There are six ways to enter China market: 1. WFOE; 2. Joint-Venture Enterprise; 3. Processing Factory; 4. Rep. Office; 5. Bonded Trading Co.; 6. Business Co. Due to different purposes, foreign investors choose different investment structure. Setting up China Rep. Office needs no paid-up capital, and it is easy to set up and remove. Compared with Business Company, it is much easier to operate. And illegal trading company registered under China local resident can be immediately liquidated, and changed into Business Company for trading in retail/wholesale. These are really wise movements for your trading in China.

Unlike WFOE which has complete legal entity such as Board of Directors, Registered Capital & Paid-up Capital, foreign processing factory registered under China local resident has no invoice itself, and can only be used for contracts purchase / sale. As the ratio of domestic selling to buying greatly increases, big obstacle exists for entering. Most processing factories have been transferred to WFOE. Now, except processing factory & WFOE, other enterprise types can be 100% foreign owned. In 2006, released by the new Company Act, one shareholder is able to complete company / factory formation processes, and there will be no “Board of Directors”, therefore getting rid of the trouble in borrowing local person. In aspects of registered capital, except rep. office/ branch, other enterprise types are set up at 73,000 USD (500,000 RMB) by law, varied from different cities. Different investing areas & industries will cause different tax incentives for foreigners.

The minimum registered capital is 73,000 USD (500,000 RMB) for foreign enterprises, varied in city. e.g. 1 million USD in Dongguan, 1 million HKD in Shenzhen.

Foreign reps. in China can engage in import and export trade through bonded warehouse.

Value Added Taxpayer: General Taxpayer (17%) & Small-scale Taxpayer (3% since Jan.1, 2009). In one tax-paying year, sales turnover of manufacturing enterprises over 1 million or turnover of retail/ wholesale enterprises over 1.8 million can apply for General Taxpayer.

High-tech/Environment Protection/ Infrastructure/Agriculture, from gaining the first income, can enjoy 3 3-year free and 3-year half tax incentive. Manufacturing enterprise set up before Dec.31, 2010 in the west 12 provinces and 3 autonomous prefectures go on to enjoy 2-year free and 3-year half tax incentive.

Since Jan 1, 2008, China has carried out unified tax rate of 25%. 20% for small-scale enterprises, 15% for New and High-tech industries and western 12 provinces (Guangxi/ Chongqing/ Sichuan/ Shaanxi/ Yunnan) as well as 3 autonomous prefectures. Enterprises with foreign investment set up before March 16, 2007 have 5 years tax transition period (progressive rate at 18%/ 20%/ 22%/24%/25%).

After applying distribution right, trading companies in bonded area can set up branch for business outside bonded zone. Since May 2006, it is forbidden to set up rep. office but branch in mainland China.