• June 8, 2018

How to Open a Subsidiary in China

Having a business in China means taking advantages of a prolific market that offers a wide range of opportunities in many sectors of interest. The legislation related to foreign investments is permissible and allows foreigners to set up different kinds of businesses.

One of the most preferred business entities by foreign entrepreneurs in China is the Foreign Invested Enterprise or the subsidiary as it is known. This type of structure lets foreigners have 100% ownership and, more than that, the registration process is quite simple if support in this sense is provided by legal advisors. A subsidiary in China will only activate as a WFOE (Wholly Foreign-Owned Enterprise), a specific business form that addresses to foreign investors.

How to Register a Subsidiary in China

Subsidiaries are independent legal entities which are registered in compliance with the Companies Act and the Commercial Code in China. Even if such business structure will place the activities under a different name, the parent company imposes the internal regulations. Among the mandatory requirements for establishing a subsidiary in China, the most important ones are the following:

  • applying for a business license with the Ministry of Commerce with the People’s Republic of China and with the State Administration of Industry;
  • drafting the Articles of Association (with information about the owners, business scope, activities, etc.) with the Trade Register in China;
  • providing the certificate of registration of the parent company from abroad that wants to open a subsidiary in China;
  • details about the board of managers of the subsidiary in China;
  • information about the bank account opened in China for the minimum share capital.

It is good to know that a name verification is suggested before creating the subsidiary’s documents, in order be sure about the validity of the name. Likewise, investors should know about the restricted business areas in China like basic telecommunication, securities, medical institutions, etc.

What Are the Advantages of a Subsidiary in China?

Subsidiaries in China can be easily registered by at least one stockholder and the incorporation procedure has fewer formalities. Moreover, subsidiaries in China have protected intellectual properties, separate management, tax deductions and much more.

Opening a subsidiary in China is less bureaucratic, a reason why foreign companies easily enter the market.