China is a unique country, with a complex legal system that differs completely from the West. If you’re looking to do business in China, you’ll need to familiarize yourself with this unique legal landscape.
Challenges of Starting Business in China:
- Investment Restrictions and Incentives: China has strict restrictions on foreign ownership of companies in China. This is especially true in finance, automotive, and telecommunications industries. These restrictions can include ownership percentage limits, or may require a joint venture with Chinese partners.
- National Security Review: If you want to invest in certain industries in China, you must undergo a national security review process. Industries that may require national security review include artificial intelligence, semiconductors, automotive, military sectors, and energy.
Choosing Business Structure:
- Wholly Foreign-Owned Enterprise (WFOE): Business controlled and owned entirely by foreign investors
- Joint Venture (JV): Partnership between foreign and local investors
- Representative Office: Branch of a foreign company allowed to operate in China, with restrictions
Reporting Responsibilities:
- Annual financial reports
- Tax reporting
- Employment reporting
- Compliance certificates
- Intellectual property reporting
- Sustainability reporting
- Anti-bribery compliance reporting
Labor Laws:
As in any country, you’ll need to comply with local labor laws regarding minimum wages, working hours, taxes, and more. Labor laws in China can differ significantly from Western countries, and are not always more lenient.