Setting up a foreign company in China (now known as a Foreign Invested Enterprise “FIE” but previously referred to as a wholly owned foreign enterprise, “WFOE”) is getting easier than it used to be. You can see the effort and commitment China is making to simplify and speed up the process and, above all, remove the formal paid up capital levels which, from my experience was a major deterrent, at least for SMEs and entrepreneurs.
As outlined in this helpful article by FDI China, “Chinese Company Law was amended in 2014 to specify no fixed minimum capital for a WFOE to be established. Prior to this, it was common to see local authorities requiring a minimum of 500k to 1 million RMB capital for consulting and trading WFOEs (and more for manufacturing WFOEs). In some specific industries, there are still minimum levels required, but these are in specialised areas usually with financial obligations”.
The key points are:
- There is no defined minimum capital requirement any more
- Capital is still required but there is more flexibility to set your own level based on a reasonable estimate of what you’re going to need to operate the business
- You can define your own capital injection time frame rather than have it imposed on you
- It’s important to get this right from the start as it will be complex and time-consuming to change capital levels after approval.
For a long time, China has found it difficult and frustrating to persuade foreign companies to go to the trouble of establishing a local China subsidiary, due to the complexity and onerous requirements of their local bureaucracy. You can see that they’re trying very hard to make it easier.