Doing Business in China

Did you know that TCT has a foreign correspondent?! Tom Owens of IKEA has been a long time TCT member and is currently on assignment (with IKEA) in Shanghai. Tom was transferred last year to China, and he has been on assignment there previously. Tom still maintains his membership at TCT and is still a member of the TCT Education Committee!

Doing Business In China

Doing business in China even for the old veterans can be a challenge. For the newcomer, the business rules and the incorporation process in the Middle Kingdom can truly be a mystery. The following is a brief introduction for foreign companies to start the process.

In China, it is not possible to incorporate a company to perform a general range of business activities. The incorporation process requires investors to specify a business scope which describes the company’s proposed business activities (such as buying, selling, distributing, providing services, importing, exporting) and the industry sectors in which it will conduct such activities. Once formulated, the proposed business scope is subject to review and approval by the Chinese authorities.

The PRC Foreign Investment Industrial Guidance Catalogue is the most important tool for determining whether activities in a proposed industry sector will be acceptable. The Industry Catalogue classifies industries into three categories: encouraged industries, restricted industries and prohibited industries. For industries such as oil and gas exploration, automobile manufacturing, and cargo shipping, a company cannot be established by a foreigner without a Chinese partner.

The business scope is one of the central points that are reviewed by the Chinese authorities as part of the incorporation process. It must be precise and correspond to the type of business the company will undertake. Establishing a business in China is normally more time-consuming than most foreigners are accustomed to. If anyone needs more detailed information, please contact me.

This article is provided by TCT Education Committee Member, Tom Owens, who in on an international assignment in Shanghai, China with IKEA, tom.owens(at)ikea.com.