Starting a Business in China: An Expat’s Guide

Published on September 30, 2025 and written by Cyril Jarnias

In a world where globalization is redefining economic boundaries, many entrepreneurs are considering taking the leap by starting their business abroad, and China, with its rapid economic growth and unique investment opportunities, stands out as a prime destination.

However, establishing a presence in the Chinese business environment requires a deep understanding of local regulations, adaptation to cultural differences, and the use of tailored strategies to achieve success.

This entrepreneurial guide provides expatriates with the keys to navigating this dynamic landscape, offering practical advice and essential resources to turn an idea into a thriving business at the heart of one of the world’s most dynamic economies.

Understanding Available Legal Structures in China

Main Legal Structures for Entrepreneurs in China:

Structure	Main Criteria	Advantages	Constraints/Limitations	Minimum Capital	Tax and Legal Obligations	Sector Restrictions
WFOE (Wholly Foreign-Owned Enterprise)	Fully owned by foreigners; commercial, industrial, or service activities	Full management control, ability to invoice in RMB, direct hiring of local staff	Complex registration process, minimum capital varies by sector and region	Variable (often starting from $30,000 USD, sometimes more depending on sector/location)	Local registration, Chinese taxation (VAT, corporate tax), annual audit, sector-specific licenses	Some sectors are restricted or prohibited, according to the Chinese “Negative List”
Joint Venture (JV)	Partnership with a Chinese company or entity, shared capital and management	Easier access to restricted sectors, local network, risk sharing	Governance complexity, profit and decision sharing, potential strategic disagreements	Generally starting from $100,000 USD, depends on the sector	Taxation similar to WFOE, audit and reporting obligations, compliance with contractual agreements	Mandatory in certain sensitive or regulated sectors
Representative Office	Extension of a foreign company, no direct commercial activity	Quick and low-cost setup, local visibility, no minimum capital required	Prohibited from generating profits, no commercial activity, limited staff (indirect hiring)	None	Annual reporting, taxes on expenses, no profit taxes	Not permitted in commercial or industrial sectors

General Registration Process:

• Preparation of a business plan, articles of association, and founding documents (translated into Chinese)
• Name verification and reservation
• Application for a business license with local authorities (Administration for Market Regulation)
• Opening a bank account in China
• Deposit of registered capital (for WFOE and JV)
• Registration with tax, customs, and social security authorities
• Obtaining specific licenses if in a regulated activity

Tips and Considerations for Choosing the Right Structure:

• WFOE: Ideal if you want full control, to protect intellectual property, and to conduct commercial or production activities in China. Prefer this structure for service, export, or industrial activities where access to the Chinese market is not restricted.
• Joint Venture: Choose this structure to access regulated sectors, benefit from a local partner with an established network, or meet specific legal requirements in certain sectors (e.g., automotive, education, telecommunications).
• Representative Office: Use this form to test the market, establish contacts, conduct studies, or oversee quality, without direct commercial activity.

Practical Examples and Testimonials:

• A French entrepreneur in the consulting sector opted for a representative office to explore and understand the Chinese market before converting the structure to a WFOE after two years, once the client base and offerings were clarified.
• A European manufacturer chose a Joint Venture with a Chinese partner to access the automotive market, a sector requiring a JV under current regulations, while benefiting from local market knowledge and distribution networks.
• A technology group preferred a WFOE to protect its know-how and maintain control over business strategy and staff management, despite a higher initial investment and more cumbersome administrative procedures.

Field Experience Tips:

• Plan for local support for document translation and understanding administrative procedures.
• Conduct a thorough audit of the Chinese partner before any Joint Venture.
• Consider the annually updated “Negative List” to check sectors open or restricted to foreign investment.
• Anticipate the need for adaptability: many entrepreneurs start with a representative office and then move to a more suitable commercial structure as they develop.

To succeed in your establishment, adapt the structure to your sector, objectives, and investment horizon, while integrating the complexity of Chinese regulations.

Administrative Procedures for Setting Up a Business in China

Essential Steps to Create a Business in China:

Choice of Legal Structure:

• WFOE (Wholly Foreign-Owned Enterprise): Entity with entirely foreign capital, full control of operations, but stricter regulatory requirements and relatively high minimum registered capital.
• Joint Venture (JV): Partnership with a Chinese company or individual; risk sharing and easier access to the local market, but partial loss of control over governance.
• Representative Office: Light structure with no direct commercial activity; ideal for market research or relationship management, but cannot issue invoices or generate revenue directly.

Structure	Control	Commercial Activity	Minimum Registered Capital
WFOE	Full	Yes	Variable by sector
Joint Venture	Shared	Yes	Negotiated between partners
Representative Office	None	No	Low / not required

Registration with Competent Authorities (SAMR/AMR)

Submission of the company name for approval. Prepare several variants to avoid duplicates.

Filing of the complete dossier including the intended scope of activity and the planned amount of registered capital.

Obtaining the Business License

Dossier to submit includes articles of association, feasibility study, official form completed and certified by the founders.

Approval is issued by the local administration after rigorous verification.

Tax Registration with the Chinese Tax Administration

Mandatory registration after obtaining the commercial registration certificate. This allows the official issuance of tax invoices (“fapiao”) and ensures compliance with local tax obligations.

Obtaining an Official Seal (“Chop”)

The chop is essential to validate all official documents related to the company (contracts, bank documents). Without this seal registered with local authorities, no document has real legal value in China.

Opening a Professional Bank Account

Required Documents:

• Business certificate
• Official seal
• Translated articles of association if necessary
• Certified personal documents

The bank will often require some documents to be officially translated into Chinese by a sworn translator.

Minimum Registered Capital

Depending on the type chosen:

• For a standard WFOE in general trade: typically around ¥100,000 to ¥500,000 RMB
• For specific sectors (finance, insurance), requirements are much higher

This amount must be deposited into the professional bank account opened in the company’s name.

Certified Translations

Some files must be accompanied by:

• Official Chinese translations validated by a notary or local consulate
• Especially foreign/original articles of association or certificates issued outside China

Practical Tips on Timelines & Specialized Services

Generally allow between two weeks and three months depending on the chosen administrative region and complexity of the dossier;

Engaging a local specialized firm allows:

• Significantly reducing timelines;
• Avoiding blocking formal errors;
• Facilitating all necessary notarization/translation/certification procedures;

Quick Checklist:

• Choose a legal structure suited to the project
• Preliminary approval of name + registered address
• Preparation of complete dossier + filing with SAMR/AMR
• Obtaining business license + tax registration
• Creation of officially validated chop
• Opening professional bank account with deposit of registered capital
• Provision of sworn translations if necessary

Plan for administrative anticipation in your planning.

Tax Considerations and Access to Funding for Expatriates

Tax Framework for Expatriates in China

Expatriates creating or operating a business in China must comply with a complex and evolving tax environment, involving specific obligations, different tax categories, and specific funding opportunities.

Tax Obligations for Expatriate Entrepreneurs

• An expatriate is considered a tax resident if they stay at least 183 days per year in China. After six consecutive years without an interruption exceeding 30 days, China then taxes the taxpayer’s worldwide income.
• For non-residents or residents of less than six years, only income of Chinese origin is subject to tax.
• Tax returns are generally monthly for income from professional activity. If annual income exceeds 120,000 RMB, an annual declaration is mandatory.
• The company must withhold income tax at source and remit it within 15 days following salary payment.
• Enrollment in the Chinese social security system is required for most employed expatriates, although some bilateral agreements may provide exemptions.

Main Taxes Applicable to Businesses

Type of Tax	Rate or Tax Base	Main Observations
Income Tax	Progressive scale from 3% to 45%	After a 5,000 CNY/month deduction for employees
Corporate Tax (CIT)	25% (standard rate)	Reduced rate for innovative SMEs (15%)
VAT	13% or 17% depending on the nature of the good/service	Possible reductions for certain sectors
Dividend Tax	10% (for non-residents)	Can be reduced by tax treaty

Bilateral Tax Treaties

• Many countries, including France, have signed a tax treaty with China to avoid double taxation.
• These treaties may allow:
  • A reduction in the withholding tax rate on dividends, interest, or royalties.
  • A tax credit in the country of origin for taxes paid in China.
  • Specific rules to determine tax residency and avoid double taxation on worldwide income.

Access to Funding for Expatriate Entrepreneurs

Key Financial Institutions:

• Major Chinese banks (Bank of China, ICBC, China Construction Bank)
• Foreign banks with a local presence
• Venture capital funds (e.g., Sequoia Capital China, GGV Capital)
• Crowdfunding platforms and business angels

Types of Available Funding:

• Traditional bank loans: under strict conditions, often requiring substantial guarantees.
• Foreign direct investments: subject to regulatory approval and sector restrictions.
• Venture capital: mainly for innovative startups with high growth potential.
• Grants and local government aids: available in certain special economic zones.

Common Eligibility Criteria:

• Legal existence of the structure (generally WFOE, JV, or representative office)
• Solid business plan and clear financial projections
• Guarantees or personal contributions for bank loans
• Project leader’s experience and local network
• Compliance with sector restrictions for foreign investments

Practical Tips for Successful Tax and Financial Establishment

• Get support from the start from an accounting/tax advisory firm familiar with Chinese legislation and the tax treaty of your home country.
• Maintain rigorous documentation of financial flows and employment contracts to facilitate tax declarations.
• Check annually for legislative changes, deductions, and tax rates.
• Prepare in advance for bank account opening procedures, anticipating the required certified documents.
• If possible, prefer setting up in a special economic zone to benefit from tax incentives and easier access to certain funding.
• Meet with local investors to understand market expectations and adapt the company’s legal structure accordingly.

Key Takeaways

Creating and operating a business in China as an expatriate requires adaptation to a strict tax system, anticipation of administrative obligations, and a proactive strategy for funding. Regular monitoring and professional support are essential to secure and optimize the entrepreneurial project.

Managing Cultural Differences and Finding Support Resources

Understanding and respecting cultural differences in China is essential for success in an entrepreneurial context. Ignoring these specifics can not only harm a foreign entrepreneur’s credibility but also compromise professional relationships and the sustainability of their business.

Specific Aspects to Consider:

Business Traditions

• Hierarchy is very pronounced; it is appropriate to always show respect towards superiors and elders.
• Personal relationships, or guanxi, play a decisive role in business development. Building and maintaining this network is often more important than the contractual aspect of exchanges.
• Exchanging business cards is done with both hands, as a sign of respect.
• Offering gifts during important meetings helps strengthen the professional relationship.

Professional Etiquette

• Taking initiative is less valued than in the West: one must primarily respect the framework established by management.
• Friendliness in the office is expressed differently; for example, it is not customary to chat around a coffee machine before work starts.
• Each department often functions independently, with little cross-department interaction.

Communication and Negotiation

• The direct Western style can be perceived as brutal or disrespectful; favoring a diplomatic and indirect approach during negotiations is advised.
• Expectations regarding transparency differ: some issues are not openly discussed to avoid challenging authority.

Common Challenges for Expatriates

• Difficulty understanding the strict hierarchical functioning
• Frustration with the apparent lack of initiative or different standards (“good enough” vs. “perfection”)
• Misunderstandings related to professional rituals (cards, gifts)
• Feeling of isolation due to the low level of informal friendliness

Strategies to Overcome These Challenges

• Participate in cultural workshops dedicated to Sino-Western differences
• Regularly take intensive or immersive Mandarin courses
• Actively seek a local mentor who can decipher implicit codes
• Take part in events organized by local professional networks

Useful Local Resources

Resource	Description
Chambers of Commerce	Personalized support, targeted networking
Specialized Consultants	Strategic advice tailored to the Chinese context
Professional Networks	Platforms (online/offline) facilitating exchange between foreign entrepreneurs

Concrete Examples / Testimonials

“At first, I thought my colleagues simply lacked critical thinking. But after participating in several intercultural workshops offered by the Franco-Chinese chamber of commerce, I understood it was mostly about respect for authority. Adapting my management style not only allowed me to gain their trust but also their involvement.”

— French entrepreneur based in Shanghai

“I underestimated the importance of guanxi until a local consultant introduced me to his professional network. Thanks to this informal introduction – far removed from the contractual formality I was used to – my project took on a whole new dimension.”

— German founder based near Shenzhen