The future of China’s economy has never looked this bright. With a thriving middle class, a new wide-spread consumerist approach to spending, and increasing liberalization, China is now home to a wide variety of promising untapped markets.
Since the late 1980s and 1990s, China’s economy has been executing significant reform to the state-owned industry. Upon the passage of The Company Law in 1993, limited liability companies were approved, and firms were able to retain a share of their profits. As a result, private ownership increased rapidly. By 2005 it accounted for about 70% of China’s gross domestic product.
Among reforms, China established an unprecedented manufacturing presence as a result of highly competitive pricing and sheer production power. After dominating our global economy as the world’s largest exporter of goods since 2009, China’s focus now shifts from expansion to stability, that is back to service and consumption.
Amidst all this economic activity, China’s middle class has boomed. With a current urban population of around 800 million people, that is only going to grow, 54% percent are expected to be the upper-middle class by 2022.
Take a look:
At this point, the economy’s growth has slowed. However, China is still ahead of their goal to double GDP between 2010 and 2020 and more industries are open to investment than ever before.
See below China’s GDP yearly growth since 2008 and China’s GDP annual growth rate over the last four years, respectively:
Even with a declining growth rate, China’s economy is still expanding at a rate three times higher than that of the US.
This is merely the start of China’s rebalancing. Economic prosperity is spreading as wages rise and workers demand better treatment. Furthermore, the quality of life is improving thanks to upgrades in transportation, health standards, and a wealth of technological advancements.
Increased opportunity and success is leading to higher disposable incomes and ideal target markets as the new Chinese consumer emerges, ready to spend. See below China’s consumer spending trend over the last ten years:
What is driving the Chinese consumer? Markets dealing with luxury items and services are bursting with opportunity and demand.
Interest continues to increase in:
• technological products
• luxury brands
• nutritional care
• trendy foods
• high-quality goods
Get specific: See why Hong Kong is a great place to start
“The time is now. Be part of the process as China becomes tomorrow’s economic powerhouse.”
Ready to expand your business and break into China’s upcoming markets? Call now for a consultation with an IncorpChina team member, and establish your most important relationship in China success. +1 561 729 6508 | [email protected]
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Besides being a prestigious business address, Hong Kong has a variety of benefits to offer for those who are looking to or already own a company in China. Ranging from financial over legislative to cultural reasons. Below are your top 7 benefits from opening up a company in Hong Kong together with a WOFE in Mainland China.
While you are expecting to pay 25% income tax on your profits in China, with a Hong Kong company under your name you are able to send said funds across the border for a 5% transfer fee. This method can save you a considerable amount of money, especially considering that funds can be transferred between China and Hong Kong companies without currency controls. What that means is, when sending money from China abroad, usually, there are extremely high fees in place as well as a maximum amount of money that can leave the country per person or company per year.
Additionally, Hong Kong operates under a territorial tax regime. This means that there is a zero percent tax rate on money that is not earned in Hong Kong. Profits earned in Hong Kong are subject to a 16.5% tax. On the other hand, startups are eligible for VAT tax refunds. Either way, income tax in Hong Kong is significantly less than on the mainland. The exact tax break will always depend on the industry of your company as well as the location of your WOFE. In the QianHai zone in Shenzhen, for example, companies are given a particularly generous tax break.
To find out about this in more detail, contact Incorp China to get first-hand tax advise from local accounting and tax experts.
Imports from abroad to Hong Kong are significantly easier to arrange and cheaper than transporting goods straight into Mainland China. Under CEPA, an agreement between Hong Kong and China with the aim to encourage trade, Hong Kong goods can even be imported into China under zero tariffs, as long as said goods and your company complies with CEPA rules. (http://www.hktdc.com/resources/MI/Article/cepa1/2009/06/274914/1244104141867_cepapdf.pdf) If you are planning on regularly moving cargo across Chinese borders, Incorp China would strongly advise talking to us about setting up an entity in Hong Kong.
Other than in Mainland China, Hong Kong takes into consideration the prior use of intellectual property when filing for trademarks, patents, copyrights, etc. China, on the other hand, operates under the first-to-file principle. If you are interested in finding out about the Chinese trademark system in more detail, please read more about it here.
Whether tax law, intellectual property registration and enforcement, an open economy or the general bureaucratic processes, Hong Kong offers a much more Western mindset when it comes to legal systems and business culture. Familiar documents, consistent bureaucratic procedures and English speaking government officials can offer a smoother entrance into the Asian business world, not just for inexperienced businessmen. Bureaucratic processes can furthermore be executed more rapidly in Hong Kong than they would in China. For example, changing the structure of your company by reallocating shares would take about two months in China, whereas such an action would only require about a week in Hong Kong.
The proximity to the mainland and its open, capitalist mindset make Hong Kong the perfect connecting point between East and West. Strong economic ties with the ASEAN countries as well as a trustworthy environment for Western investors make Hong Kong a fertile ground for businesses from all around the world. The combined understanding of both the Western and Eastern business and cultural mentality will prove to be beneficial in more ways than you would expect.
…especially if you are turning to Incorp China to help you out! We are offering a free initial consultation to help you figure out how to open up a company stress-free.
Hong Kong companies take less time to open in comparison to Chinese enterprises. More importantly, government institutions are considerably more straightforward and consistent regarding their requirements for opening an entity. In Mainland China, rules and regulations can change unexpectedly and abruptly, making it absolutely essential to have a team on the ground that is tirelessly checking up on your application and actively pushing it forward. On top of legislative changes, in China, it is common that institutions like banks or government bureaus will change their mind unexpectedly about a signature or document they require on top of what you were instructed to provide. Don’t let this discourage you as this is a commonly observed phenomenon, especially towards foreigners.
Opening a Hong Kong entity makes applying for a Chinese WOFE significantly easier. Hong Kong incorporation documents are filed in English as well as Chinese which speeds up the process of incorporating a company on the Mainland.
Setting up a limited liability company (LLC) in Hong Kong can protect you from lawsuits even in Mainland China. Since each shareholder of an LLC can only be held accountable for the capital they have invested and the Hong Kong company is liable for the registered capital in Mainland China, in case of a lawsuit, your personal capital outside of your business would be protected.
No doubt, a Hong Kong company can be highly beneficial to those planning to open up a company in China and even those who already own one. Nevertheless, if you are unsure or would like to talk to us about your specific situation. Don’t hesitate to contact us by calling us (+1 (561) 729 6508) or sending us an email ([email protected]).
Without any discussion, money and time are the most valued resource for business. For western companies, traveling to china can be an investment due to the utilization of this two resources. Think about the costs of traveling, lodge, transportation, and the time spent on meetings or any process like registration and permits application. This case is about how one of our clients has saved through our effective negotiations.
In this case we are not talking about the fees involved to get paperwork filled out and submitted to register a WOFE. We are talking about the clients’ travelling expenses to personally sign the documents in order to get them approved.
It just so happened that a US client of ours, a jewellery manufacturer, had to fly to China for business reasons unrelated to us. While his WOFE application was pending and his licenses were being processed, the company did not officially exist yet in China. However, Incorp China believes in seizing opportunities. Since the client was already on the ground we decided to visit a local bank branch who we frequently work with. Could we open up a bank account for the soon-to-be company saving the jewellery manufacturer the fare for a second trip across the world?
Usually it is absolutely impossible (even as a local Chinese) to get a bank account opened without the corresponding business license. With our local Chinese staff and a lot of patience, networking and preparation we were able to convince them how detrimental it is to this business to sign the required legal documents for a bank account right away. The bank account would be pending the readiness of the business license and tax certificate and be officially opened once both the WOFE business license and the tax certificate were approved.
If your company needs to get a service done quick, we will give it our best to deliver – just because, against all odds, it sometimes actually works. In this case we saved our client a few thousand US Dollars and a lot of personal time.
Read more about how we solve problems opening up bank accounts for foreigners
Convinced? Then take advantage of a free consultation! Call us today: +1 (561) 729 6508
Western companies face every day the struggles of having a split operation between Head Quarters and a Chinese manufacturing division. Complying with due dates, design specifications, proper storage, and shipping can become a nightmare. Obvious questions just rise when dealing with those situations. How do you guarantee quality and oversee the process cheaper than by hiring even more staff? How to effectively communicate with the production team? How to save the operation without sacrificing the budget?
Through many years, Incorp China had helped clients to overcome this struggle and here are the three main challenges you need to overcome when trying to conquer Chinese manufacturing.
Naturally, the factory order changed several times before the final product was agreed upon. In order to get everybody on the same page and organized instead of confused, make sure every detail is translated correctly and in a timely manner. Correct translation doesn’t guarantee accurate engineering though and you need to be sure those instructions are executed properly. Let’s say you’re a flower pots manufacturer. You need your product to be produced according to specific design-details and stored in a specific way and conditions to preserve the integrity of your product. Communicating these instructions during the production process is crucial.
A strong plan for logistics is key to success. You need to think about every detail affecting your production and how you can come over with an alternative plan. This particular plan needs to be designed with a wide perspective over your SWAOT’s analysis. Does the location of your production site a key factor in delivery? Are there potential threads due to climate conditions over the year that can affect both the production and delivery? Do you have alternative resources to deal with last-minute struggles? As we can see, logistic is one of the biggest challenges to face and can ruin your operation if you don’t plan it properly.
This is the most underestimated task and this is precisely the reason why is a challenge and it’s also related to logistic. You need to know which clearance and documents you need to have for transport and freight but also need to have a scope on how long you’ll be ready with it. Some products have a live period and getting stuck in your warehouse can end in huge losses for your business. Also, paperwork and documentation can delay your delivery affecting contracts and damage your reputation. As you can see, an eye for detail is indispensable. Risking paperwork not being compliant with China customs is not an option.
Letting us assist you with your business in China means you don’t have to look for multiple contractors to help you with aspects like factory quality control and help with logistics. With Incorp China you get full service in one stop.
We always look to provide the best support to our clients, but due its size, China can be an overwhelming country , so we understand when our clients are hindered to come directly to our office in Shenzhen. Just recently, one of our clients, a paper products manufacturer, was looking into moving part of his manufacturing process to the South West region of China. Since the team of three was on a strict time schedule they were not able to come to Shenzhen personally in order to meet with Incorp China’s team to discuss the bureaucracy behind such a move.
Therefore, Incorp’s CEO, Robert Fisch and two of his team members took a train, planning to meet the client in the city close to where they were looking at potential factories looking to provide an appropriate support. Since it is hard to stick to a specific time schedule with factory visits, the Incorp team needed to come to the airport to catch the client shortly before they would fly back to the US. Thankfully, everything worked out and the US clients had over an hour to discuss the procedures behind setting up an entity in China with Incorp China. A Wholly Foreign Owned Enterprise (WOFE) would allow the client to invoice other Chinese factories, in the local currency, Renminbi.
Taking such a long trip simply to meet a potential client might seem like an odd allocation of company resources. Incorp China, however, has built its success on establishing personal relationships and providing the quality service and support our clients deserve. Going the extra mile for our clients shows that we truly care and are prepared to help, no matter the obstacles.
Incorp China is about much more than just serving clients. We want to be a long term partner and support system to all our clients and bridge the gap between the Eastern and Western business world. Flexibility plays a huge factor in that, especially since China can be unpredictable in terms of its rules, regulations, and conditions for foreign enterprises. We have the experience and are prepared to deal with these challenges. Incorp China will assist you no matter where you are from, where in China you want to operate and how big or small your mission might be.
Are currently looking into expanding or moving your business to China? Let us do your paper work for you – so you can fully concentrate on your business. Call us for a free consultation today at +1 (561) 729 6508, or write us an email at [email protected]. We are looking forward to hearing from you.
Want to know how Incorp China help saving an oil platform? Click HERE to read the story.
It is no secret that the recent crackdown on money laundering has left foreigners struggling to open a bank account in China. As a result, it has become even more beneficial for foreigners, seeking to move or extend their business to China, to consult an agent on the ground. The reason why there are so many China consultancies on the market is because it’ is quite challenging as well as time and labor intensive to get a company approved. Only a few of these China consultants are as committed as Incorp China, connecting with the government bureaus and banks, forming friendships, and therefore getting our clients the service they deserve.
One of our most recent clients, a US software security company, had to open up a bank account after his company license had been approved. In order to do just that, our team went to one of the bigger China Construction Bank (CCB) branches located not too far from our office. Unfortunately, since banks had tightened their requirements over the past couple of months, our first request was denied. Why, is open for speculation.
As Robert Fisch, Incorp China’s CEO did not want our client to have to fly back to China in order to give it another try at another bank, he went into the branch again with two members of his team. At the CCB branch, he found the employee who had refused our application, talked to her, and tried to find out why our client got refused and what we could do to fix it. When this did not work out, he managed to find the account manager.
The account manager, respectful and courteous as the Chinese treat their guests, offered us tea and his time in the staff kitchen. There, the Incorp China team and he talked, tea, took pictures and we each showed interest in each others’ jobs, cultures, and languages. After a while, the account manager promised to help us in every way he could, but that he would first need to get approval from the branch manager. She, luckily, was on site this day.
The account manager was incredibly friendly and helpful and introduced us to the branch manager, who agreed to see us immediately. Again, the Incorp team were offered tea, we talked in the CCB branch manager’s office about this and that – starting with small talk but ending up talking about family, the beauty of China and how rapidly it has evolved in the past decades. The manager did not, however, clearly state how she was going to help us, despite being very friendly and enthusiastic about our visit. Nevertheless, she did make sure to let us know that she wanted to assist us in the process.
When we went to visit the branch a second time, the mood was slightly more dampened and the odds did not look like they were in our favor. Even a long meeting, talking about all the technicalities of the bank account opening procedure, did not change or clarify anything.
Unfortunately, for the following couple of days, there was honestly more confusion than progress. Nobody could really tell us what had gone wrong, what we needed to do to get the process going, or whether, in the end, they couldn’t do anything for us at all.
Therefore, our CEO headed back into the branch and had a meeting with all managers he could find on site together. After, yet again, some tea and chatter, the situation looked a lot better. We finally got a hint of what had gone wrong, and after ensuring the team at the bank branch that we would love to bring them more business, they understood that we were as serious about the legislations as they are. They agreed to restart the bank account opening process all over again – a clean slate – without the head of the client’s company having to travel to China again.
While this was time-consuming for our team, it got us connected with the CCB branch team near us, taught us yet another lesson about China’s bank requirements, and reminded us that with friendliness, patience, and a true passion for our field, every problem can be resolved. We are thankful for all of the China Construction Bank team’s time and effort and their dedication to their clients. Even more so we are proud to have resolved this issue for our clients and helped them to the best of our ability.
The trick to why all of these meetings with the managers of the bank’s branch where possible, and ultimately why they listened to us, was for Incorp China’s boss to speak Mandarin fluently. His China experience, consisting of well over 30 years and counting, gave us the insight into what is and what isn’t possible in such delicate situations, and, perhaps more importantly, displayed the legitimacy and seriousness of our business. It showed that Incorp China is helping both Western companies as much as the Chinese economy by bringing them here. We have been here for a long time and are intending to stay. This feeling of stability combined with our China knowledge has helped us more than once in negotiating a great deal for our clients.
Therefore, it is truly important and money well invested to have somebody on the ground in China who can provide this support to your business.
If you are currently looking into expanding or moving your business to China, let us do your paperwork for you so you can fully concentrate on your business. Call us for a free consultation today at +1 (561) 729 6508, or write us an email at [email protected]. We are looking forward to hearing from you.
Nationalities are a way of creating a sense of belonging. As soon as you are born, you are gifted one, sometimes two, nationalities. They play an important part in how you identify yourself throughout your life and they can come with – or prevent – great liberties. The problem with belonging to one nationality is that, as soon as you take a step beyond your mother land’s borders, you are a stranger. It is human nature to protect what we know and recognize and seek distance from what we see as foreign and unknown. Whether executed consciously or subconsciously, this behaviors is deeply engraved in our DNA.
It comes at no surprise, therefore, that institutions within one country make it their duty to protect their own citizens as best as possible from everything and everyone outside national territory. Foreigners are therefore naturally subjects to greater controls, restrictions and more tightly supervised legislations.
Coming to China will illustrate this point precisely. Being treated like this by banks and bureaus is neither meant intrinsically bad nor malicious, but can be very frustrating and drag out simple tasks seemingly forever.
One of our US clients, providing HR services for companies worldwide, was experiencing grave trouble with banks in Shanghai. While we cannot name the exact cause for this problem, it essentially prevented our client to pay their staff in multiple countries as a large part of their profit was stored in the Shanghai bank accounts. Incorp China had the entire team on their phones talking to banks in all time zones – Shanghai, Singapore, the United States and the United Kingdom – day and night. It was our goal not only to find a short term solution and get the client’s staff payed with whatever bank accounts were accessible, but even more importantly, smooth things over with the Shanghai branch and regain access to the client’s account. The issue was resolved, salaries were payed on time and the Shanghai account was reopened for transfers in and out of the country. Incorp China is continuing to look after this client’s staff all over China and helps the individual branches manage their HR payroll processes.
Contact us to find out how we can help you. With over 30 years experience in China, we have the knowledge and passion for the field to support you and your business.
Last week, three Incorp China team members and the CEO, Robert Fisch, headed to the Shenzhen tax bureau to help one of our US clients on shuting down their entity in China. When shutting down a foreign company in China, the tax bureau has to issue a “notice of cancellation of tax registration”’ for the Foreign Trade & Economic Cooperation Bureau. This is a rather difficult and time intensive procedure: The company owner, or a representative thereof, has to physically visit the local tax bureau in order to fill out and hand in the requires paperwork. While some documents are in English, the majority of the procedure will necessarily be dealt with in Mandarin. This highly bureaucratic task involves dozens of different forms that are each tailored to the nature of your business as well as the reason for its closure.
Our team had spent the days prior to our visit of the tax bureau preparing the individual documents. Good preparation, however, never actually guarantees that your paperwork will be dealt with quickly. Often, you will be asked to return with special, additional documents. The Incorp China team knows from experience that establishing a good relationship with employees of the bureau will make this procedure as effective and stress free as possible for both ourselves and our clients.
As we arrived at the bureau we headed to one of the front counters in order to find out who in the building would handle a case like ours. We were directed to an office on the 6th floor. After some chatting and having explained the purpose of our visit, it was obvious we had been directed to the wrong office. A few doors down the hall, the government official was willing to process our case. Our CEO, Robert Fisch, didn’t leave it at that.
He found out who the immediate superior of the tax officer was. This allowed us to talk to him personally and show our respect for his work and his country. Due to Robert Fisch’s fluency in not only Mandarin and Cantonese, but his added knowledge about numerous Chinese dialects, allowed him to prove that he was not just any “laowai” – a foreigner. Showing genuine interest and knowledge about China, builds trust, shows respect, and often gets a chuckle or two out of your conversation partner if you happen to be able to introduce yourself in the respective home dialect. Knowing how to sing a couple traditional, Communist songs has never failed to lighten the mood. After all, people are more likely to help if they know you are a friendly, trustworthy and interesting soul.
The team returned to the office of the official who would be processing our paperwork. After some more chatting and giving face to a couple of his colleagues, we finally returned to the head of the department once again. This last visit was just to ensure that everybody was on the same page. Especially knocking on the head tax officer’s door, a second time proved beneficial. Even though we only came to thank him again for his help, saying our goodbyes and paying respect to how well he is running his department, he immediately grabbed the phone to call his co-workers, who we had just seen a minute ago, to ensure them to process his friends’ request as soon as possible.
Our work was done, hands were shaken and we headed back down to the crowded ground floor. It took us the entire morning but was well worth it. Our clients are getting their paperwork in a timely manner and our office has formed a good relationship with a new department within the tax office for future collaboration.
Incorp China offers special attention to its clients: we are not just sending your documents off to be processed by government departments which we have never seen from the inside. We try our best to constantly create and enforce our relationship with different bureaus in order to provide the best service possible for our clients.
Effective 1st July 2017, the State Administration of Taxation extended its requirements for fapiao issuance. All companies need to add their taxpayer identification number on all issued VAT tax invoices (fapiaos) in addition to the original information. The notice was given under the Taxation Notice No. 16 of 2017.. 16 of 2017.
Originally, a fapiao only had to include four components. The paying company’s name, its company address, a description of the good or service being sold as well as its price, and the government issued red stamp. The latest regulation entails that those receiving the receipt have to provide their company’s unique taxpayer identification number in addition to the original requirements. This law, at first, only applied to VAT fapiaos that were intended for tax deducing purposes. Now, however, it includes all normal VAT fapiaos as well. This adjustment in the legislation is supposed to aid the Chinese government in tracking a company’s exact income and expenses in an effort to eliminate tax fraud.
To find out what your company’s taxpayer identification number is, have a look at your business license. Every company receives a unique taxpayer ID number upon registration for tax filing purposes. In case you are the owner of multiple different companies, you will have received a separate taxpayer ID number for each.
No, only companies receive a taxpayer ID number upon their registration.
Incorp China advises all its customers to have a physical or digital note on them clearly stating the company’s name as well as the taxpayer identification number. Having this information both in English and pinyin will make fapiao issuance as easy and hassle-free as possible. The new taxpayer number has to be filled into the line located right underneath the company’s name. Every time you ask for the issuance of a fapiao, please double-check whether the taxpayer identification number has been included and whether it is correct. If either isn’t the case you will not be able to record the fapiao in your accounting books. This means you will not be able to deduct the fapiao’s value from your taxes.
If you have any further questions or concerns, please call us under +1 (561) 729 6508 or write us an email at [email protected]
While every business needs to keep a tight grip on their expenses, some investments do truly pay off. One of such investments is hiring a local company in China to represent your business here. Why? Because Chinese bureaucracy and law is of complicated and ever-changing nature. Even more importantly, here, nobody stands a chance doing paperwork over the phone. Doing business face-to-face remains the most effective and respectful after all.
Incorp China was just retained by a Human Resource company based in the US to register their consulting WOFE (Wholly Owned Foreign Enterprise) in China. As part of establishing a WOFE, the company is required to own a bank account at a Chinese bank. Until the recent crack down on money laundering by the central government, representatives were able to open up bank accounts on behalf of their clients as long as an attorney was present.
Now, however, the client himself has to make the request personally, which is not only a time intensive procedure but often impossible, as our clients tend to be based overseas. This issue doesn’t just affect businesses on Chinese main land but equally in Hong Kong. Since Incorp China is a small boutique consultancy our management is able to personally oversee every project we take on.
In this case Incorp China’s CEO, Robert Fisch, went directly to the bank manager’s office to first establish guanxi over tea, talking about their families and personal life, before addressing the issue of the bank account. Having initiated a personal connection, the bank manager instructed his employees to open the account for Incorp China’s client that same day even though the customer could not be present.
While this case reflects the benefits of hiring a local consultancy very well, there is a deeper reason why a company might employ an advisory team for business in China. Rules and regulations are constantly changing in every country around the world. Other than in the Western hemisphere, however, laws made in Beijing when funnelled down to the provincial level, are being translated and reinterpreted differently in every part of the country. Fully understanding the impact of such non-transparent law on individual companies, and arguably even more importantly, knowing what legal changes to expect in advance, is crucial to every successful enterprise. Incorp China’s task is to stay informed and ahead of the game so we can give your business the best advice for its growth and success.