How to Form a Company in China

 

Dave at Chinese Hacks introduced the following article, How to Form a Company in China, as something might be interested in.  You may, too.

Here is a link to an article in the China Law Blog titled How to Form a Company in China. The article covers the follow areas: (1) Make Sure Your Business is Legal For Foreigners.  (2) Provide The Proper Documentation.   (3) Investor Documents Needed.  (4) Consider Forming a Special Purpose Company to Own the WFOE.  (5) Secure Chinese Government Approval.  (6) Compile and Provide These Documents for Chinese Government Approval.  (7) Compile and Provide These Additional Documents for Chinese Government Approval.  (8) The Approval Process.   Good overall view.  I imagine the people associated with the blog can provide the nuts and bolts of it all.

 

One Country, Two Systems

This article was taken from Shanghaiexpats.com.  Get a taste of what it might be like to live in a foreign country.

One Country, Two Systems

By Mike Finstad is the Editor for ShanghaiExpat

I have to get my scooter fixed because it broke a few weeks ago. But I am wondering whether I should go myself, or possible ask one of my Chinese friends to go instead and tell the mechanic it’s their scooter. Why go through this nonsense, you ask? It’s because of the well-known fact that there can be two different price systems in the course of daily business in China — one for locals, and one for foreigners. If you don’t agree, please stop reading and turn on a Disney movie, which will take you even further from reality.

Many of you know the situation: you go up to a dumpling stand and place an order for one plate of dumplings, and you get charged 6 yuan. The local guy standing right behind you orders the same thing, yet he pays only 4 yuan for the same plate of dumplings! It’s blasphemy, we know, but many expats have come to expect this sort of thing, and some accept it as the “Laowai Tax,” or just another expense of doing business in China….

But that’s just one expat’s take on the subject, you can chime in on this forum if you wish.

Mike Finstad is the Editor for ShanghaiExpat. If you have any comments or questions, you can send Mike an email at: editor@shanghaiexpat.com.

The Importance of “Guanxi” in China

“Guanxi” stands for any type of relationship. In the business world, it is the network of relationships among various parties that cooperate together and support one another. “If you scratch my back, I’ll scratch yours.’ Often actions are performed to either show “we” want to get to know each other, we have a good relationship, or to get another party indebted to you.

With the right “Guanxi” (with the right people), a company or businessman can reduce troubles and get help when doing business in China. In other words, having good “guanxi” means you are more competitive.

To develop “guanxi,” you need time make friends and establish close relationship with important others (salesmen, shippers, officials, bankers) and the people dear to their hearts.  You can do this by constant social interaction, doing small and large favors, or offering a small gifts when meeting.  Your goal is to build a network of people close to you (a phone call away) that can help you when in need.

The Chinese prefer to deal with people they know and trust. The closer to the family, the better.  With good “guanxi” in a close knit circle friends, you are expected to act on the up and up and respect your good friends.  To do this, you have to make your company and yourself known to others with whom you want to build relationships and then start building.  It could be built by gift-giving, but is often built with frequent interaction, and fulfilling your early promises, building up a good, reliable reputation.

Chinese work hard at developing their “guanxi” because it pays off in the end with a good reputation, loyal friends, and smoother business dealings.  You may find out that although a business opportunity has recently been posted for the public to see, it is merely a formality to feigning “fairness,” but behind the scenes these opportunities have already been decided, through “guanxi.”

“Guanxi” can go wrong, too.  Someone with “guanxi’ may ask for a cheaper price than your company can afford, making you look bad in front of your own boss or asking you for an invoice a little larger than the actual amount so that they can enjoy a little kickback.  These put you in unethical situations, so it might be best to know the reputation of those you should to build guanxi with.