Registered Capital
On we go to the second cost centre for foreign companies aiming to open a company in China: Registered capital.
It's not in China's interest to let foreign businesses open a company if they aren't sure that there is sufficient capital in place to keep it running, create jobs, and pay staff on time. This is why the government usually insists on an amount of registered capital being committed to any new WFOE incorporation.
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Depending on which industry you're in, you're likely to be required to provide the following registered capital levels:
Manufacturing: 1,000,000 RMB
Trading: 500,000 to 1,000,000 RMB
Consulting: 100,000 to 500,000 RMB
This may not be required 'at once,' and often the authorities will put a time limit on when the amount needs to be invested in China, for instance, within one year. This gives new companies time to build up funds in a Chinese bank account, although this allowance is less likely in fields like manufacturing where many jobs are riding on the employer, and the investment acts as a 'safety net' for their salaries were the company to hit a rocky patch.
Also in some regions of China, the local governments don't insist on any registered capital at all in a move that is meant to level the playing field between foreign companies and their local counterparts who don't have to provide it. The thinking behind this is that it may spur more job creation by encouraging ever more foreign companies to set up businesses in China, even smaller ones.
Rounding Up The Costs
Foreign companies could pay as much as RMB100,000 to set up their WFOE if they use an international law firm, but this is seriously overkill for most organisations!
Typically you can have your WFOE set up by a professional outfit for around RMB10-20,000, and this will get you speed, security, and excellent local knowledge. You'll also be aware of the exact amount of registered capital that you will need to put up as the local China business services provider will know your area's requirements.
Cutting corners and trying to save a meagre RMB5,000 or so here and there is likely to cause far more stress and hassle than it's worth.
Their costs can be high. The amount that you would have to pay may be as much as RMB100,000 for each company that you wish to incorporate in China. While this covers everything, the high cost makes it prohibitive for many SMEs.
You may also face a situation where the international firm¡¯s representatives aren't as 'hands-on' as a smaller firm's employees. You may not be kept informed of the progress due to the sheer number of clients they're handling at any one time. Some people prefer to keep close tabs on their project, so an international law firm may not be the best choice.
Cutting corners and trying to save a meagre RMB5,000 or so here and there is likely to cause far more stress and hassle than it's worth.
Conclusion
While dropping huge bundles of cash on just opening your business in China is not a good use of money, relying on trusted local experts to set up WFOEs cheaply, quickly, and correctly, is a good use of funds, especially when costs are typically affordable.
Are you interested in starting a business in China? Does a Wholly Foreign Owned Enterprise sound like it's the right option for your business? What kind of budget do you have to open your China company? Contact Yaxin, answer for you.
