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How do I select a location for setting up my company in China?

Mainland China consists of 23 provinces, four municipalities and five autonomous regions, and within these there are 22 pilot Free Trade Zones, more than 200 national industrial/economic development zones, more than 170 high-tech zones, and numerous local industrial parks. European investors generally only think about first-tier cities such as Beijing, Shanghai and Shenzhen when trying to enter China; in practice, lower-tier cities might also be very attractive locations for European SMEs.

There are various factors to consider when selecting a location for your foreign-invested company in mainland China, including (but not limited to):

  • Target consumer group/suppliers/partners: where are your clients/partners concentrated?
  • Infrastructure: different locations are connected in different ways (both domestically and internationally), each presenting different logistics challenges, time and costs
  • Human resources required: highly skilled talents (e.g. top scientists and engineers) are more available in first-tier cities and areas with polytechnic universities; however, larger cities have higher salary requirements
  • Incentives provided by the local administration: including tax incentives, financial subsidies, access to services, reduced red tape, support when applying to grants or loans, etc.

Currently, most FIEs are concentrated along the eastern coast and in large cities. This has led to a significant imbalance in terms of socio-economic development vis-à-vis central and western regions, as well as old industrial bases such as Northeast China, or specific regions within provinces (e.g. north Guangdong; northwest Anhui, etc.). For this reason, foreign investment in those regions is highly encouraged by both the central and local administration through various preferential policies and incentive schemes (e.g. the national Catalogue of Priority Industries for Foreign Investment in Central and Western China).