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What is the Cost of Starting a Business in China?

What is the Cost of Starting a Business in China?

Over the years, China has developed into a fascinating market for foreign investors. The abundant infrastructure, low manufacturing costs, and large consumer base of the Asian nation have long demonstrated the market’s vibrant environment, particularly to international corporations.

However, many companies are confused of how to set up shop in China and manage the costs and associated bureaucracy that come with it.

There are several different forms of business structures exist in China that may be suitable depending on the particular requirements of the growing enterprise.

Wholly Foreign-Owned Enterprise

A wholly foreign-owned enterprise, or WFOE, or WOFE, is a limited liability company.

This kind of company is permitted to carry out profitable activities and employ both domestic and international workers. The categories of this corporate structure are further broken down into consulting, trade, and manufacturing.

An investor, director, supervisor, and legal representative are just a few of the people who must be involved in this kind of firm. The business scope must also be determined, and this form of organisation must have a registered firm location.

In general, there are three types of foreign businesses in China:

  • manufacturing
  • trading
  • consulting

You must decide what kind of business activity will serve as your main revenue source. Chinese legal authorities permit limited deviation from this principal scope of business, but if a company changes its concentration, it must reapply for its WFOE.

The totally foreign-owned corporation is a popular choice for businesses who wish to make a big impact in China. Fully foreign-owned businesses provide a number of advantages over other business models.

Some of the most important advantages for investors include:

  • Greater control over intellectual property
  • They can retain all of their profits
  • They can legally transfer profits outside the country in US dollars
  • They are not required to have a business relationship with an existing Chinese partner like some other business structures in China
  • They can also provide customers with fapiao

WFOEs in China must make tax and social insurance contributions, much like the majority of Chinese firms.

The WFOE has been replaced as of January 1, 2021, by the more inclusive category of a Foreign-Invested Enterprise (FIE) for new businesses in China. This applies to Chinese businesses that are entirely or partially controlled by foreigners.

Joint Venture

A joint venture is an enterprise that is run jointly by a domestic and foreign company. This enables you to establish a beneficial partnership with an established company in China.

The benefits of this choice include:

Local connections: gaining access to the company’s local contacts and knowledge
Reducing risk: The Chinese corporation is jointly managed by local and foreign businesses, with earnings and losses split equally.

Sales Office

In order to conduct business, a sales office in China leases a local space. This choice gives you more freedom and doesn’t call for the registration of a different legal organization. All expenses and bills are handled by the headquarters firm. The legal and financial aspects of the company are handled by the employer of record.

This choice is ideal for businesses that wish to grow in China with the least amount of financial, tax, or human resource burden. A sales office makes the process of starting a business in China faster than alternative methods. The risk of using a local workforce is assumed by the employer of record.

Representative Office

A representative office enables a foreign corporation to employ personnel in China via a separate legal entity to represent the business. Businesses who want to undertake market research, marketing activities, business meetings, or brand or product promotion use this option.

However, this choice prohibits companies from doing direct business operations in China. The parent business is required to carry out those operations abroad. Furthermore, the representative office is prohibited from earning money locally on behalf of its overseas parent firm.

Local employees can be hired by businesses through their own subsidiary. This business model works well with PEO services, which utilize a neighborhood company to staff employees and manage administrative and payroll concerns.

Options for Determining Initial Capital Investment in China

The type of assistance the business decides to use with the registration procedure will also affect the amount of money required to start a business in China. For calculating the size of their initial capital investment, foreign enterprises typically choose one of the following methods:

Sole Trading China Business Services Provider

Former employees of small to mid-sized Chinese commercial service providers occasionally choose to launch their own businesses. They might provide prices that are 10,000 RMB less than what the standard market price is for these services.

But using one of these services carries a significant risk. The former employee might not have the same industry knowledge as the business owner and could not know how to run their own company.

They might make mistakes throughout the incorporation procedure, which could end up costing the company money and important time. The relationship between local government officials and business can suffer as a result of these errors. They might not be able to adequately manage their time and provide each client their undivided attention.


Due to their limited financial resources, many companies may attempt to save money by doing the majority of the labor themselves. There is no restriction in Chinese law against a firm managing its own registration.

This approach is more cost-effective and might only cost you 10,000 RMB. The risk is really high, though.

The different rules and legislation pertaining to conducting business in China may be unfamiliar to foreign business owners. They might unintentionally break the law, which could result in significant liability for them. They could be unable to communicate with local government representatives because they don’t speak the language. They could be unsure of what forms to fill out or where to send the paperwork. All of the contracts they enter into with suppliers and staff will need to be negotiated by them.

You might experience a lot of unforeseen outcomes if you handle the registration procedure yourself. Your reputation may suffer with local government authorities.

International Law Firm

Large, worldwide law firms might offer knowledgeable, timely counsel. They might act professionally and employ personnel who speak other languages. Since these experts have to be knowledgeable about what they are doing, using this solution is frequently safe. They might have taken part in this process across several decades for numerous businesses.

This option’s primary drawback is the potentially higher startup costs for enterprises. Many startups and small businesses cannot afford these high costs.

Additionally, seasoned organizations could have a lot of clients at once and be less communicative with their clients, which prevents clients from being informed of the status of the process. It can be challenging for business owners to assign such a crucial duty to someone else.

Local China Business Services Provider

Utilizing a local China business services provider that specializes in offering business services to overseas enterprises is an additional choice.

These businesses offer comparable services to those of big-name law firms, but at costs that the typical company may easily afford. These service providers can assist with small businesses, startups, and multinational corporations that want to grow into a new area.

Customers profit from this connection without directly paying for the expenses of the international lawyers because these enterprises frequently have their own working connections with them.

These service providers act as authorities and rely on solid local reputations. They offer practical representation and have working knowledge of regional government and tax authorities.

A local supplier of Chinese business services will be familiar with your region’s needs. They will collaborate closely with clients to establish this budget because they are aware of how important it is to ascertain precise numbers connected to capital investments. Additionally, these services give you the assurance that you are dealing with qualified experts, which gives you peace of mind.

Cost of Starting a Company in China

The overall costs for business start-up procedures have decreased from prior years. The ease of doing business score for China from the World Bank has increased recently, and the country is becoming more welcoming to foreign businesses. The totally foreign-owned enterprise is the most common kind of corporation among foreign investors (WFOE). Some of these businesses, such as those engaged in trading, commerce, business consulting, information technology, and so forth, do not need to have a minimum share capital requirement, but others do.

The registered capital of a WFOE ranges from 100,000 to 500,000 CNY.
The procurement of several certificates as well as the around 500 CNY cost of a company seal are additional expenses incurred during the company incorporation process. Depending on the documents you must provide for incorporation, you may be charged for notary services. You can get help from our professionals to calculate these costs and complete the necessary documentation.

In addition to the costs associated with forming a corporation, Chinese firms must also pay for the acquisition or renting of real estate. The corporation will have to deal with social security contributions as it expands and seeks to hire personnel. Additional details on Chinese taxation and the associated expenditures for a typical Chinese business can be obtained from our specialists.

You can choose whether or not to do business with a Chinese company thanks to this thorough investigation. By learning more about a legal organization than simply the fundamentals, you can avoid doing business with a firm that is bankrupt or in the liquidation stage.

Contact us to get assistance to start a business in China!

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