China: The new economic hub for offshore companies
China is the second-largest economy when measured by nominal GDP. However, it is the projection that it is expected to become the largest by 2028 that is driving investors’ interest in the nation. The current growth can be traced back to 1978, when the country started implementing economic reforms that have made it the current manufacturing, financial, and business hub on the globe.
One of the most interesting things about China is that a lot of firms operating there are foreign-owned. If you are looking for ways to rapidly grow your enterprise, especially between now and 2028, one potential option should be company formation in China. Keep reading as we explore this high potential jurisdiction and demonstrate how to open a company there.
China in numbers
When opening a business, whether back at home or China, it is crucial to get the numbers about the targeted market right. Understanding the market can help you to avoid making mistakes, such as overestimating what clients want or not factoring in competitions. So, let us understand the Chinese economy and its suitability for new companies.
The Chinese economy is a sort of socialist market economy that includes a combination of components, such as economic planning, strategic policies, state-owned firms, mixed-enterprises, and private companies. Although the state-owned enterprises have dominated the country’s economy, accounting for 73% market capitalization in 2019, the landscape is changing. Now, more private firms, including wholly foreign-owned enterprises (WFOE) are becoming common and helping to rapidly grow the economy. If you are targeting to open a business in China, the country is willing to support direct foreign investment. You are welcome.
The country’s large population is another important factor that makes every investor want to head there (Evergrande was a bad example of management…). Imagine what you can do with a population of about 1.4 billion. According to the 2021 estimates, the country’s population was estimated at 1,443,995,000 people. This implies that even if you only want to form a company in China and concentrate on the local population, it can be a viable idea. However, you can also target the regional markets, such as Taipei, Hong Kong, the Philippines, and Malaysia for more profits.
If you are thinking of a manufacturing business, China will be an excellent host for the company. Today, China is the largest manufacturing economy and exporter on the globe. In 2001, China became a member of WTO and has also signed multiple free trade agreements with a long list of countries on the globe. Some good examples include South Korea, ASEAN, Australia and Switzerland. These are all viable additional markets waiting for you to explore.
What companies are allowed to operate in China?
The numbers we have shown above are only a few highlights, and they show that China is an excellent choice for business. So, are you ready to form a company in China? Here are the main types of companies that you can open in the jurisdiction:
- WFOE: WFOE, shortening for a wholly foreign-owned enterprise, is a type of limited liability company in China, and it allows foreigners to have 100% shareholding. It is the most preferred form of business by foreigners.
- Joint Venture (JV): This is also a limited liability company in China, but unlike a WFOE, it requires you to enter into a partnership with a local Chinese. The partner must have more controlling shareholding in the company.
- Representative Office (RO): This type of company is very easy to form because it is considered an extension of the parent firm back home. Notably, you can only use an RO for non-profit-based operations, such as market research and marketing.
This post has demonstrated that China stands out from its peers both in Asia and across the globe as an investment destination. Now, the next step is registering your company. The process of company incorporation in China can be complex because it is lengthy, requires a lot of documentation, and involves dealing with multiple offices. However, it is pretty straightforward, fast, and cost-effective when using an agency of experts. The experts can also help you craft the right strategies for success in the Chinese market.
