Starting a business in China

As the world’s largest manufacturing hub, China continues to be an ideal location for businesses to produce goods. As of September 2024, China had more than six million enterprises in the manufacturing sector, a 5.5% increase from the end of the previous year. Given the scale of this sector, there is the significant potential for partnerships when running a business here. 

Recent government efforts are also centred around boosting China’s advanced manufacturing industry. This includes more support in emerging areas like artificial intelligence (AI) and new energy, which can give businesses the confidence to operate in these fields in the country. 

As a result of its manufacturing capabilities, China is a leading global exporter. As of August 2025, the country is among the top three trading partners for 157 countries and regions around the world. Manufactured goods make up the majority of the country's exports, with electrical machinery and equipment being the most in-demand overseas.

China’s exports reach markets around the world – while traditional trade partners like Europe and the US remain significant, it was Africa, India and the Association of Southeast Asian Nations (ASEAN) that showed the most year-on-year growth from 2024. Major ports, such as Shanghai, Shenzhen and Ningbo-Zhoushan, are among the busiest globally, handling an immense volume of containers each year.

China has signed more than 20 free trade agreements (FTAs) with other countries and regional blocs, including Australia, Mauritius, South Korea and the Association of Southeast Asian Nations (ASEAN). It also has a number of FTAs currently under negotiation as it looks to expand its treaty network.

These FTAs allow for tax reductions when you’re importing or exporting products to and from FTA partner nations.

In the coming years, businesses in China will gain access to even more markets via the Belt and Road Initiative. This ongoing infrastructure project aims to improve trade routes and can better connect your business to other parts of Asia, Europe and Africa.

By 2030, China is projected to have more than one billion consumers, a 15% increase from 2024. A significant rise in its middle-class segment is helping spur a boom in local spending. As more individuals move into this bracket, their purchasing power will only strengthen China’s position as a favourable location to grow your customer base.

E-commerce has also been a major driving force behind the growth of China’s consumer market. Online platforms, such as Taobao/Tmall, JD.com, Douyin (TikTok), Pinduoduo and Xiaohongshu are widely used among local consumers.

These channels not only showcase products but also serve as influential spaces where consumers can watch live-streaming and videos, share reviews, learn about product functions and compare pricing before making purchasing decisions. This is worth exploring when you are catering to and attracting China’s tech-savvy consumers.

In recent years, China has implemented reforms that make it easier to do business. The government has categorised its sectors and put emphasis on areas with the potential to grow the economy faster. To learn more about the categories, you may refer to the Catalogue of Encouraged Industries for Foreign Investment. This catalogue is revised regularly, with the government aiming to attract investors who are focused on innovation. For example, if you are in advanced manufacturing, your business venture may be greatly supported.

Lower corporate income tax rates and other new incentives are also available depending on the size and sector of your business. Collectively, this may boost your capacity to compete, grow and invest in new opportunities with greater assurance.

Widely accepted as the most popular entity for doing business in China, a WFOE is a limited liability company (LLC) allowing 100% foreign ownership, whether by individuals or corporate entities.

As a mainland Chinese investor is not essential, you can independently operate a business here. It’s for this reason that the WFOE continues to be a suitable structure for foreign investors entering China, as long as the business activity is not included in the 2024 Negative List for Foreign Investment.

Encouragingly, the latest version has relaxed rules on foreign investment in the manufacturing sector. However, if your sector remains restricted, you may need to consider using a joint venture structure instead.

There are three common types of WFOEs:

• Trading WFOEs: For trading, wholesale, retail or franchises in China
• Consulting WFOEs: For consultancy and other related services
• Manufacturing WFOEs: For the manufacture and sale of goods and products

What’s more, being an LLC, a WFOE operates as a separate legal entity. This means that your liability is limited to your registered capital, protecting your personal assets.

WFOE advantages

• Allowed to engage in all activities it is registered for in China
• Total control over decision-making processes
• Ideal for protecting your trademark when expanding operations to China
• Full authority over the hiring of staff
• Suitable for establishing a long-term presence in China

WFOE disadvantages

• Entrance restrictions for certain sectors
• Initial costs required for registered capital, office rent and other fees

Popular WFOE locations in China

When choosing a location to base your business in China, it’s important to understand that different municipalities and regions suit different types of industries. For example, Shanghai is known for finance, automobile, chemical and logistics investment, whereas Shenzhen is developing itself as tech powerhouse for smartphones, IT equipment, home appliances, robotics and drones.

Locations that are highly sought after for WFOE registration include:

• Shanghai
• Shenzhen
• Beijing
• Guangzhou
• Chengdu
• Xiamen
• Xi’an
• Yiwu

China WFOE requirements

If you already have a location in mind, the next step is to understand the requirements for setting up a WFOE in China. You will need to prepare and translate documentation for submission to the authorities and appoint key statutory positions.

Minimum registered capital requirement

Since the Company Law reforms in 2014, the registered capital requirement has been removed. As of 2025, no minimum investment is required to set up a WFOE, unless the business involves a regulated industry such as securities, insurance and banking.

As a gauge, however, you may set aside an amount that can cover the first year of your operations in China. It’s also important to note that following the new Company Law amendments announced in July 2024, all subscribed registered capital must be fully injected within five years of incorporation. This makes it essential to plan ahead and decide on a realistic capital commitment before establishing your entity.

Documents required

To get authorised and start operations, you’ll need to prepare the following documents for approval:

• Office lease contract: Proof of a registered address for your WFOE.
• Name approval: To ensure that your name does not conflict with others already in operation. Approval is required from the local Administration for Market Regulation (AMR).
• Board resolution or appointment letters: For your directors, supervisors, general manager and legal representatives. This should be accompanied with copies of their identification documents.
• Articles of Association (AoA): This is another crucial document for the China company registration process, providing information on your business description, including the scope that you intend to operate in.
• Feasibility study (optional): To demonstrate that the company is feasible, you need to provide a comprehensive business plan and a budget.

All documents in foreign languages (including English) should be accompanied by Chinese translations. Once these are fulfilled, your WFOE company registration can be approved.

WFOE setup procedure and timeframe

The incorporation of a WFOE can be completed within two months. We typically manage this process in two phases to simplify the preparation on your end:

Note: This only applies where the necessary documents have been provided. Additional preparation time will be required should any documents be missing or deemed non-compliant. This will be determined on a case-by-case basis, separate from the standard procedure outlined above.

Structured as an LLC set up with a local partner, a JV is another way for foreign businesses to enter China. While many sectors are now fully open to 100% foreign ownership, China still operates under the Negative List approach, which identifies areas where foreign investment is restricted or prohibited.

For sectors that fall under these restrictions, the law may require you to engage a local partner. In some cases, foreign ownership may be capped below 50%. Much depends on the sector you’re operating in. Rigorous research and due diligence must then be conducted in advance to find a qualified and reliable partner.

For many investors, however, this could seem risky. Where regulations allow, we would recommend going with the WFOE structure instead for greater independence and control over day-to-day operations.

As a JV is considered a more complex corporate vehicle, the incorporation process can take up to two months.

JV advantages

• Access business sectors which are restricted in equity ownership terms
• Gain insights from your partner’s experience in doing business in China
• Leverage your partner’s existing channels for sales and distribution
• Receive local treatment when participating in official and public tenders

JV disadvantages

• Costly and lengthy process to scout for a suitable Chinese partner
• Complexity when it involves multiple partners
• Difficulties in merging different company cultures and management styles
• Intellectual property protection and management issue
• Conflicting interests represented at the board level
• Division of profits

If you are simply wanting to learn more about the business opportunities in China, you could establish a RO. This is the simplest type of business formation that you can open in China, with the process taking about two months.

A RO does not constitute an independent legal entity in China, meaning that its registration merely grants you a presence in the local market. ROs are thus limited in their activities as compared to the company registration of a WFOE or JV. Specifically, ROs:

• cannot partake in direct profit-generating activities;
• cannot issue invoices; and
• cannot hire Chinese staff directly.

The office is only allowed to engage in non-profit making operations, such as offering customer support and conducting market research. Additionally, to establish a RO in China, your overseas parent company must have been incorporated and operating for at least two years. This option is thus unavailable for newly formed entities.

For these reasons, you may consider establishing the WFOE structure from the start. We've seen companies that began with a RO eventually converting to a WFOE as operations grow. If you're looking to expand in China, a WFOE is likely to be more suitable.

RO advantages

• Quick and low-cost setup
• Suitable for market research, promotion and liaison
• Lighter compliance obligations than other business structures

RO disadvantages

• Restricted activities
• No legal independence
• Hiring limitations
• Tax liabilities apply even without local income

To help you decide on a suitable business structure, view our 'at a glance' comparison table outlining key information for different entity types.