China is the first Asian economy in terms of gross domestic product and is the economic engine of the region. In addition, the country maintains close trade relations with the rest of Asian countries and areas: Japan, the Republic of Korea, ASEAN (Association of South East Asia Nations), the special administrative area of Hong Kong, Taiwan and India.
China, in addition to having bilateral agreements with Asian countries, signed on November 29 of 2004 the ASEAN a free trade agreement, which annulled all tariffs between China and the member countries of this organization (Vietnam, Thailand, Singapore, Philippines,
Myanmar, Malaysia, Laos, Indonesia, Cambodia and Brunei).
In China there are still a number of non-tariff barriers, such as sanitary and phytosanitary barriers or certification requirements that hinder investment in the country. Other problems that arise in China are related to the handling of construction permits, the opening of a business or the payment of taxes, as well as the lack of effectiveness of intellectual property regulations or restrictions on foreign investment in certain sectors. However, the existing barriers are surmountable if you have the market knowledge and the appropriate advice offered by BBCC Consulting LTD.
The legal framework of China’s foreign investments is based on the three main laws of the foreign investment regulations: Law of Contractual Non-Foreign Joint Ventures, Law of Joint Ventures of foreign-owned shareholdings and the Law of Totally Foreign-Owned Enterprises. In addition, there is a negative list of sectors and companies where foreign capital is not admitted.
The treatment of foreign investment in China is determined by the activity or sector to which it is addressed. There are several sectors that are totally restricted to foreign investment or to which the foreign investor can only access through a mixed capital company.
The legal framework in Chinese is sufficiently broad and imprecise so that the corresponding local authorities are the ones who define the duration and complexity of the constitution and establishment procedures. For this reason and to expedite the procedures, it is advisable to contact specialized companies such as BBCC Consulting LTD to expedite the procedures.
Fundamentally there are four possibilities: representative office, 100% foreign company or WFOE (for its acronym in English), Joint venture or joint venture and Association for the Enterprise with Foreign Investment (FICE).
The main problems to which the foreign investor must face in China are the adaptation to the characteristics of the Chinese economy and the complexity of its legislation, sometimes not precise and even difficult to locate, which generates instability in its legal framework and fiscal. Other notable difficulties are the language, the difficulties in finding qualified personnel at managerial level or the high turnover of the workers.
The main taxes that companies must face in China are corporation tax and value added tax. The average corporate tax is 25%, although there is a special rate of 20% for small companies with reduced benefits. The value added tax has a general rate of 17%, although there are other lower sections. The so-called “business tax” is applied to the income generated by the provision of services not encumbered by VAT, transfers of intangible assets and sales of real estate and rights of use.
China has a coherent legal framework for the implementation of intellectual property rights in accordance with international standards, but the application of these laws lacks rigor and its compliance is often difficult to guarantee. To minimize the risks it is fundamental to register the intellectual property rights to be able to take administrative or judicial actions in their defense. This record should be carried out, preferably, before the beginning of operations in China, since the records in principle are granted to the applicant who first submits the corresponding request.
The sectors in which Spain accumulates the largest stock of investment are financial services, retail trade, automotive and chemical industry.
The foreign companies established in China are located around the large urban centers on the coast of the country: the cities of Beijing, Shanghai and Guangzhou (Guangzhou), where BBCC Consulting LTD has its office. The preferred destination for foreign investment is Guangzhou, specifically the whole province of Guangdong, located in the Pearl River Delta.