperation (“MOFTEC”) became the Ministry of Commerce (“MOFCOM”) in 2003. MOFCOM is in charge of foreign and domestic trade, and also incorporates administrative functions. MOFCOM has delegated the approval of the
Articles of Association and Joint Venture Contracts to Bureaus of Commerce (“BOFCOM”) at various levels. MOFCOM approval is evidenced in the form of an Approval letter <<批复>> and a Certificate of Approval <<外商投资企业批准证书>>.

6.3.1 The Joint Venture Contract (if applicable) - the Joint Venture Contract is signed by all parties to the Joint Venture and is the basic agreement between the parties for the future operation of the Joint Venture. Under current PRC law, Joint Venture Contracts must
include (1) the proposed scope of business, (2) the registered capital and (3) the profit distribution and the constitution of the board of directors, etc.

The Joint Venture Contract will reflect the results of often lengthy negotiations between all the Joint Venture parties on issues such as percentage of ownership, board representation, corporate governance, degree of control and the parties respective
rights and obligations. The foreign investor should take added care when negotiating the constitution of the board of directors since it will be the highest organ of authority of a Joint Venture.


6.3.2 The Articles of Association- the Articles of Association’s main role is to set out the procedures for board meetings and the powers and functions ofthe officers of the FIE.


In order for a FIE to legally exist in China, it must be registered with the SAIC at the national level or a duly authorized local AIC within 30 days after obtaining the Certificate of Approval


6.4. Establishment Registration
In order for a FIE to legally exist in China, it must be registered with the SAIC at the national level or a duly authorized local AIC within 30 days after obtaining the Certificate of Approval. To register, the FIE must further submit the prescribed application documents and many of
the approval documents mentioned above together with the FIE’s Approval Letter and Certificate of Approval.
Within two weeks after the filing of these documents, the AIC may issue the foreign investor with a Business Licence <<企业法人营业执照>>. The date on which the Business Licence is issued is the date the legal person is established and (subject to obtaining any industry-specific permits or qualification certificates) can legally “commence business” such as entering into contracts with third parties.




6.4.1 Recent Change to Registration Procedure
On 24 April 2006, the SAIC promulgated the <<关于外商投资的公司审批登记管理法律适
用若干问题的执行意见>> (“Registration Opinion”). Pursuant to the Registration Opinion, all
approval documents and the foreign investor’s identity documentation must now be notarised by a notarial agent in the foreign investor’s own country and authenticated by the Chinese embassy or consulate stationed in such country prior to submission to the SAIC for registration. Furthermore,the Registration Opinion now requires the foreign
investor and a donee to co-sign a power of attorneycalled the <<法律文件送达授权委托书>> which authorises the donee to accept service of legal documents in China.
6.4.2 Further Industry-Specific Approvals
It is important to note that it may also be necessary for FIEs to secure further approvals for specific industries from the relevant Chinese government authority that is responsible for such industry. For example, an application for approval to establish a foreign-invested insurance company would require approval from the China Insurance Regulatory
Commission.

6.5. Post-Registration Formalities

According to current PRC law, all FIEs must complete various post-registration formalities, which include (1) submitting an application to the Public Security Bureau for a corporate chop, (2) registering with the State Administration of Foreign Exchange, (3) registering with
the State and local Tax Bureau, (4) registering with the Customs Bureau, and (5) registering with various other government authorities.

6.6. Confirmation of “encouraged” status
A qualifying FIE will receive the confirmation letter that the FIE is in the “encouraged status” after the establishment of the FIE. “Encouraged status” for the FIE should have been confirmed prior to obtaining the Business Licence, although the official confirmation letter will only be issued after the formation of the FIE. Under two separate notices recently issued by the NDRC and MOFCOM, for FIEs  whose total investment is US$30 million or above, the power to confirm “encouraged status” projects shall vest in the NDRC (application shall first be made to the local-level DRC which may forward the application to the NDRC) and the MOFCOM. For FIEs whose total investment is below US$30 million, the local-level DRC or BOFCOM (as the case may be) has the power to confirm their “encouraged” status.
“Encouraged status” may entitle FIEs to benefits such as importing equipment on a tax-exempt basis, or a VAT refund on PRC-sourced equipment (other than nonqualifying
equipment).

6.7. Business Scope
Once established, the FIE will be a Chinese legal person. Every Chinese legal person may only engage in those business activities specified in its permitted “scope of business” and will be stated on the Business Licence of the Chinese legal person. Any FIE that engages in activities beyond its scope of business may be liable to a fine and in serious cases the cancellation of its Business Licence.


The scope of business in a PRC legal person is usually expressed in a short statement prepared in accordance with the <<国民经济行业分类>> set by the National Bureau of Statistics in China. In practice, both the Chinese approval authorityand foreign investor will amend the FIE’s business scope to allow the FIE to conduct to the fullest extent its planned
business activities, and if possible obtain any benefits under the Chinese law.It should be noted that as of the first day of January 2008,the will become effective. Under such law, enterprise income tax will be 25% regardless of whether the China legal person is a domestic company or a FIE and many of the preferential tax treatments currently enjoyed by FIEs will be abolished, including the “two plus three” tax holiday applicable to FIE manufacturers (under the present tax regime, manufacturing FIEs are entitled to an enterprise income tax exemption for a period of two years after they commence to make profits and a further enterprise income tax reduction of 50% for a period of three years
thereafter).


6. 8. Annual Inspection
Under PRC law,12 all FIEs established in the PRC must attend to, and pass an annual inspection every year. The FIE must submit to its original registration authority (1) an
annual examination report, (2) an annual balance sheet and (3) a profit and loss statement and (4) a duplicate copy of its Business Licence.
The purpose of the annual inspection is to allow the AICto inspect the above documents and ascertain whether the FIE has complied with the relevant PRC laws and regulations during the period under review.
A FIE may fail its annual inspection if (i) it “seriously” (not defined) violates the law, (ii) it does not during the period under review have an operating address, (iii) its investor fails to contribute its registered capital or (iv) it fails to conduct business for a continuous period of one year (or within six months of issuance of its Business Licence). In the event that a FIE fails to pass its annual inspection, the AIC will notify the FIE and will allow the FIE a further time period (not defined) to rectify the cause of such failure. If at the end of such time period, the FIE still fails to rectify the cause of the failure, the AIC may impose additional (unspecified) penalties. In “serious cases” (again not defined) the AIC has the right to cancel the FIE’s Business Licence.

Mr Shen wei Email:sw@HLconsulting.cn

Tel:0086-10-58613952

Fax::0086-10-58613956

MSN:Cnswei@hotmail.com

Shen wei is the president of HL consulting,he graduate from Tsinghua education with master degree  and bachelor degree in Engineering(civil engineering major), he also get bachelor degree in Economics. he is a certified public account in China also a certified consultant of NDRC in China. Shenwei has over 10 years experience in help international enterprises start business in China and has good relation with all level of government in China
Work language:English and Chinese