How to start a business in China? Requirements, taxes & more

China isn’t a market where you can take shortcuts. As the world’s second-largest economy with a growing middle class, it offers great business opportunities. However, entering the market means following local rules, and understanding them from the start can save you months of delays and paperwork.

Starting a business in China as a foreigner can be challenging. Foreign investors must comply with specific regulations, some industries limit or prohibit foreign ownership, and language differences can make the process even more complex. That’s why it’s a good idea to work with a local expert from the beginning.

This guide explains how the system works, what options you have, how much it costs, what taxes apply, and the registration process step by step.

How much does it cost to start a business in China?

The cost of starting a business in China depends on several factors, such as the type of company, where it’s registered, the industry, and whether you use a local service to help with the process. Below, we’ll look at the main costs you can expect.

1. Registered capital

Since 2014, most foreign-owned businesses in China no longer need a minimum amount of registered capital. However, the amount you declare is still important. It can affect your reputation with banks, suppliers, and customers, as well as the licences you can apply for.

Some regulated industries, such as financial services, telecommunications, and transport, still have minimum capital requirements, which vary depending on the type of business and where it’s registered. Registered capital can be contributed in cash, assets, or intellectual property, and it doesn’t have to be paid in full upfront. In most cases, it can be invested gradually over a period of up to five years.

2. SAMR registration fees

Registering a company with China’s State Administration for Market Regulation (SAMR) is relatively inexpensive. However, most of the cost comes from hiring a lawyer or consulting firm to manage the process. For a standard Wholly Foreign-Owned Enterprise (WFOE), these services usually cost between $3,000 and $8,000, depending on the type of business and any extra licences you may need.

3. Registered office

Every business in China must have a registered physical address. A standard virtual office isn’t accepted. While the exact requirements vary by city, you’ll usually need to provide a valid office lease agreement. Since this is an ongoing expense, it’s important to include it in your budget from the start.

4. Opening bank accounts

Foreign-owned businesses in China usually need to open at least two bank accounts. A foreign currency capital account to receive investment funds from shareholders, and a Chinese yuan (CNY) business account for day-to-day transactions.

The process can take between one and two months, and some banks require in-person interviews with company executives.

5. Accounting and auditing

Every Wholly Foreign-Owned Enterprise (WFOE) in China must keep its accounts in line with Chinese Accounting Standards (CAS) and undergo an annual audit. Many businesses hire an external accounting firm to handle this, making it an ongoing cost to include in your budget from the very beginning.

6. Management of corporate seals

In China, legal documents are approved with official company chops, not signatures. When you register your business, you’ll receive several of these seals, and each one has legal authority. It’s important to keep them safe, as anyone with access to them can act on behalf of the company.

What types of businesses can be established in China?

Chinese law groups all businesses with foreign ownership under the category of Foreign-Invested Enterprises (FIEs). If you’re a foreign investor or entrepreneur, these are the main business structures to consider:

1- WFOE (Wholly Foreign-Owned Enterprise)

This is the most common business structure for foreign investors who want full control of their operations in China. A Wholly Foreign-Owned Enterprise (WFOE) is a limited liability company registered in China and fully owned by one or more foreign investors, with no Chinese partner required.

Under China’s 2024 Foreign Investment Law, foreign investors can fully own and manage a WFOE. A WFOE can open bank accounts, sign contracts, issue invoices, hire employees, and carry out normal business activities in China.

A WFOE is a good option for businesses in consulting, services, technology, B2B trade, and import/export, as long as the business activity is not restricted under China’s Negative List.

One variation is the Foreign-Invested Commercial Enterprise (FICE), which is designed for businesses involved in wholesale, retail, or franchise operations.

2- Joint Venture (JV)

A Joint Venture (JV) is a business owned by one or more foreign investors and one or more Chinese partners. There are two main types. An Equity Joint Venture (EJV) distributes profits according to each partner’s investment, while a Cooperative Joint Venture (CJV) allows partners to decide how profits will be shared. In most cases, the foreign investor must own at least 25% of the company.

Before recent reforms, a Joint Venture (JV) was the only way for foreign companies to enter many industries in China, and it is still required in some restricted sectors. However, managing a JV can be more challenging because you need to work closely with a Chinese partner. Differences over management decisions, business strategy, or intellectual property can sometimes create challenges.

3- Representative Office

A Representative Office (RO) is the simplest way to establish a presence in China without setting up a separate legal entity. It operates as an extension of your foreign company and can carry out activities such as marketing, market research, and building business relationships. However, it can’t issue invoices, sign commercial contracts in its own name, or earn income in China. It doesn’t require minimum registered capital, and its taxes are based on its operating expenses.

4- Branch of a foreign company

Foreign companies in regulated industries, such as banking, insurance, and aviation, can sometimes open a branch in China with government approval. A branch is part of the parent company, not a separate business. This option is mainly used by large international companies.

What are the requirements for starting a business in China?

Before looking at the registration process, there’s one important question every foreign business should answer: Is my type of business open to foreign investment in China?

The answer can be found in China’s Negative List for Foreign Investment, which is regularly updated by the Ministry of Commerce (MOFCOM) and the National Development and Reform Commission (NDRC).

The list includes two types of industries: prohibited, where foreign investment is not allowed, and restricted, where extra rules apply, such as requiring a joint venture with a Chinese partner. If your business isn’t on the list, foreign investment is generally allowed.

Once you have confirmed that your business activity is permitted, these are the practical requirements:

1- Legal Representative

Every company in China must appoint a legal representative to act on its behalf. This person can be a foreign national and does not need to live in China. Because the role comes with important legal responsibilities, it’s best to choose someone who knows the business well.

2- Registered office with a verified lease agreement

China does not accept standard virtual office addresses. To register your company, you’ll usually need a lease for a physical office in the city where the business is based. Some areas have more flexible rules, but a registered office is usually required.

3- Documentation for investors and executives

If the shareholders are foreign individuals, they’ll need an apostilled passport and a notarized Chinese translation. If a foreign company is a shareholder, its incorporation documents must also be apostilled and translated into Chinese. All registration documents must be submitted in Chinese.

4- Registration with the SAMR

To register your company, you’ll need to apply through the State Administration for Market Regulation (SAMR) using its One-Stop Service. You’ll submit the required company documents, proof of where the funds come from, and details of the business owners. If no extra licences are needed, registration usually takes 7 to 12 business days.

5- Additional industry-specific licenses

Some businesses need extra licences or approvals. For example, medical companies, apps that use personal data, and businesses selling electronic or automotive products may need special permits or certifications. These extra steps can make the registration process take longer.

6. Foreign exchange registration

Foreign-owned businesses must register their investment with the State Administration of Foreign Exchange (SAFE). This is required to transfer capital into China, use a foreign currency capital account, and send dividends back overseas in the future.

What taxes must be paid when starting a business in China?

China has made several changes to its tax system in recent years, making the rules for foreign and local businesses more consistent. Here are the key taxes and requirements you should know.

1- Corporate Income Tax (CIT)

The standard corporate income tax rate in China is 25% on taxable profits. However, some businesses qualify for lower rates, especially those operating in government-supported industries or special economic zones.

Businesses recognized as High and New Technology Enterprises (HNTEs) may qualify for a reduced 15% corporate income tax rate if they meet certain research, development, and innovation requirements. The same reduced rate is also available for some businesses operating in areas with special tax incentives, such as Hainan and Shanghai’s Pudong district.

Small businesses with annual revenue below certain thresholds may qualify for even lower tax rates under simplified tax regimes.

2- VAT (Value Added Tax)

China’s Value-Added Tax (VAT) works much like VAT in other countries. The standard rate is 13% and applies to most goods, as well as services such as construction, real estate, and transport. A reduced rate of 9% applies to agricultural products, essential goods, and some services. 6% is charged on areas such as financial services, telecommunications, education, healthcare, and other modern services.

Exports are generally exempt from VAT in China. Businesses registered for VAT can also claim back the VAT they pay on eligible business purchases by offsetting it against the VAT they charge on sales.

3- Withholding Tax on Dividends

When a WFOE distributes profits to its foreign shareholders, a 10% withholding tax is applied to the gross amount of the dividends.

China has double taxation agreements with many countries. Depending on the treaty, you may qualify for a lower withholding tax on dividends and be able to claim a tax credit in your home country, helping you avoid paying tax twice on the same income.

4- Social Security

Employers in China must make social security contributions for all employees, including foreign nationals living and working in the country. The amount varies by city and province but can be around 30–40% of an employee’s gross salary in places like Shanghai and Beijing.

Employees also contribute a percentage of around 10–11%. This is a significant cost for any company planning to hire local staff.

5- Property Tax

If your company owns property in China, you’ll also need to pay property tax. This is typically 1.2% of the property’s value or 12% of the rental income if the property is leased out.

Steps to start a business in China

Setting up a WFOE, the most common option for foreign investors, follows a clear process. These are the main steps.

1- Check whether your business activity is permitted

Before you start, check the latest Negative List to make sure your business activity is open to foreign investment. If it’s restricted, you may need to set up a Joint Venture with a local partner.

If it is on the list of prohibited sectors, there is no leeway: that business activity is not available to foreign investors in mainland China.

2- Specify the city and registration area

Choosing where to register your company is an important business decision. Free Trade Zones (FTZs) in cities like Shanghai, Beijing, Shenzhen, and Hainan often offer faster registration, better tax incentives, and fewer restrictions for foreign investors than other parts of China.

Even outside Free Trade Zones, some technology and industrial parks offer attractive local incentives. Where you register your business can affect your operating costs, tax burden, and how easy it is to hire employees.

3- Reserve the company name

Your company must have a Chinese name, and it must be unique across the country. Certain words, such as “China,” “National,” “International,” or “State,” cannot be used unless you have special approval.

The name must clearly reflect your business and cannot be misleading or match an existing registered company. You can reserve it through the local State Administration for Market Regulation (SAMR), a process that usually takes 2 to 15 business days.

4- Prepare the incorporation documents

At this stage, you’ll prepare your articles of association, the incorporation documents, appoint the legal representative and general manager, and submit apostilled documents for all shareholders and directors, translated into Chinese.

If you’re setting up the company from abroad, you’ll need to give your representative in China an apostilled power of attorney. Foreign individuals must provide an apostilled passport with a notarized Chinese translation, while foreign companies must submit their incorporation documents, also apostilled and translated into Chinese.

5- Register the company with the SAMR

All the required documents are submitted through the local SAMR One-Stop Service. Once your application is approved, you’ll receive your Business Licence. It officially confirms that your company is legally registered in China.

Starting in 2026, the standard processing time is between seven and 12 business days if the documentation is complete and no additional sector-specific licenses are required.

6- Obtain the corporate seals

After you receive your Business Licence, you’ll need to make and register your company’s official seals. These usually include the company seal, legal representative’s seal, and financial seal. Some businesses also need a contract seal.

Each seal has a different legal purpose. To avoid problems later, it’s a good idea to set clear rules from the start on who can use them and how they should be kept secure.

7- Open bank accounts

Once you have your Business Licence and official seals, you can open your business bank accounts. You’ll need a foreign currency capital account to receive investment funds from shareholders and a CNY operating account for your day-to-day business transactions.

The process can take between one and two months, depending on the bank and the city.

8- Complete the additional registrations

After registering your company, you’ll also need to register with the tax authorities, the State Administration of Foreign Exchange (SAFE), and the local social security office.

This is also the time to hire a certified accountant or an accounting firm. They can handle your monthly VAT returns, quarterly corporate tax filings, and the mandatory annual audit.

How can I get internet access for business trips to China?

Internet in China works very differently from most other countries. The country’s Great Firewall blocks services like Google, Gmail, WhatsApp, Instagram, LinkedIn, and many other popular Western platforms. That’s why many travelers choose to use a VPN when visiting China.

If you’re traveling to China for business and need access to your usual work tools, it’s worth planning your internet connection in advance, as staying connected is different from most other destinations.

Holafly’s eSIM for China gives you unlimited data for as many days as you need, with coverage across the country’s major cities. Having internet access as soon as you land means you can stay in touch with your team, access cloud-based documents, and manage your business without relying on public WiFi.

If you’re staying in China for a longer period, Holafly’s monthly plans are a more convenient option. You only need to subscribe once, and your plan renews automatically each month with no long-term commitment, so you can cancel whenever you like. They also include coverage in over 160 destinations, making them ideal if you travel frequently.

Another advantage of these plans is Always On, which gives you 1 GB of automatic monthly data in more than 70 countries at no extra cost. It activates only when your main plan ends or you cancel it, providing a backup connection without any extra steps.

Frequently asked questions about starting a business in China

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Paula Henderson

Spanish-English Translator

Hi! I'm a Spanish-English translator working with Holafly, helping bring travel content to life for curious travelers. As a digital nomad with a passion for exploring, I'm always adding new spots to my bucket list. If you love to travel like me, stick around because you're in the right place to find inspiration for your next trip! ✈️🌍

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