Page 12 - Doing Business in China

BUSINESS ENTITIES

“By the end of 2022, the total number of registered market entities in China increased from nearly
55 million in 2012 to 169 million. 1

In recent years, it is clear that the Chinese government has been making significant efforts to
improve the business environment and has achieved some notable successes. The word “Business
Environment” was initially introduced by the World Bank in the report of “Doing Business” in
2003. In 2013, China had already become the world’s second largest economy, yet its business

environment was only ranked 96th out of 190 economies worldwide. In 2020, China witnessed
significant improvement as its ranking in the business environment soared to the 31st position.
2
To further improve the business environment, the Chinese government began assessing all of its
cities in 2020 and now regularly publishes the China Business Environment Report every year.
Additionally, to promote fair competition, the new Anti-Monopoly Law took effect on 1 August 2022.
Furthermore, the Chinese government developed an integrated government service platform and
digital government to standardise administrative approval and enhance efficiency. Finally, China
accelerated its convergence with the common rules of international trade and investment, and the
Regional Comprehensive Economic Partnership Agreement officially came into force in January 2022.

Tan Lee Lee, Head of China

FOREIGN INVESTED ENTITIES

Foreign investors are allowed to register the following types of entities:

FOREIGN-INVESTED COMPANY
Foreign-invested companies can be mainly divided into limited liability companies and joint-stock limited
companies� Since the establishment of a joint-stock limited company involves very strict requirements and
complicated procedures, the limited liability company is the first choice for most foreign investors�

Limited liability companies can be further divided into the following 2 types:

a) WHOLLY FOREIGN-OWNED ENTERPRISE (WFOE)
A WFOE refers to a company that is wholly owned by one or more foreign investors� The WFOE is a popular
option for foreign businesses today because the investor has complete control over the business entity and
can derive full profits from its operation� In addition, WFOEs offer better protection of the investor’s intellectual
property rights compared to other types of entities� The establishment of export-oriented or high-tech
WFOEs is encouraged�

b) JOINT VENTURE (JV)
A Joint Venture refers to a company that is jointly invested by Chinese investors and foreign investors� It is worth
noting that under the latest provisions of the “Foreign Investment Law of People’s Republic of China”, Chinese
investors in a joint venture are no longer required to be an enterprise, which means that foreign investors can
cooperate, jointly funded and establish an enterprise with any Chinese natural person or Chinese enterprise�
This new policy offers foreign investors a more flexible choice�

1 http://www.stats.gov.cn/sj/zxfb/202302/t20230228_1919011.html
2 https://archive.doingbusiness.org/en/rankings

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