Expand Business in China

Global Upside helps businesses expand into China by providing talent acquisition, human resources, accounting, payroll, tax, incorporation, and professional employer organization (PEO)/employer of record (EOR) services. Our comprehensive offerings create an end-to-end solution that helps you establish your business and optimize your operations, all while maintaining compliance with Chinese laws and regulations.

The hiring and incorporation processes in China are often complex, time-consuming, and involve numerous legal and compliance challenges. Global Upside simplifies these processes and lifts the compliance burden from your business. Our teams have the experience and expertise required to help you establish a legal entity in China. We also offer PEO/EOR solutions to companies interested in hiring employees quickly, without setting up a legal entity in the country.

Capital City

Beijing

Currency

Renminbi (Yuan (¥))

Language

Mandarin, Cantonese

Government

One Party State (Communist Party)

Country Overview

Situated in East Asia, China is one of the world’s oldest civilizations. It is the world’s most populous country with around 1.4 billion inhabitants. China has an entrepreneurial economy and is one of the best places to do business due to its low costs.

  • China ranks as the 2nd largest economy in the world by nominal GDP
  • China ranks as the largest economy in Asia
  • China has the world’s largest total banking sector
  • China is the world’s largest manufacturer and exporter of products
  • China is the world’s largest producer of natural resources (coal, gems, various metals)

Legal Entity Setup

The major business entities available in the country are:

  • Branch offices
  • Representative offices
  • Foreign-owned establishments
  • Cooperative joint undertakings
  • Equity joint undertakings
  • Corporations restricted by shares with foreign assets
  • Holding companies

China’s Company Law regulates two kinds of business entities:

  1. Limited liability companies
  2. Companies limited by shares

 

Companies:

Limited Liability Company (LLC)

A limited liability company (LLC) is the most common and preferred form of legal entity setup. The advantages are:

  1. Limited Liability – the stockholders’ or owners’ private resources remain protected from the losses and liabilities that the company may incur.
  2. Legal Entity – the certified LLC enjoys legal rights and security. Assets that may include intellectual property are protected by Chinese law. However, in cases of potential breach or infringement, a company’s IP may be subject to litigation. The stakeholders of an LLC are responsible to the extent of their confirmed capital contributions.
  3. Regulatory Regime – in China, LLC registration is less complex than registration processes for other types of entities. Compliance standards and regulatory requirements are also more lenient. To transfer the ownership of the company, the owner can simply transfer his or her shares. That said, it is mandatory that the majority of shareholders provide their consent to the handover. This aids an easy exit and governance, thus providing better control over the proprietorship of the business, its scope, and its assets.

Joint Stock Limited Company (JSLC)

A joint stock limited company (JSLC) is a company that is limited by its shares (CLS). The process of setting them up as governing compliance is inflexible as compared to the LLC.

Partnerships:

General Partnership

A general partnership can be started by two or more general partners who bear unrestricted joint responsibility and several obligations for the debts of the enterprise.

Limited Partnership

A limited partnership is formed by a group of general partners and limited partners. Limited partners only bear the obligations for the corporation’s debts to the extent of their capital subscription.

Special General Partnership

A special general partnership bears a resemblance to a general partnership, excluding the fact that it must be an expert service establishment that offers services that require professional knowledge. Unlike a general partnership, this form of partnership safeguards its co-partners from unrestrained liabilities in cases of gross negligence or deliberate wrongdoing committed by the other partner(s).

Provisions of the Agreement

The distribution of revenues and sharing of capital losses of the partnership establishment must follow the provisions of the agreement.

Human Resources

According to Article 12 of the China Labor Contract Law, there are three types of employment contracts:

  • Fixed-term contracts
  • Open-term contracts
  • Specific-task contracts (which fix the accomplishment of detailed tasks as the tenure to end the bond)

With reference to Chinese labor law, the following information must be included on all employment contracts:

  • Employee’s name, address, and ID number
  • Name and address of the company
  • Legal representative of the company
  • Salary and compensation details
  • Job description
  • Location of employment
  • Working hours and leaves
  • Probation period or term

Payroll

Wages are normally paid once a month, with some corporations paying the salary in 13 installments. Paydays are between the 10th to the 20th of the subsequent month.

Accounting

The accounting rules in China (Chinese Accounting Standards or CAS) differ from the International Financial Reporting Standards (IFRS). Legal establishments in China must take note of the differences and adjust their accounting processes in the country accordingly.

Tax & Compliance

Corporate Tax

The tax rate in China is 25%.

Value Added Tax (VAT)

The VAT rate in China is 13%.

Data Privacy

The personal data protection guidelines state that no one can unlawfully collect, use, process, or transfer any personal data of an employee. Employees must give consent before their data is used.

As per the recently passed Cyber Security Law (CSL) of China, a network operator, before collecting any personal information about a user, must clearly mention the purpose and use of the data collection.

Anti-Bribery & Anti-Corruption Law

The Communist Party of China (CPC), along with the state council, has furnished constitutional disciplinary guidelines that regulate bribery and corruption of government officials. Strict rules and penalties apply for both parties – the party that offers a bribe and the party that accepts a bribe. Criminal law forbids:

1. Bribery of Public Officials:

For Individuals:

i) Imprisonment for 10 years

ii) Confiscation of assets resulting from bribe

iii) Additional fiscal penalty

For Businesses:

i) Imprisonment for up to 5 years

ii) Additional criminal penalties imposed on the company

2. Bribery of Private Officials

For Individuals:

i) Imprisonment for up to 10 years

ii) Additional criminal penalty

For Businesses:

i) Imprisonment for up to 10 years

ii) Additional criminal penalties imposed on the company