Opening a Company in China: GEOS Guide for Global Expansion

This article is apart of our weekly series associated with the The Global Subsidiary Index. The series is designed to help businesses identify the best countries for establishing a subsidiary based on key operational factors. GEOS provides a data-driven ranking of jurisdictions worldwide, assessing across 40+ criteria to bring you insights into global expansion opportunities.

Each country on the index is scored on an overall score out of 100, with each individual criterion out of 5 or 10. Higher scores indicate a more favorable environment for businesses. By leveraging these insights, companies can make informed decisions on where to establish a legal presence.

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China is entering a new phase of growth, and it’s not business as usual. As the country moves into its 15th Five-Year Plan (2026–2030), innovation, resilience, and security now drive economic policy. AI, advanced manufacturing, and tech self-reliance are shaping how companies operate, manage data, and structure their presence on the ground.

Recent momentum in China’s AI sector makes this shift clear. Breakthroughs from firms like DeepSeek and Alibaba Cloud highlight deep talent, strong policy backing, and rising domestic capability. At the same time, tighter rules around data and governance raise the bar for foreign entrants.

Expanding in China today takes clear intent and careful planning. Location, entity structure, data strategy, and long-term commitment all matter. This guide explains what to expect and how GEOS helps companies expand into China with more control and fewer surprises.

Why Should You Expand to China?

China still draws global attention as an expansion market for a reason. Few countries offer the same mix of scale, infrastructure, and industrial reach. For companies that plan ahead and know the risks, China can still support meaningful long-term growth.

Scale, Infrastructure, and Industrial Depth with Elevated Risk

China remains one of the few markets where size and industrial capacity can genuinely change how a business grows. Its GEOS Global Subsidiary Index score of 54.4 reflects that balance. The upside for companies expanding in China is meaningful. The operating environment takes more work.

Scale that supports real volume

With a population of 1,412,914,088, China offers one of the largest labor markets and consumer bases in the world. That scale supports high-volume production and broad distribution, while the size of the domestic market allows many companies to grow locally before relying on exports.

For foreign investors, it is essential to conduct market research to understand local demand and competition before entering the Chinese market.

An economy built on heavyweight industries

China’s economy is anchored by industries that operate at massive scale.

• Construction and infrastructure remain dominant, supported by ongoing urban development and public investment.
• E-commerce and mail-order retail now rival construction in revenue, driven by advanced logistics and widespread digital adoption.
• Software development ranks among China’s largest industries, reinforcing its shift beyond traditional manufacturing and into higher-value activity.

This mix gives foreign subsidiaries access to dense supplier networks and end markets in the same geography.

Infrastructure that makes scale workable

China earns 5/5 for communications infrastructure, backed by extensive transport networks and advanced digital connectivity. This reduces the friction of operating across large regions and helps keep transaction costs down.

Research also suggests strong telecommunications infrastructure supports innovation by improving information flow, governance, and visibility, particularly for private and technology-focused firms.

Productivity concentrated in key hubs

China’s GDP per capita reached 13,303.1 in 2024, driven largely by output in major commercial centers. These hubs combine talent density, supplier access, and infrastructure, which is why many foreign subsidiaries anchor operations there first.

Where risk reshapes the expansion case

China’s overall score is pulled down by factors that increase complexity for foreign companies expanding in China.

• Political risk is the defining constraint. A 1/5 score reflects policy shifts, regulatory intervention, and ongoing geopolitical tension.
• Growth is moderating. GDP growth is expected to settle into the mid-4% range, earning a 3/5 growth score.
• Operating friction is higher. Strong state involvement, regulatory complexity, and rising debt levels increase compliance demands and execution risk.

Local expert insight

China is not a market to test casually. The scale and industrial reach can unlock serious growth, especially for companies that rely on volume, dense supply chains, or advanced manufacturing and digital ecosystems. 

Success usually comes to businesses that commit for the long term, understand the regulatory landscape early, and build strong local support and risk controls into their structure from the start.

Tax & Regulatory Environment

China’s tax and regulatory environment is well-defined, closely monitored, and actively enforced. All businesses in China, including foreign-owned enterprises, must register for business tax and comply with local tax regulations by registering with the tax bureau. The rules themselves are not opaque, but compliance requires ongoing attention, documentation, and local expertise.

The Chinese Company Law serves as the legal framework that governs company formation, registration, and ongoing compliance in China.

How China scores on tax and compliance

China lands in the middle of the pack overall, with a few clear pressure points.

• Corporate Tax Rate Score: 6/10. The standard corporate income tax rate sits at 25%, which is competitive globally. A wide range of incentives can lower the effective rate to 15% or even 10% for qualifying industries, regions, and business types. Companies may also be eligible for tax benefits based on their registered capital and business activities.
• Tax & Accounting Score: 5/10. Tax rules are clearly defined, but compliance is detailed and continuous rather than occasional. Value Added Tax (VAT) in China is typically 13% for goods and 6% for services. China has signed over 100 double taxation treaties to help foreign investors avoid double taxation.
• Compliance Reporting Score: 2/5. Frequent filings, supporting documentation, and audit readiness create real administrative overhead.
• Overall Ease of Doing Business Score: 5/10. The system works, but it is procedural, structured, and time-intensive.
• Data Management Laws Score: 1/5. This is the biggest drag on the overall score and a major planning consideration.

Corporate income tax in practice

China applies corporate income tax based on residency and source of income. Tax resident enterprises are taxed on worldwide income, while non-resident enterprises are taxed on China-source income or income connected to a Chinese establishment.

The headline 25% CIT rate is often not the rate companies actually pay. Preferential rates apply to high-tech enterprises, software and integrated circuit firms, technology-advanced service enterprises, pollution control businesses, and qualifying small enterprises.

Regional incentives also play a major role, with multiple free trade zones, innovation zones, and development areas offering 15% rates through defined time windows. These incentives are attractive, but they come with strict qualification criteria and ongoing assessments. Companies expanding in China should assume regular reviews rather than one-time approval.

Ongoing filing and audit expectations

China’s tax administration is active and detail-oriented. Companies file provisional tax returns monthly or quarterly, followed by a full annual filing supported by a local audit report. There is no fixed audit cycle, and authorities select cases based on risk indicators.

Transfer pricing, related-party transactions, and cross-border payments receive sustained attention. Tax authorities regularly review service fees, royalties, and equity transfers, and they apply a strong substance-over-form approach. Structures that lack clear commercial purpose face a high risk of challenge, even if they appear technically compliant.

Data regulation is the real constraint

China’s data laws reshape how companies run HR systems, internal tools, and cross-border reporting. The Cybersecurity Law, Data Security Law, and Personal Information Protection Law form a layered framework that affects both local operations and global systems.

Key expectations often include data classification, security assessments, localization planning, and regulator engagement. Regulatory updates move faster than many enterprise IT projects, which can create timing and execution risk if data strategy is not addressed early.

Local expert insight

China’s data rules touch HR systems, reporting, and internal tools right away. Data localization is something to sort out early, not after setup. The tax system can be competitive for the right industries, but ongoing compliance and scrutiny come with it. Teams that plan ahead and rely on local expertise usually avoid the biggest surprises.

Incorporation & Setup Essentials

Incorporating in China is structured, procedural, and closely reviewed by regulators. Most foreign companies should plan for a 2–3 month company incorporation timeline, covering document preparation, certifications, company registration, and key post-incorporation filings.

The company incorporation process in China involves several steps, including choosing the appropriate business entity, reserving a company name, preparing notarized documents, securing a registered address, and obtaining necessary approvals.

Companies expanding in China must submit Articles of Association and investor documents to the local SAMR for business license approval. The company name must follow a specific structure and receive approval from the State Administration for Market Regulation (SAMR). The process is reliable, but delays are common when early decisions are misaligned with local requirements.

When discussing registered address requirements, note that a physical office lease is usually required when registering a company in China, although virtual options exist in some zones.

What drives setup complexity

Several factors consistently shape how smooth or challenging incorporation will be, starting with the selection of the appropriate business structure. Choosing the right business structure is crucial for compliance, control, liability, and defining the business scope.

• Licensing requirements (2/5). Business scope selection is one of the most important early decisions. Authorities review scope carefully, and activities outside the approved scope are not permitted. Changes later are possible, but often slow and costly.
• Resident director expectations (3/5). There is no strict nationality requirement, but local representation is commonly expected. A locally based director or representative can help with regulatory interaction and ongoing compliance.
• Share capital expectations (3/5). While there is no statutory minimum, authorities and banks expect capitalization that matches the scale of operations. Under-capitalization can delay hiring, licensing, or bank approvals.
• Registered address requirements (3/5). A physical office address is required at incorporation. A physical office lease contract is usually required for company registration, and foreign investors must provide a registered address lease agreement for at least one year.
• Government systems (3/5). Digital portals exist for filings and tracking, but approvals remain manual and sequential. Timelines often depend on the responsiveness of local authorities.
• Documentation and travel (2/5). Original documents, notarization, legalization, and in-person steps, particularly for banking, remain part of the process. Overseas investors must have their certificates, such as the certificate of incorporation, certified by the Chinese Embassy.

In China, foreign investors often face multiple legal structures and industry-specific pre-approvals, which can complicate the setup process.

Licensing and business scope

Every foreign company expanding in China must obtain a business license before operating, opening a bank account, or signing contracts. The company’s business scope must be clearly defined when opening a company in China, as this limits operations and is strictly enforced by authorities.

Clearly stating the company’s business scope on official documents is essential for legal compliance and determines the authorized range of business activities.

All companies in China must register with the local Administration for Market Regulation (AMR) to obtain a business license. The company’s business license displays the registered capital, the company’s business scope, and other key registration details.

Many industries also require additional administrative licenses, which vary by sector and location. Professional services, technology, and other regulated activities face closer scrutiny, making business scope accuracy critical from the outset. After obtaining a business license, businesses must register with the State Taxation Administration and relevant customs authorities in China.

Registered capital planning

China’s subscribed capital model gives companies flexibility, but it also places responsibility on shareholders to plan realistically. While there is no statutory minimum, unlike Hong Kong where there is no minimum capital requirement at all, China still requires a defined capital amount during company formation.

China no longer enforces a statutory minimum registered capital for most businesses, but the registered capital amount must be defined when forming a company in China.

Recent Company Law updates require subscribed capital to be fully paid within five years of incorporation, increasing the risk of setting amounts that are either too low to sustain operations or too high to manage liability. Adjusting capital later is possible, but involves time-consuming approvals.

Local expert insight

Choosing the wrong business scope when expanding in China often leads to licensing issues later and may require a costly entity amendment. Companies that align business scope, capital levels, and licensing strategy upfront typically move faster and avoid unnecessary delays.

Financial & Banking Considerations

Banking and capital movement are often the most complex parts of operating in China as a foreign company. Companies in China must open a corporate bank account to handle capital injection and daily operations, typically through a capital account, which is essential for receiving and managing foreign direct investment during company setup.

The financial system is technically advanced, but controls around capital flows, compliance, and documentation add friction at almost every step. Early planning here can prevent long delays later.

When opening a corporate account, foreign companies can choose between local banks, such as China Construction Bank, which is a leading domestic option known for regulatory compliance and integration with government systems, or foreign banks like HSBC and CITI, which may offer convenience for international transactions but can have different setup requirements and fee structures.

How China scores on financial operations

China’s Index scores point to a system that works well in theory but requires patience in practice.

• Financial infrastructure (4/5). Core banking, payments, and settlement systems are modern and reliable. The complexity comes from controls around how money moves in and out of the country.
• KYC requirements (2/5). Banks conduct deep due diligence on shareholders, UBOs, funding sources, and business purpose. Reviews are detailed and can be repeated if anything changes.
• Expense management (2/5). Strict invoicing rules apply. Tax-compliant receipts (fapiao) are required for most expenses, and gaps can create tax or audit issues.
• Operating costs (6/10). Costs vary widely by city and region. Tier-one cities are significantly more expensive than secondary hubs.
• Salary benchmarking (5/10). Junior and mid-level roles are often cost-effective. Senior leadership, technical specialists, and bilingual talent can be expensive.

Banking setup and capital flow realities

Opening and activating bank accounts often takes longer than incorporation itself. Opening a corporate bank account in China typically requires an in-person visit by the Legal Representative, who is authorized to perform key duties such as signing contracts and acting on behalf of the company.

Banks closely review the approved business scope, registered capital, and planned transaction flows before allowing full account functionality. Foreign currency settlement is tightly managed, and transfers must align clearly with documented business activity.

China continues to gradually open parts of its financial system, including easing ownership limits in certain financial services sectors. However, for most operating companies expanding in China, capital controls, foreign exchange approvals, and documentation requirements remain a core reality.

Compliance pressure is increasing

China’s updated Anti-Money Laundering framework, effective from 2025, strengthens enforcement across financial institutions and certain non-financial businesses. Enhanced KYC, UBO transparency, and transaction monitoring are now standard expectations. For foreign companies, this means more scrutiny during onboarding and ongoing reviews throughout the business lifecycle.

Local expert insight

Bank account activation and foreign currency settlement are often the longest steps in the setup process. Misalignment between approved business scope and bank expectations is a common cause of delays. Companies that align banking strategy with incorporation decisions from the start tend to move faster and avoid repeated reviews.

Workforce & Employment Environment

China’s labor framework is structured, formal, and actively enforced. Ongoing compliance and support services for human resources, including payroll and employment law, are essential for foreign companies operating in China.

The rules are clear, but they expect discipline when expanding in China. Companies that plan upfront usually operate smoothly. Issues tend to appear when global policies get applied without local adjustment.

Legal structure and employee protections

China’s Employment Law Complexity score is 6/10, meaning the framework is understandable but very process-driven. Employment often starts with fixed-term contracts, but after two renewals or long service, employers typically must offer an open-term contract. At that stage, termination becomes much harder and more expensive.

China’s “Too Employee Friendly?” score is 3/5. The system feels balanced on paper, but it generally leans toward employee protection in disputes. Authorities pay close attention to termination, severance, overtime, and working hours, and recent enforcement around excessive overtime shows these rules carry weight.

Payroll, benefits, and long-term cost

Employment costs extend well beyond salary and vary by city.

• China’s Employer Payroll Contributions score is 4/5, as social insurance and housing fund contributions add real overhead.
• China’s Benefits score is 4/5, reflecting mandatory coverage for pension, medical, unemployment, workplace injury, maternity, and housing.
• China’s Pension Management score is 3/5, due to a multi-part system with local variation. Recent reforms are gradually raising retirement ages and extending contribution periods, which affects long-term planning.

Public holidays also matter. China now has 13 statutory holidays, and work on those days usually requires 300% pay, so scheduling needs care.

Unions, oversight, and restrictions

China’s Union score is 4/5. Unions are present and state-linked, but they rarely disrupt daily operations. Their focus is compliance and dispute mediation rather than aggressive bargaining.

Non-compete agreements are allowed but tightly controlled. They typically apply only to senior or confidential roles, must be narrowly scoped, capped at two years, and paid during the restriction period. Courts are increasingly strict about overreach.

Local expert insight

Employment contracts must be localized, bilingual, and precise. Improper termination or poorly structured contracts remain one of the most common sources of disputes for foreign companies in China.

Talent Availability & Hiring Reality

China’s talent market is deep, but competition has picked up, especially in tier-one cities. Hiring is very doable, but it often takes more time and budget than companies expect. A recruiting difficulty score of 6/10 reflects that talent is there, but competition with large domestic firms and global players shapes how fast roles get filled.

Recruiting Conditions

Hiring outcomes depend a lot on where you are hiring and for which roles. Tier-one cities attract top candidates, but they also attract the most employers. Offers move quickly, counteroffers are common, and flexibility on compensation helps keep hiring on track.

Developer Talent

China continues to offer strong technical depth, particularly in engineering and product roles. A developer talent score of 4/5 reflects the size and capability of the talent pool, not ease of hiring. Many developers are used to fast-paced environments, but retention can be a challenge in the most competitive markets.

• Strong engineering and product skills
• Large pipeline from technical universities
• High demand in major tech hubs

Finance Talent

The finance and accounting talent pool is well established. With a finance talent score of 4/5, companies can usually find professionals who understand local accounting standards, payroll, and reporting requirements. Finance teams often become a steadying force for foreign subsidiaries navigating local rules.

• Experience with local compliance and reporting
• Familiarity with foreign-owned company structures
• Strong operational reliability

Sales and Marketing Talent

Sales and marketing talent is widely available and commercially sharp. Scores of 4/5 for both reflect strong market knowledge and execution. Teams tend to perform best when strategies are adapted to local buying behavior rather than lifted directly from global playbooks.

• Strong customer and market awareness
• Experience selling in competitive environments
• Better results with localized messaging

Language Reality

Language remains a practical hurdle when expanding in China. A language score of 2/5 reflects that English proficiency varies, while Chinese is still required for contracts, HR documents, and government interactions. Many companies rely on bilingual local staff to keep things moving smoothly.

• Chinese required for legal and HR processes
• English skills vary by role and region
• Language gaps can slow early execution

Local Expert Insight

Many foreign subsidiaries do best with a hybrid leadership model. Local teams handle day-to-day execution and hiring, while regional or global leaders provide strategic direction and alignment with headquarters. Over time, leadership can localize further as the business settles in and gains confidence in the market.

Immigration & Mobility

China’s immigration system is structured and closely regulated, with limited flexibility for employers. An immigration score of 2/5 reflects that work and residence permits are available, but approvals depend far more on role design and employer credentials than on individual preference.

How Immigration Works in Practice

Foreign nationals who plan to live and work in China must convert their visa into a residence permit soon after entry, usually within 30 days. Applications go through local public security bureaus under national rules. Timelines are fairly clear, but outcomes hinge on how closely the application matches the stated purpose of stay.

• Permits are issued by category, such as work, study, or family reasons
• Each category comes with specific documentation
• Most applicants need to apply in person

Even small mismatches can slow things down when expanding in China.

Role, Seniority, and Employer Fit

Immigration approvals are strongly tied to job title, seniority, and the employer’s legal and financial standing. Senior or highly specialized roles tend to move more smoothly, while junior or loosely defined positions face closer review. Company capitalization and compliance history also influence how long permits are granted.

• Job titles need to reflect actual responsibilities
• Employer credentials affect permit length
• Role changes often trigger new applications

Permit Length and Renewals

Permit duration varies. High-level or urgently needed professionals may receive multi-year permits, while others are limited to one-year approvals that require regular renewal. Extensions must be filed well before expiry, and approval is never guaranteed.

• Longer permits require stronger justification
• Renewals depend on role consistency
• Missed deadlines can force an exit

Local Expert Insight

Immigration approvals are tied closely to job title, seniority, and company capitalization. When these elements don’t line up, even strong candidates can face delays. Many onboarding issues come from roles being defined too loosely or adjusted after arrival, which can slow down key hires.

Choosing a Company Structure

When expanding in China, foreign investors need to choose a company structure that fits both their business goals and China’s regulatory reality. The decision affects control, compliance, tax exposure, and how easily the business can operate day to day. The three most common options are a Wholly Foreign-Owned Enterprise (WFOE), a China Representative Office (RO), and a China Joint Venture (JV).

Wholly Foreign-Owned Enterprise (WFOE)

A WFOE is a limited liability company funded entirely by foreign capital. It gives the parent company full control over operations, management, and profit distribution. For most foreign investors, this structure offers the best balance of independence and operational flexibility.

• Operates as an independent legal entity
• Can generate revenue and invoice locally
• Allows full control over strategy and decision-making

Because of this autonomy, WFOEs remain the most popular choice for companies planning long-term operations in China.

China Representative Office (RO)

A China Representative Office is not a separate legal entity and cannot generate revenue. It works best as a light-touch entry option for companies that want local presence without full operations.

• Limited to activities like market research and liaison work
• Cannot sign contracts or issue invoices
• Often used for early market exploration

RROs offer visibility, but very limited commercial functionality.

China Joint Venture (JV)

A Joint Venture involves partnering with a Chinese company. This structure is often used when regulations restrict foreign ownership or when local expertise and networks are critical.

• Can provide access to restricted or sensitive industries
• Shares ownership, control, and profits with a local partner
• Requires careful alignment on governance and incentives

JVs can work well, but shared control adds complexity and risk if expectations aren’t aligned early.

Mainland China vs. Hong Kong

Some companies choose to start in Hong Kong before expanding into mainland China. Hong Kong allows 100 percent foreign ownership, has no minimum capital requirement, and typically completes company registration in about five business days.

• Lower corporate tax rates
• Simpler setup and administration
• Option for offshore structuring

That said, operating in Hong Kong does not replace the need for a mainland entity if the business plans to hire staff, invoice customers, or operate directly in China.

Decision Factors for Foreign Investors

Choosing the right structure when expanding in China comes down to a few practical considerations.

• Nature of business activities and industry restrictions
• Desired level of management control
• Registered capital expectations and funding plans
• Long-term growth goals and tax implications

China uses a subscribed capital model, but capital levels still need to align with business scope and regulatory expectations. A registered office lease, typically for at least one year, is also required. Business scope definitions matter more than many expect and are strictly enforced.

Intellectual Property Protection

IP protection needs attention early. China operates under a first-to-file system, meaning rights go to whoever registers first, not whoever used the IP first elsewhere.

• Register trademarks, patents, and copyrights locally
• Conduct IP risk checks before market entry
• Use clear contracts with partners and distributors

Monitoring for infringement and working with experienced local advisors reduces risk. Companies that treat IP protection as a setup task rather than an afterthought tend to avoid the most common pitfalls.

Choosing the right structure and protecting core assets are foundational steps. Done well, they make everything that follows in China far easier to manage.

Unique China Expansion Insights

Expanding in China looks manageable on paper, but real-world outcomes hinge on a few factors that tend to surprise first-time entrants.

Market regulation plays a central role in the registration and licensing process. Foreign-funded enterprises must file with the State Administration for Market Regulation (SAMR) and comply with business scope restrictions and other legal requirements, especially in regulated industries such as alcohol. Understanding and adhering to these regulations is essential for a smooth setup and ongoing compliance.

Political risk is the biggest outlier. With a 1/5 score, it affects far more than geopolitics. Companies feel it in banking access, cross-border data movement, audit sensitivity, and internal governance. Decisions that are routine elsewhere often need extra review in China, especially for foreign-owned entities or sensitive sectors.

Data management laws require early planning. A 1/5 score reflects how deeply data rules affect daily operations. IT systems, HR platforms, and cross-border reporting must account for localization requirements and transfer approvals. Treating data compliance as a later step usually leads to rework and delays.

The fapiao system shapes how finance actually works. In China, invoices function as tax instruments, not just receipts. Fapiao handling directly affects expense reimbursement, tax filings, and audit readiness. Weak processes here slow teams down and increase compliance risk.

Intellectual property protection is critical for foreign companies operating in China. Registration of patents, trademarks, and copyrights should be done early to safeguard rights under China’s first-to-file system and prevent potential disputes.

City-level variation changes the cost and effort of operating. Shanghai, Beijing, Shenzhen, and secondary cities follow the same national laws, but enforcement, timelines, and local expectations differ. These differences can impact hiring costs, office setup, tax treatment, and regulator interaction.

China rewards long-term commitment. The market tends to favor companies that invest steadily and operate with patience. Short-term or exploratory setups often struggle, while committed operators typically see smoother relationships and more predictable outcomes over time.

How GEOS Simplifies Your Expansion into China

GEOS supports entity setup, registered address coordination, incorporation workflow management, and ongoing entity maintenance. This helps companies expanding in China move through it’s structured regulatory environment with more clarity and control.

AI-Powered Global Expansion Support

Geovanna, GEOS’s digital assistant, supports compliance tracking, documentation readiness, and regulatory reminders tailored to China. Teams get better visibility into deadlines and requirements as operations scale.

Is China the Right Fit for Your Business?

With a GEOS Global Subsidiary Index Score of 54.4, China remains a powerful but complex market. It is best suited for companies seeking scale, industrial depth, and a long-term strategic presence, and that are prepared to manage elevated political, regulatory, and data-related risk.

📩 Contact GEOS for a customized expansion strategy!

This article does not constitute legal advice.