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China Offshore Company Incorporation

China has a population of approximately 1.45 billion. The official language is mandarin Chinese.

Economy:

China adopts a socialist market economy regime.

Dominant Industries:

China has various industries, including agriculture, banking, construction, e-commerce, infrastructure, banking, finance, insurance, real estate and technology.

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Business Regulation

Government Authorisations

To operate a business within China, foreign investors must incorporate a foreign-invested enterprise (FIE) in China and obtain a business licence for it, issued by the local government. The incorporation of an FIE must be reported to (or approved by) and filed/registered with the Chinese authorities, including the:
  • State Administration for Market Regulation (SAMR).
  • Ministry of Commerce (MOC).
  • Other local authorities (for example, tax authorities and foreign exchange authorities).
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Business Culture

Chinese business culture is largely influenced by oriental thinking, based on the values of authority, reputation, solidarity, loyalty, modesty and courtesy. Chinese people appreciate the characteristics of hard-work, pragmatism, self-discipline, and typically will consider win-win situations when dealing with counterparties.
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Foreign Investors

Foreign investment in China is regulated by the Special Administrative Measures (Negative List) for Access of Foreign Investment promulgated in 2020 (2020 Negative List).
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Doing Business in China

With a land mass that is roughly the size of the United States, China’s population is equivalent to the combined populations of North America, South America, Western Europe, Norway, Sweden, Australia and New Zealand. China is also a highly diverse country with substantial regional differences resulting in multiple markets within the country rather than a single monolithic one.

Due to China’s cultural differences and massive economic opportunities, the country is often perceived as a “Wonderland”. However, due to the complicated regulatory environment and hyper-competitive business environment, China is more akin to a minefield, with one misstep resulting in the possibility of failure. Therefore, it is paramount that potential entrants partner with reputable companies that can be trusted.

Legal System

China has a civil law system, consisting of statutes, administrative rules and regulations. In addition, the Supreme Court of China issues judicial interpretations which the lower courts must follow when adjudicating cases. The lower courts do not have to follow the rulings of higher courts, although they usually do in practice. China does not have a federal system like the United States.

Due to China’s cultural differences and massive economic opportunities, the country is often perceived as a “Wonderland”. However, due to the complicated regulatory environment and hyper-competitive business environment, China is more akin to a minefield, with one misstep resulting in the possibility of failure. Therefore, it is paramount that potential entrants partner with reputable companies that can be trusted.

Foreign Investment

Government Authorisations
To operate a business within China, foreign investors must incorporate a foreign-invested enterprise (FIE) in China and obtain a business licence for it, issued by the local government. The incorporation of an FIE must be reported to (or approved by) and filed/registered with the Chinese authorities, including the:
  • State Administration for Market Regulation (SAMR).
  • Ministry of Commerce (MOC).
  • Other local authorities (for example, tax authorities and foreign exchange authorities).

Restrictions on Foreign Shareholders

In most industries, foreign shareholders will be companies duly incorporated in their home country. For industries subject to special regulation by the Chinese government, such as banking, insurance and telecommunications, foreign shareholders may be limited to those engaging in similar businesses, owning a certain amount of capital and/or other qualifications.

Restrictions on Acquisition of Shares

Except for specific industries in which foreign investors are restricted or prohibited from investing, foreign investors are generally allowed to acquire an equity interest in existing domestic companies and to conduct businesses subject to registration/filing with the local governmental authorities (SAMR, MOC and other authorities). To acquire a domestic A-share listing company, a foreign investor must first obtain approval from the MOC.

Specific Industries

Foreign investment in China is regulated by the Special Administrative Measures (Negative List) for Access of Foreign Investment promulgated in 2020 (2020 Negative List).
Under the 2020 Negative List, foreign investors are restricted or prohibited from investing in the industries set out in the list. For example, a foreign investor’s stake in value-added telecommunication enterprises must not exceed 50% and they are prohibited from investing in news entities. Except for the industries set out in 2020 Negative List, foreign investors are allowed to invest in other industries, enjoying equal treatment with domestic investors.

Due to China’s cultural differences and massive economic opportunities, the country is often perceived as a “Wonderland”. However, due to the complicated regulatory environment and hyper-competitive business environment, China is more akin to a minefield, with one misstep resulting in the possibility of failure. Therefore, it is paramount that potential entrants partner with reputable companies that can be trusted.

Regulatory Authorities

Competition

Main activities. The regulatory authority in charge of competition affairs in China is the Anti-Monopoly Bureau of the State Administration for Market Regulation – SAMR.
W: www.samr.gov.cn/fldj/

Environment

Main activities. The Ministry of Ecology and Environment’s main activities include, among others:
  • Formulating and implementing environmental regulations, policies, plans and standards.
  • Monitoring environmental protection activities and performing law enforcement duties.
  • Supervising and administrating prevention of environmental pollution.
  • Organising nationwide environmental protection inspections.
W: www.mee.gov.cn

Financial Services

Main activities. Other than the Chinese authorities for general FIE investment approval and registry purposes, the China Banking and Insurance Regulatory Commission (CBIRC), the China Securities Regulatory Commission (CSRC) and the People’s Bank of China (PBOC) are the main regulatory authorities for licensing an FIE conducting financial services business in China, for example:
  • The CBIRC licenses banking and insurance-related services, including foreign-invested banks, non-bank financial institutions and insurance companies.
  • The CSRC licenses securities and futures services.
  • The PBOC licenses services in the inter-bank bond market and certain of the State Council delegated financial services, such as bond settlement agents and financial holding companies.
CBIRC: http://www.cbirc.gov.cn/en/view/pages/index/index.html
CSRC: http://www.csrc.gov.cn/pub/csrc_en/
PBOC: http://www.pbc.gov.cn/en/3688006/index.html

Other Considerations

Understanding Chinese culture, and recognising the differences between the West and the East, is the most important way to achieve a win-win situation in China.

As the number of foreign enterprises investing in China and doing business with Chinese partners has increased, so has the number of commercial disputes. It is therefore paramount that potential China entrants should partner with reputable companies with first-hand experience and understanding of China.

The team at Landmark China is on hand to support and advise foreign businesses that are considering entering the Chinese market. With offices in Shanghai and Beijing, we have successfully assisted more than 700 companies from over 50 countries with their China market entry and operational activities.

Main Business Vehicles

The main business vehicles in China include:
  • Limited liability company (LLC).
  • Partnership.
  • Company limited by shares.
  • Non-profit organisation.
Trusts are not independent legal entities in China.

 

Foreign Companies

The most common structure used by a foreign investor is a wholly foreign-owned enterprise (WFOE). A WFOE is a limited liability company, 100% owned by foreign company(ies) or individual(s). The foreign investor in a WFOE can control all aspects of the business process and daily operations. This makes it easy to protect its business processes, trade marks, and trade secrets. A WFOE’s after-tax profit can be repatriated back to the investor’s home country after making up losses for previous years (if any) and allocating legal reserve funds in accordance with its articles of association. An incorporated WFOE provides the highest level of confidence in legal title, and the highest level of flexibility and discretion for foreign investors.
A joint venture (JV) is the second most common form of business vehicle in China. A JV is a limited liability company formed between Chinese investor(s) and foreign investor(s). The ratio between foreign and Chinese capital is based on commercial decisions and regulatory restrictions on certain industries. Chinese and foreign investors share in the revenues, expenses and control of the enterprise. A JV requires a foreign company to join forces with a local Chinese business. The benefits of sharing internal business networks, contacts, and processes is apparent as it reduces the time it takes for the foreign investor to establish itself. The drawback is that it makes the company vulnerable to theft and abuse of its intellectual property if the relationship between the shareholders deteriorates or if adequate protection is not built into the initial company setup. A JV is typically used by foreign investors who:
  • Rely on their Chinese partner’s network channels or background for a proposed project.
  • Intend to invest in restricted industries where Chinese laws and regulations require the project company to be controlled by Chinese parties, for example:
    • nuclear power plant operation;
    • printing of publications;
    • pre-school education institutions, ordinary high school education institutions and institutions of higher learning.

Registration and Formation

Both WFOEs and JVs are FIEs. Therefore, the incorporation processes for a WFOE and JV are very similar. This is except for the fact that the application documents prepared for a WFOE and JV are different.
The incorporation of an FIE must be reported to (or approved by) and filed/registered with the Chinese authorities, including:
  • SAMR.
  • Other local authorities (for example, tax authorities and foreign exchange authorities).
  • MOC.
The foreign investor must apply on the SAMR online platform for the pre-approval of the proposed name of the FIE. When the pre-approval of the name is completed, for company registration, the foreign investor must submit the following SAMR application document copies:
  • Official application forms.
  • Articles of association.
  • Shareholders’ incorporation certificates (notarised and authenticated), authorised representative and other information.
  • Letter of appointment for directors.
  • Required MOC reporting document copies (information regarding the FIE, the foreign investors and their ultimate actual controllers).
The SAMR will share the following with the MOC:
  • The relevant application information and the ultimate actual controller of the shareholders.
  • FIE incorporation or change registration as submitted by the applicant to the SAMR.
This is to promote time efficiency, as the MOC filing can be processed together with the SAMR registration.
The SAMR will normally complete the review within five to ten working days after the application and reporting documents have been submitted online. After the SAMR completes the review, the foreign investor can make a reservation online to deliver all the required original documents to the relevant SAMR for registration.
Once the FIE is incorporated, it must conduct any further registration requirements as necessary under Chinese laws and regulations, such as tax and foreign exchange registration, and preparing the company chop (seal/stamp) of the FIE.

The team at Landmark China is on hand to support and advise foreign businesses that are considering entering the Chinese market. With offices in Shanghai and Beijing, we have successfully assisted more than 700 companies from over 50 countries with their China market entry and operational activities.

Our One-Stop and Hassle-Free Solutions

Corporate Secretarial Services

  • Establishment of business entity in China
  • Health check & maintenance of company statutory records & registers
  • Company research
  • Retainer secretarial advisory services
  • Reminder and renewal of certificates that are expiring
  • Statutory filing & inspection
  • Safekeeping & maintenance of company seals, stamps, certificates and licences
  • Liquidation & de-registration of business entity
  • Updates of corporate-related laws & regulations
  • Licensed translation services

 

Corporate Advisory Services

  • One-stop establishment services
  • Wholly foreign-owned enterprise (WFOE)
  • Equity joint venture (EJV)
  • Corperate joint venture (CJV)
  • Representative office (RO)
    • Investment environment, market analysis & preferential policy
    • Structuring of business ventures
    • Corporate governance & compliance
    • Corporate restructuring
    • Mergers & Acquisitions
    • Intellectual property rights advisory
    • Litigation support

    Accounting, Tax Advisory & Compliance

    • Accounting Outsourcing Service
    • Business processes outsourcing solutions
    • Revenue recognition
    • Billing, invoicing, collection management
    • Vendor payments and staff reimbursements
    • Bookkeeping and RPC reporting
    • Group reporting
    • Budget, treasury and cashflow management services

    Tax Compliance & Advisory

    • Corporate income tax filing, Value-added tax
    • Transfer pricing, Individual income tax
    • Tax consultation and planning
    • Mergers and acquisition, International Tax
    • Tax and customs dispute management

      Business Advisory and Strategic Planning

      • Profit improvement
      • Working capital consulting
      • Business planning
      • Profitability enhancement
      • Financial statement analysis
      • Business and strategy planning
      • Succession planning
      • Divestment and exit strategy

      Corporate Governance and Risk Management

      • Development of policies and procedures
      • Enterprise risk management
      • Governance and risk assessment reviews
      • Internal control review and compliance

      Financial Management

      • Review and evaluation of accounts
      • Budget preparation & variance analysis
      • Cost analysis
      • Management reporting
      • Review of key performance indicators
      • Cash flow management
      • Loss control
      • Tax structuring  
      • Working capital management
      • Loans management
      • Profitability enhancement

      Market Entry into China

      Landmark-China works with clients who are focused on establishing a long-term sustainable presence within the market. We provide our clients with the depth and breadth of knowledge required to ensure that they can avoid the pitfalls of setting up in China, expediting their time to market while avoiding costly mistakes.

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      Landmark, through their partners, can help clients manage and protect their wealth through our established trust administration services in Hong Kong. Providing a full suite of Family Office services we can also assist with business immigration applications and relocation globally.

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      With Hong Kong’s ideal geographical location and accessibility to international markets and the Greater Bay Area, Landmark is set up to help any company establish themselves in Hong Kong and provide support services to manage those companies. We can assist any entrepreneurial start-up to establishing ESOPS, IPO Trusts and company secretary work for listed companies.

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      Hong Kong combines an established, low tax system with a pensions framework that attracts legitimate and transparent pension planning for both local and international clients. The basis of Hong Kong’s corporate pensions’ infrastructure is provided by the Occupational Retirement Schemes Ordinance (ORSO), which established a registration system for occupational retirement schemes that were established voluntarily by employers to provide retirement benefits for their employees.

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