Since the late 1970s, with the initiation of economic reforms and opening, China has continuously increased its degree of openness to the outside world. The scale of foreign investment has gradually expanded, making foreign capital a crucial force in the development of the Chinese economy.
Foreign-Invested Enterprises (FIEs) refer to businesses established within the territory of China, either independently by a foreign investor or jointly with other investors.
After you have a business idea, you need to choose a business structure that suits your needs and objectives. There are different types of business structures that foreign investors can choose from, such as:
Wholly foreign-owned enterprise (WFOE): A type of business structure where Shareholders are individuals, companies, or for-profit economic organizations based overseas, contributing capital unilaterally to establish the entity， where you have 100% ownership and management control of your business.
Joint venture (JV): A type of business structure where Shareholders include individuals, companies, or for-profit economic organizations from overseas, jointly investing with individuals, companies, or for-profit economic organizations in China to establish the entity. You can leverage your Chinese partner’s existing facilities, workforce, sales/distribution channels, or market access.
Representative office (RO): A Representative Office, serving as the vanguard of a foreign company in China, typically exists primarily for liaison and market promotion purposes. A Representative Office itself does not possess independent legal person status and lacks the complete economic functions to engage in general commercial activities. It cannot directly sign contracts with suppliers or clients in its name, cannot apply for independent import and export rights, cannot apply for general taxpayer status, cannot independently hire employees, and cannot open a letter of credit account at the bank, among other limitations.
Foreign-invested partnership (FIP): It refers to a partnership enterprise formed inside China by two or more foreign enterprises or individuals, or by a foreign enterprise or individual and a Chinese natural person, legal person, or other organization. You can engage in various business activities, such as servicing, consulting, or investing. You also have unlimited liability for the debts and obligations of your business. The types of Foreign-Invested Partnership Enterprises include Foreign-Invested General Partnership Enterprises (including special general partnership enterprises) and Foreign-Invested Limited Partnership Enterprises.
Types of business entities foreign investors can establish in China
Foreign individuals, companies, or other organizations are all eligible to establish business entities in China. The main types of entities that can be established include:
Entity Type | Entity Characteristics | Business Restrictions | Responsibilities Foreign Investors need to bear | Recruitment Restrictions |
LLC 【Wholly foreign-owned enterprise (WFOE)】 【Joint venture (JV)】 or INCOPORATION |
| Except for businesses with shareholding restrictions on the negative list or as otherwise required by law, all types of businesses can adopt a corporate or partnership system. Since corporate enterprises are independent legal persons, most foreign-invested enterprises adopt the corporate system. | Foreign investors only bear limited liability to the extent of their subscribed registered capital or subscribed shares. | No specific restrictions, subject to negative list requirements (if applicable). |
Foreign-invested partnership (FIP) | Unincorporated organization (an organization that does not have legal personality but can engage in civil activities in its own name in accordance with the law) | The general partners bear unlimited joint and several liability for the debts of the partnership, and the limited partners (if any) bear limited liability for the debts of the partnership to the extent of their capital contributions subscribed to the partnership. | ||
Representative office (RO) |
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| The civil liability of the representative office shall be borne by the foreign enterprise. |
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Branches of foreign companies in China |
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| Foreign companies bear civil liabilities for the operations of their branches within the territory of China. | There is no clear limit in regulations. |
The process for establishing a Company
1.Pre-approval of Company Name
Foreign-invested enterprises must initially submit an application for the pre-approval of the company name to the city’s Municipal Administration for Industry and Commerce. The typical format for the name of a Chinese enterprise is generally: Administrative Division + Business Name/Trade Name + Industry + Legal Form of the Company.
Note: According to Article 9 of the “Naming Regulations,” the content and characters that are not allowed in the names of enterprises include: “Chinese Pinyin letters (excluding foreign names), numbers.”
2.Execution of Articles of Association
The articles of association serve as the foundational regulatory framework for foreign-invested enterprises. In the case of establishing Sino-foreign joint ventures, a legally binding joint venture agreement must be signed between foreign investors and Chinese partners.
3.Registration and Receipt of Business License
Upon preparing all necessary registration documents, the foreign-invested enterprise is required to submit them to the city’s Municipal Administration for Industry and Commerce for registration. Following successful registration, the enterprise obtains a business license.
4.Tax Registration and Bank Account Opening
Following the registration process, the foreign-invested enterprise needs to proceed to the tax bureau for tax registration and initiate the opening of a corporate bank account.
5.Registration with Public Security Bureau
Obtain Official Seal and Relevant Certificates. Register with the local Public Security Bureau for the issuance of the company’s official chops.
Documents required for setting up business
The process for establishing a company in China involves several key documentation requirements:
1.Business Entity Certificate or Natural Person’s Passport
Foreign investors must provide documents verifying their investor qualifications. For instance, if the investor is a foreign company, the certificate of formation or certificate of incorporation of the foreign company should be submitted. If the investor is an individual, a copy of the passport is necessary.
2.Articles of Association
Foreign-funded enterprises need to draft the articles of association, outlining details such as the company name, registered capital, shareholder information, business scope, organizational structure, etc. Industries within the negative list may require a feasibility study report during the examination and approval process by the commerce department.
3.Certificate of authorized signatory
In many countries and regions, the Investor’s Business Entity Certificate may not explicitly display information about authorized representatives or individuals empowered to sign on behalf of the company. In practice, there are typically two solutions.
The first approach involves providing additional documentation that specifies the individuals authorized to sign on behalf of the company. This information is often found in documents such as the articles of association. Therefore, presenting the articles of association can serve as proof of the authorized signatory for foreign investors. The second method is to submit resolutions or appointment documents signed by all directors, designating a specific individual as the authorized signatory.
4.Appointment Letters for Board Members and Legal Representative
The appointment letters for members of the board and the legal representative of the foreign-invested enterprise are mandatory.
5.Identification of Legal Representative and Board Members
The legal representative or board members of the foreign-funded enterprise must provide identification documents, such as copies of ID cards or passports.
6.Proof of Company Registered Address
Foreign-funded enterprises need to furnish proof of the office address, which could be a lease contract or property certificate, to establish legal registration in China.
7.Authorization Letter
Foreign-funded enterprises are required to appoint a representative within China and provide documents like an authorization letter and power of attorney.