Differences between Local Enterprise & Foreign Enterprise in China

INCORPORATION

2020-09-11

When we are setting up a business in Hong Kong, there isn’t any difference for a local person or an overseas expat setting up a Hong Kong Limited. However, when you setup an entity in China as a foreigner, there are differences between a local and a foreign investment enterprise.

 

Local Enterprise

First of all, local enterprise can only be setup by local Mainland Chinese, this exclude Hong Kong, Macau or Taiwan born Chinese. Local enterprise is simple to establish. Firstly, you apply online on the State Administration for Industry and Commerce (SAIC) website. Once you have the pre-approval registration. All you need is to bring the required documents e.g. Article of Associations to SAIC. SAIC will grant you the Business License. Once you have the Business License, it means your company is established officially. 

For certain industry like insurance company, there is a special requirement in China. You may need an approval from China Insurance Regulatory Commission.

Foreign Investment Enterprise

Foreign Investment Enterprises are applicable for any non-mainland Chinese persons.  In order to setup, you will required to have below information and proof before you can setup the enterprise.

  • Residential address
  • Registered address
  • Registered capital
  • Business time frame
  • Business code of scope

In addition, you will need to complete the pre-approval of the name. Filing to the local Ministry of Commerce. And then registered with the State Administration for Industry and Commerce. The Ministry of Commerce will review the foreign investors whether in the allowed industry.

China Negative Lists and Encouraged Catalogue for Foreign Investment

The National Development and Reform Commission (NDRC) and the Ministry of Commerce (MOF) work closely together to create the China Negative Lists and Encouraged Catalogue.  Entry into the Chinese market is regulated by the country’s negative lists and encouraged catalogue for foreign investment. The catalogue stipulates restricted or prohibited sectors and listed out sectors open to foreign investors. Foreign investors can use the negative list and encouraged catalogues to identify the industries and have better understand of what businesses they are allowed to setup.

Special Arrangements between Hong Kong and China with the Closer Economic Partnership Arrangement (CEPA)

CEPA is a free trade agreement concluded by the Mainland and Hong Kong covering four areas, namely trade in goods, trade in services, investment, and economic and technical cooperation. This agreement shows the special benefits granted to Hong Kong Investors receive comparing with other foreign investments. For instance, Hong Kong investor can establish a 100% wholly owned medical organisation in China. While foreign investors can hold no more than 70% ownership.

For further information, please contact us.

You may want to read: WHAT IS THE REQUIREMENT FOR A WFOE REGISTERED OFFICE?

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