Setting up a company in mainland China is a complex matter. Although the new Foreign Investment Law that entered into force in 2020, simplified the company setting up process, the complexity of the process still depends on:
- Type of business, e.g. manufacturing, trading or consulting
- Specific sector, i.e. whether it is encouraged, permitted or restricted for foreign investment – as stipulated by the Foreign Investment Negative Listand Positive List
- Location and support of the local government
The time needed for registration varies accordingly. It can be as short as two months for simple consulting FIEs, to up to six months or even more for FIEs operating in restricted areas or requiring special permits or approvals.
The smoothness of the application process also depends on how well your application documents are prepared. This requires in-depth knowledge of law requirements when drafting the application documents, but also a deep understanding of local practices which may vary from region to region. Although the entire process can be completed alone, it is strongly advised to seek advice from experienced advisors to avoid mistakes and unnecessary delays. Fees can be very modest especially in case of consulting firms, starting from as low as 10,000 RMB.
When engaging local advisors to help with the setting up process, one should always be very careful of what services are specifically covered: it has been reported that some advisors may limit their understanding of the company setting up process only to the obtainment of the business licence; in fact, there are still a number of other actions that must be completed after the release of the business licence and before starting operations – e.g. arranging tax registrations, opening accounts, carving company seals, etc. Clearly clarify at the outset whether such actions are included or not in the scope of the service.
