An Introduction to

DOING BUSINESS IN
China 2015

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This edition of Doing Business in China was produced by a team of professionals at Dezan Shira & Associates,
with Samuel Wrest and Matthew Zito as managing editors and Qian Zhou as technical editor.
Creative design of the guide was provided by Jessica Huang and Estela Mi.
2015 Dezan Shira & Associates

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About Dezan Shira & ASSOCIATES

At Dezan Shira & Associates, our mission is to guide foreign companies through Asias complex
regulatory environment and assist them with all aspects of establishing, maintaining and growing
their business operations in the region. Since its establishment in 1992, Dezan Shira & Associates
has grown into one of Asias most versatile full-service consultancies with operational offices
across China, Hong Kong, India, Singapore and Vietnam, as well as liaison offices in Italy, Germany
and the United States, and partner firms across the ASEAN region. With over 20 years of on-theground experience and a large team of professional advisers, we are your reliable partner in Asia

AN INTRODUCTION TO DOING BUSINESS IN CHINA

Preface

Now the worlds second largest economy and long since the most populous nation on earth,
China offers enormous opportunities for foreign companies, both as a manufacturing labor pool
and increasingly, as a consumer market of seemingly endless potential.

Alberto Vettoretti
Managing Partner
Dezan Shira & Associates

In the 30 years since Deng Xiaopings reform and opening-up policy of 1978, Chinas GDP has
developed at an unprecedented rate, averaging 10 percent growth per annum. After years of redhot economic activity, in 2013 the countrys growth slowed to 7.7 percent - a trend that continues
to raise concern about the future viability of investment into the worlds factory.
To the discerning eye, however, the mature Chinese economy of today presents a set of different but
equally encouraging signals for foreign investors: firstly, that China is prepared to sacrifice rapid growth
for long-term economic reform, paving the way for greater market liberalization of key industries that
have long remained the exclusive domain of state-owned enterprises, such as telecom and finance.
Second is policymakers commitment to moving towards a consumer society more reliant on
the services sector than the heavily polluting and low-value added manufacturing on which the
Chinese economy cut its teeth. Meanwhile, decades of prosperity and rising wages have given
rise to a growing number of young professionals, whose aspirations toward higher standards of
living are fueling a nationwide retail boom.
Lastly, in their drive to address export markets, Chinese businesses have developed an appetite
for technology, systems and infrastructure that cannot be easily satisfied by domestic suppliers,
to the benefit of foreign companies specializing in automation, logistics and corporate training.
Combined, these trends are creating opportunities in Chinas emerging tertiary industry for a new
generation of foreign-invested enterprises.
Designed to introduce the fundamentals of investing in China, this publication is compiled by the
experts at Dezan Shira & Associates, a specialist foreign direct investment practice, providing
corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due
diligence and financial review services to multinationals investing in emerging Asia.
Since its establishment in 1992, the firm has grown into one of Asias most versatile full-service
consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam
as well as liaison offices in Italy, Germany and the United States.

Contact
Dezan Shira & Associates
china@dezshira.com
www.dezshira.com

AN INTRODUCTION TO DOING BUSINESS IN CHINA

Main governmental organs

Despite ongoing liberalization, Chinas business environment remains riddled with bureaucratic
hurdles, with the country ranking 96th out of 185 economies surveyed in the World Banks 2014
Ease of Doing Business report. Presented here is a selection of the main governmental organs
and departments with whom foreign investors will most commonly interact.
The Peoples Congress of China is the supreme organ of state power, within which the Standing
Committee exercises the legislative function. Local People Congresses at various levels of
administration represent the state at a local level.
The State Council of China is the supreme administrative organ of the state, and the executive
organ of the Peoples Congress; local governments serve as the executive organs of state power
and administrative organs in local jurisdictions, under the leadership and command of the State
Council.
Peoples Courts at different levels are the judicial organs of the country, divided between local
courts, Special Peoples Courts and Supreme Peoples Courts. The local-level Peoples Courts
are further divided into Basic-Level Courts, Middle Peoples Courts and Higher Peoples Courts,
tasked with handling cases of varying magnitude and reviewing appeals on an ascending basis.
Key departments:
The Ministry of Commerce (MOFCOM, Ch: ), under the auspices of the State
Council, is an executive agency tasked with steering policy decisions on foreign trade, import/
export procedures, foreign investment, consumer rights and market competition, in addition to
negotiating trade agreements on behalf of China.
The State Administration of Taxation (SAT, Ch: ), is the highest tax authority in China,
authorized by the State Council to oversee the countrys tax system, draft national tax regulations
(sometimes in conjunction with the Ministry of Finance), provide support in developing national
tax and economic policies, and execute the collection and administration of taxes attributed to
the central government.
The State Administration of Foreign Exchange (SAFE, Ch: ) is an administrative
agency responsible for managing foreign exchange activities in China, setting relevant regulations,
and administering Chinas foreign exchange reserves. SAFE approval or record-filing is required
for a range of transactions involving inbound and outbound forex payments.
The State Administration for Industry and Commerce (SAIC; Chinese: ) is the
state-level authority charged with guiding legislation related to the administration of industrial and
commercial activities. SAICs local iterations (local AICs) oversee the registration and licensing
of enterprises within their respective jurisdictions.

AN INTRODUCTION TO DOING BUSINESS IN CHINA

TABLES OF CONTENTS

01/03 establishing and running a business

What are my options for investment?

11
11
12
13

Representative Office (RO)

Joint Venture (JV)
Wholly Foreign-Owned Enterprise (WFOE)
Other options

How do I establish a business?

15

15
17
19
20
22

Corporate establishment
Key positions in a foreign-invested entity
Office premise requirements
Opening a bank account
Intellectual property considerations

How do I make changes to my business?

23

23
24
24
25
26
27

Company name
Business scope
Registered capital
Shareholder structure
RO-WFOE conversion
Relocation

02/03 Tax, Audit and Accounting

28

What are the major taxes of China?

29

29
31
33
33

Income taxes
Turnover taxes
Consumption tax (CT)
Other taxes

What are some of the key compliance requirements?

35

35
35
37
38
39

Accounting and bookkeeping

Annual compliance
Due diligence
Internal control and audit
Transfer pricing

AN INTRODUCTION TO DOING BUSINESS IN CHINA

03/03 Human Resources and Payroll

40

How do I employ workers?

41

41
41
41
42

Fixed-term contract
Non-fixed term contract
Job contract
Part-time Contract

How do I obtain visas for foreign employees?

43

What obligations do I have as an employer?

45

3.3.1. Minimum wages across China

3.3.2. Overtime
3.3.3. Social Insurance

45
46
46

Termination

49

AN INTRODUCTION TO DOING BUSINESS IN CHINA

Corporate Establishment . Due Diligence . Business Advisory . Tax . Accounting . Payroll . Audit . Compliance
China@dezshira.com

www.dezshira.com
AN INTRODUCTION TO DOING BUSINESS IN CHINA

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