Opening an office in China

Question posted by jeremy swinfen green, on behalf of amberlight in London

I run a design company. To what extent would it be a) legally necessary and b) advisable to have a local partner were I to open an office in China? Does the answer depend on the nature of the office in China. For instance are requirements less stringent if I simply have a sales representative in China rather than having people who undertake design work there.

In addition would it suffice to have an operation in Hong Kong or Taiwan, or would I be better advised to open an office in mainland China?

Posted:
Report inappropriate content

Patrick Li, on behalf of UK Trade & Investment Hong Kong in Hong Kong.

Hi Jeremy,

With regards to setting in China, my opposite number in China will be able to provide details shortly. In the interim, you may wish to take a look at the various options in establishing a presence in China at www.cbbc.org/guide/setting_up/. This is the CBBC (China-Britain Business Council) advice on setting up in China.

Many companies do use Hong Kong as a gateway into China. This is especially so for SMEs as Hong Kong provides a relative easy place ie similar legal and accounting structures, use of English is common in local business community etc for overseas companies wishing to set up here. Hong Kong also serves as a good testing bed as it is a good way to see how well your services are received. One can then fine tune one's business model and offerings before exploring the China market. In addition, Hong Kong and China operate the Closer Economic Partnership Agreement (CEPA). For instance, service suppliers in Hong Kong enjoy preferential treatment when setting up business in various service sectors in mainland China. Computer & related services is one such service sector which Amberlight may fall under. Further details can be obtained at www.tid.gov.hk/english/cepa/tradeservices/trade_services.html.

Obviously, there are pros and cons to setting up an operation in Hong Kong. You may wish to contact Invest HK (www.investhk.gov.hk), the government's agency tasked to assist overseas companies in establishing a presence in Hong Kong.

I hope the above helps and should you require further details, please do not hesitate to let me know.

Best regards,

Patrick - UKTI Hong Kong

Posted:
Report inappropriate content

Kegang Wu, on behalf of BCC LinkToChina in SL1.

Hi Jeremy,

In your type of business, you can either set up a limited company or a representative office. In both cases there is no legal requirement to have a local partner. There is slight difference in the procedures / paper work of gaining the approval and registration.

Whether it is advisable to have a local partner, it is purely a business case depending on what your circumstance and requirements are and what can a partner bring to your operation, i.e if a partner can provide certain resource or expertise you don't currently have, which benefits the local operation.

Selecting a location for a design business will depends on how you match your design expertise and track record with sector and geographical demands in a Chinese location. It is a case specific question. Happy to discuss further over the phone.

Dr. Kegang Wu, BCC LinkToChina Programme
(www.linktochina.org)

Posted:
Report inappropriate content

Jeremy

I realise you asked your question a while ago, and you may already have decided how you want to proceed in China. However, if you would like a chat about the various options open to foreign companies in China, I'd be happy to discuss with you.

Lise Bertelsen
China Business Adviser
China-Britain Business Council
www.cbbc.org

Posted:
Report inappropriate content

Peter Curnow-Ford, on behalf of Viatec Associates Ltd in WC1N.

Hi,

In addition to all the good advice already given, you should also consider the business objectives you have:

- if the primary business is on the mainland then eitehr a mainland office or a HK office will work, I would not suggest Taiwan.
- what do you want for the future of this company, will you wish to repatriate profits or re-invest locally
- a sales rep office or full company will determine what you can or cannot do, if you wish to build local value and either sell it on or enter into a JV then a full company is better

etc.

The next is the location, where are your primary customers, Shanghai, Beijing or in the technology/manufacturing haven of Shenzen. Latter would make HK a better bet.

Hope that helps.

Peter

Posted:
Report inappropriate content

Jeremy,

Assuming your intention is to secure orders from China as opposed to carrying out design work in China, the choices are to set up (i) wholly owned foreign company in China; or (ii) representative office in China.

The requirements and costs for (i) are stringent and higher that those for (ii). On the other hand, activities of a representative office are restricted, e.g. it can only engage in business promotion and cannot invoice clients. Invoices must be in the name of the foreign company and in foreign currency.

We have seen many European companies incorporate a Hong Kong company as a bridge between the China practice and UK holding company. Such a structure takes advantage of (a) double tax arrangement between China and Hong Kong and (b) low tax rate in Hong Kong.

If Amberlight aims to test the water in the China market, it is suggested that you set up a Hong Kong company which holds a representative office in China. The representative office can be replaced by a fully operated company down the track when the business grows.

Regards,

Erica Xiong
Russell Bedford Hong Kong Limited
ericaxiong@russellbedford.com.hk
Tel : (852) 2851-0260 Ext. 303

Posted:
Report inappropriate content

Hi Jeremy,

If you still need to open an office, either representative office or setting up a new company in China, just contact us at www.lbsc.com.cn. We have assisted many foreign companies relocate their busniness in China.

Cheers.
Charles

Posted:
Report inappropriate content

To respond to this question, please Login or Register