In China, only a company’s registered name in Chinese is legally binding. When applying for registration, the brand name, industrial selection, and registration area should be listed.

The typical format for a company name is Registered Area Name + Brand Name + Industry Type + Co., Ltd. Or Brand Name + (Registered Area Name) + Industry Type + Co., Ltd. It is important to note that in most cases, if any proposed name is similar to any existing company name, name preapproval is likely to fail.

Therefore, investors are required to prepare 5-10 Chinese names. Names in English or other languages may be used for marketing and production of company seals but are not legally binding and not relevant for registration.

Before starting a business in China you should decide the location where your company is going to be registered. China is a vast country with large gaps in economic levels between the east and the west, where each region has different economic policies, cultures and key industries.

For most foreign investors, it may be sensible to register the company in prosperous business central cities, such as Shanghai, Beijing and Shenzhen, or free trade zones (FTZ) around China.

Shanghai in particular has its own unique advantages in that the local government encourages foreign investment and business operation, implements competitive tax preferential policies in the Shanghai FTZ, releases industry restrictions for foreign enterprises, and gives them fewer administrative restrictions and higher trade freedom.

A Director has a wide range of powers including, but not limited to the development of the company’s operation agenda, the formulation of investment plan and strategy, and the formulation of company annual budgets.

The director is accountable to the company’s shareholders and holds the power to appoint or dismiss the general manager, deputy manager(s) and the financial personnel upon the recommendation of the internal management body or managers of the company.

According to the PRC Company Law, directors have the responsibility to abide by the laws, administrative regulations, and the articles of association of the company. Directors also have duty of loyalty and duty of diligence to the company.

In China, the legal representative must be the Board Chairman or Executive Director or the General Manager of the company. It is the main person in charge of a company and is the person who represents a company. Key responsibilities and duties of legal representatives in China include:

As a foreign investor, you can either appoint a foreigner from the head office or your China General Manager to be the legal representative of your WFOE.

During the set up process, the appointed legal representative is required to provide relevant support.

A Supervisor (or a board of supervisors) have duties to supervise the execution of the company to ensure full compliance with company rules and regulations.

Supervisors have the right to supervise the duties and conduct of directors and senior management in case any of their acts is prejudicial to the benefit of the company. If the employee has actions which violate the law, administrative regulations or the company’s articles of association, causing loss to the company, the supervisor can investigate the staff, or file a lawsuit.

To ensure no conflict of interest, the supervisor cannot concurrently hold any other legal roles within the company.

As a foreign investor, you can appoint someone from the head office to be the supervisor of your China business or you can engage a third party (a law firm or an accounting firm) to fulfil your supervisor’s responsibilities and duties. Please visit our Supervisor Service for more information.

According to the PRC Company Law, setting up registration capital is a mandatory provision for anyone who wants to establish a company in China. The amount of registered capital will be listed on the company’s business license and made available to the public.

The relationship between Registered Capital and Total Investment is:

Assuming that the total investment of a company is about $2 million, then the company should set up at least $1.4 million of the total investment as registered capital, and only $600,000 as debt financing at most.

You can find detailed key information about your company on the Chinese Business license, including:

The digital business license is an electronic document that has the same legal effect as a paper business license.

The digital business license can be used to:

Having company chops are mandatory if you want to start a business in China. According to the PRC Company Law, the company chops (seals/stamps) can be used as legal evidence and represent business activities. Your firm will be bound by the validity of a contract or other documents when these documents are affixed with company chops.

A company may need to hold different types of company chops according to different utilize purposes (these depend on your business scope). In most cases, companies can choose to hold the following five main types of seals:

• Official company chop (mandatory required)
  This company chop has the highest authority and is the most powerful chop that it can be used for all basic operation activities and covers almost all other chops’ functions except that of the fapiao or customs.

• Financial chop (mandatory required)
  You will use financial chops when you are dealing with banks on behalf of the company, such as the printing of bank credentials, money orders, and checks. The financial chops can also be used for the settlement of financial transactions.

• Legal representative’s chop
  The legal rep’s chop is generally kept by the company’s legal rep. This chop can be used for handling bank affairs and approving company decisions.

• Contract chop
  Sometimes, the company may use a separate contract chop to sign a contract with their employees, clients or partners. A firm in its early stage of business may just use its official company chop for any contract execution to avoid the risk of losing the chops or illegal seal usage.

• Fapiao (invoice) chop
  A company needs to affix the fapiao chop when purchasing and issuing the fapiao (invoice).

Other chops: The company may need some special types and forms of chops to meet the specific industry or regulatory requirements, such as:

• Electronic chop: These types of chops are the digital forms of firms’ given chops for online business transactions.

• Customs chop: This is a mandatory chop for enterprises that need to do customs declaration business, used for declarations of import and export goods.

Foreign Bank:

• Safety
  Foreign banks are more experienced and rigorous in the due diligence system.

• International settlement network
  Foreign banks have advantages over local banks in the international settlement network.

• A limited type of account to open
  Foreign banks, especially small and medium-sized foreign banks, are relatively limited in the types of accounts they can open in China. Some of these banks have no access to Cash business.

• Higher cost
  Opening an account in foreign banks need to pay higher bank charges. Most foreign banks also require for a minimum deposit in the bank account in order to waive your monthly bank service fees.

Some recommendations of Foreign Banks:

• Hongkong and Shanghai Banking Corporation (HSBC)
• Standard Chartered Bank
• Citibank
• JP Morgan

Chinese Local Bank:

• The convenience of opening an account
  Compared to Foreign banks, it is much easier to open a bank account with local bank.

• More types of accounts to open
  Local banks have comprehensive types of accounts and have access to Cash business.

• Domestic settlement network
  Local banks have absolute advantages in the Chinese domestic settlement network. The speed of capital transfer is generally faster than that of foreign banks.

• Lower cost
  Local banks generally charge much cheaper fees to open an account and will not require for minimum deposit in the bank account.

Some recommendations of Local Banks:

• Industrial and Commercial Bank of China (ICBC)
• Agricultural Bank of China (ABC）
• Bank of China (BOC)
• China Construction Bank (CCB)
• China Merchants Bank (CMB)

Estimated time for opening a bank account in Foreign Banks: 2-6 months

Estimated time for opening a bank account in a local Chinese Bank: 2-4 weeks

A fapiao is an official receipt that serves as proof of purchase for goods and services in China, it can be used to track the tax payment.

The special value-added tax (VAT) fapiao is one of the main types of Chinese fapiao used for businesses to claim input tax credits, which contains a company’s information including the company’s name, the tax code, address, contact number, bank account number, etc.

Special VAT fapiao
The special VAT fapiao allows general VAT payers to claim input tax credits against their VAT on sales.

VAT fapiao
The VAT fapiao cannot be used for claiming input tax credits. This type of fapiaos can be purchased and used by all kinds of VAT payers who are engaged in business activities. The general VAT fapiao have 3 forms:

• the VAT fapiao,
• the roll VAT fapiao, and
• the VAT e-fapiao.

In order to issue customers the VAT fapiao, companies need to have the following information from their customers and confirm with them the type of the VAT fapiao required (a special VAT fapiao or a normal VAT fapiao):

According to the China Social Insurance Law, social insurance contribution is mandatory. The Chinese social insurance contribution rates and caps are changing annually and varied from city to city. Foreign employees might be exempted for certain types of insurance if your home countries have entered into bilateral exemption agreements with China.

Types of social insurance: Pension, Medical Insurance, Unemployment Insurance, Work Injury Insurance, Maternity Insurance.

Please contact us for more information and obtain the latest social insurance contribution rates and caps for the city you are interested in.

Housing fund is a type of long term saving that can be accessed by Chinese residents to buy residential properties. The housing fund contribution is mandatory for local Chinese staff but is not mandatory for foreign staff. Company and employees can choose to contribute between 5% -12% to the housing fund. In principle, the employer’s contribution rate should equal to the employee’s contribution rate.

Some Foreign workers in China may get social insurance exemptions if they come from the following countries that have signed social insurance exemption agreements with China:

With the exposure to food safety problems, Chinese food operation license requirements are becoming more and more strict. Companies that want to enter the Chinese food industry need to pay more attention to this area.

Here are the requirements to obtain a Chinese Food Operation License:

Companies that have business interests in wine, spirits, beer, and other types of liquor in China are required to obtain the Liquor Retail Permit (酒类商品零售许可证) and Liquor Wholesale Permit (酒类商品批发许可证).

Application for New Liquor Wholesale Permit or Liquor Retail Permit requires the following materials: