Setting up a company in Shenzhen

Shenzhen is the epitome of technological progress and a symbol of innovation in China. It has deservedly gained status not only as a technological giant, but also as an important international economic centre. This city, located in close proximity to Hong Kong, stands out for its open economic policy and favourable investment environment, which has attracted the attention of many entrepreneurs wishing to open a business in Shenzhen.

1. Innovation Engine. Shenzhen is actively engaged in supporting innovation and technological development. It is a city where the free exchange of ideas fuels innovative startups and research projects. Its rapid pace of development and focus on developing cutting-edge technologies make it a global leader in technological innovation.
2. International Landmark. Due to its strategic location near Hong Kong and open economic policies, Shenzhen has become a magnet for foreign investors and entrepreneurs. The local government provides a wide range of incentives and privileges for foreign companies, including simpler registration and taxation procedures.
3. Economic diversification. Shenzhen has successfully diversified its economy, becoming a centre for a multitude of industries such as information technology, finance, biotechnology and international trade. This multi-faceted approach allows those wishing to set up a business in Shenzhen in various fields and find their place in this diverse business ecosystem.
4. Infrastructure and Connectivity. Infrastructure projects and efforts in transport accessibility have made Shenzhen a highly developed metropolis. Advanced public transport systems, seaports and airports provide connectivity to global markets, making the city even more attractive to entrepreneurs and investors.
5. Openness to global opportunities. Shenzhen's open economic policy and commitment to innovation make it a bridge for international co-operation. The city actively participates in global initiatives and creates a favourable environment for foreign investors and companies, giving them access to the huge potential of the Chinese market.

Forms of legal structures in Shenzhen

Representative Office

A Representative Office in Shenzhen is the formal establishment of a foreign company in the city. This form of enterprise allows foreign organisations to demonstrate their presence in China by performing certain tasks but not directly engaging in commercial activities.

• Marketing and analytical tasks: a branch office can conduct marketing campaigns and market analyses, studying consumer preferences and identifying business growth potential in the area.
• Trade restrictions: it is worth remembering that once a Shenzhen branch is registered, the enterprise cannot engage in direct sales of products or services. All commercial transactions must go through the parent company.
• Legal nexus: a branch office acts as part of a foreign enterprise and is not a separate legal entity. Its assets and liabilities are closely linked to the parent company.
• Intermediate presence: for foreign companies, a branch office can serve as an initial stage for market research and image building in Shenzhen, before a more significant investment.

In general, establishing a branch office in Shenzhen offers foreign enterprises a strategic approach to market research and image building in China, bypassing direct involvement in trade.

Wholly Foreign-Owned Enterprise

A Wholly Foreign Owned Enterprise (WFOE) is an independent legal structure that enables foreign participants to fully own and operate their business in Shenzhen, operating in different economic sectors.

Key characteristics of WFOEs:

• Full management: The main feature of establishing a WFOE in Shenzhen is the full ownership and management of the business by the foreign investor. This ensures autonomy in decision-making and management of the business.
• Legal autonomy: A WFOE operates as a separate legal entity with the same rights and obligations as domestic companies. It can enter into contracts, conduct financial transactions, recruit employees, etc.
• Scope of activities: A WFOE can carry out a wide range of commercial activities, depending on what is stated in its statutes.
• Investment: The establishment of a WFOE in Shenzhen requires the investment of registered capital, which can be in the form of a financial or tangible contribution. However, new Chinese regulations allow some sectors to operate with little or no investment.
• Accounting and Reporting: A WFOE must maintain accounting records and submit financial reports to the relevant government authorities, subject to inspections and audits on an equal footing with domestic enterprises.
• Ownership: The WFOE may own assets, including real estate, and have property rights.
• Personnel management: The WFOE has the right to employ both local and foreign workers, forming its own corporate standards and rules.

Overall, the establishment of the Shenzhen WFOE offers foreign participants deep autonomy and management of their business in China, making this format particularly attractive to those seeking full autonomy and a variety of opportunities.

Joint Venture partnership

A joint venture partnership, or Joint Venture (JV), is a business model where a foreign organisation and a Chinese participant combine their capabilities, expertise and experience to establish and manage a business in Shenzhen. This structure can be highly beneficial for companies wishing to exploit local opportunities, market advantages, as well as minimise risk and improve the performance of their business.

Key aspects of collaborative partnerships:

• Collaboration: In the process of establishing a JV in Shenzhen, both foreign and Chinese parties become co-owners and operate the venture jointly.
• Local market penetration: a JV provides foreign firms with the opportunity to utilise the local resources, market insight, connections and infrastructure that are critical for successful operations in China.
• Cost and risk sharing: establishing a joint venture in Shenzhen allows both financial costs and risks to be shared, which can reduce economic losses for foreign participants and reduce potential threats.
• Combination of capabilities: the JV combines the assets, technology base and professional skills of both parties, helping to create synergy and efficiency in business.
• Degree of governance: a joint venture requires a coordinated effort in decision-making, which may involve agreements and give-and-take between the parties.

Foreign Invested Commercial Enterprise

A Foreign Invested Commercial Enterprise (or FICE) is an organisation established by foreign investors to conduct commercial operations in Shenzhen and elsewhere in China. This structure offers many opportunities for commercial interaction and has certain advantages such as the right to engage in domestic and international trade transactions, access to different markets and flexibility in management.

Main characteristics of Enterprises with foreign capital participation:

• Commerce: once a FICE is registered in Shenzhen, a company can engage in a wide range of commercial activities, distributing its goods and services both domestically and internationally.
• Trade operations: such businesses are authorised to conduct domestic and international trade operations, allowing FICE to engage in import, export and global commercial initiatives.
• Management flexibility: FICE in Shenzhen can adapt to different business strategies, whether selling goods, providing services or other commercial endeavours.
• Ownership and control: foreign investors can fully own FICE, giving them full control over the enterprise and its operations.
• Access to the national market: with its status as a local enterprise, FICE is free to interact with local counterparties, customers and suppliers.

The choice to establish a foreign-invested enterprise in Shenzhen is often made by foreign companies wishing to be active in the Chinese market, expand their trade relations and capitalise on local opportunities. This model offers flexibility in operations and extensive growth opportunities both within Shenzhen and beyond its borders.

Registration process

Preparation of necessary documents

Submission of documents to the relevant state authorities

To incorporate a company in Shenzhen, after preparing all the necessary documents, the next step is to submit them to the local registration authorities. In Shenzhen, this authority is the Shenzhen Administration for Market Regulation. This authority registers various types of legal entities and monitors compliance with business laws.

The application process involves submitting all necessary documents and forms completed in accordance with the requirements of the registration authority. The applicant may also be subject to interviews or further enquiries to clarify details and ensure compliance with legislation.

After thoroughly checking the documents provided and completing all the necessary formalities, the local authorities will carry out the process of registering the firm in Shenzhen. If this process is successfully completed, the company will be officially registered and will receive a certificate of incorporation.

Timeframe for company registration

Typical timelines for registration

The process of incorporating a company in Shenzhen can take different amounts of time depending on various factors. Typically, the timeframe for incorporation varies from a few weeks. It is important to realise that these times are approximate and may vary depending on the following factors:

• Type of company: the registration time may differ for different types of legal entities. For example, the registration process for a representative office may be faster compared to the registration of wholly foreign-owned enterprises.
• Compliance: If all the required documents and information are submitted completely and correctly, it can speed up the process of opening a company in Shenzhen. Incorrectly completed documents or missing information can cause delays.
• Advice and assistance: if you use the services of legal or consultancy firms, this can also affect the overall registration time, as these professionals can help speed up the process and ensure that all steps are completed correctly.

Therefore, it is recommended to familiarise yourself with the requirements in advance, prepare the necessary documents and information, and, if necessary, seek professional help to speed up the process of company registration in Shenzhen.

Main tax rates

Opening a bank account for non-residents

Documentation and procedure requirements

Keep in mind that the specific requirements for setting up a corporate account in Shenzhen may vary depending on the bank and their policies, so it is recommended that you contact qualified legal counsel for accurate information on the documentation requirements and procedure for opening a bank account.

Main banks offering services for foreign companies.

There are a number of banks in Shenzhen that specialise in providing services for foreign companies. These banks offer a variety of banking services including opening business accounts in Shenzhen, fund maintenance, tax advice and financial management. Below are some of the main banks that provide services for foreign companies in Shenzhen:

• Industrial and Commercial Bank of China (ICBC): It is one of the largest banks in China and globally. ICBC provides a wide range of financial services for foreign companies, including corporate accounts, lending, fund management and others.
• China Construction Bank: is another major bank in China that offers services for foreign companies. It also specialises in banking services, loans and financial management.
• Bank of China: this bank is one of the oldest banks in China and has a wide network of branches and outlets. It provides banking services for foreign companies as well as international trade and investment counselling.
• HSBC: although it is a British bank, it has a strong presence in China and provides services for foreign companies. HSBC specialises in international financial transactions and advisory services.
• Standard Chartered: another international bank that provides banking services for foreign companies in Shenzhen. It also emphasises on international financial transactions.
• CITIC Bank: this bank also provides services for foreign companies, including account opening and lending.
• China Merchants Bank: it specialises in banking services, including servicing foreign companies.

Before choosing a particular bank to open an account in Shenzhen, it is advisable to research and compare the services offered, fees and requirements of each bank to choose the best option that suits your company's needs.

Business prospects in Shenzhen after successful registration

After registering a company in Shenzhen, entrepreneurs have a wide range of prospects for business development. The city is one of China's key economic centres and a global technology giant. Here are some of the prospects that entrepreneurs can look forward to:

1. Access to a huge market: China is one of the largest markets in the world. Once your company is registered, you will have access to a huge base of potential customers and consumers.
2. Innovative environment: Shenzhen is famous for its innovative spirit and technological developments. Startups and technology companies are actively growing in the city. After setting up a business in Shenzhen, your company can be close to cutting-edge developments and ideas.
3. Infrastructure support: the city has a strong infrastructure, including modern office space, technology parks and business centres, making it easy to do business.
4. Trade opportunities: due to its location next to Hong Kong, Shenzhen is an important point for international trade. Opportunities to import and export goods and services can greatly expand the geography of your business.
5. Financial support: the city has access to financial services and investors, which can help attract capital for business development in Shenzhen.
6. Human resources: Shenzhen attracts talent from a variety of fields, which can enrich your team and foster innovation.
7. Flexible business environment: The city creates a favourable business environment by providing a variety of options for legal structures and taxation regimes.
8. Research and development: Shenzhen actively supports research projects and innovation, which can be beneficial for companies focused on developing new products and technologies.

Considering all these factors, Shenzhen is a promising place for business development, providing entrepreneurs with many opportunities for success and growth.

Our experts in the field of company registration in China are ready to provide detailed advice on the peculiarities of business registration in Shenzhen. Our lawyers also provide full support in the process of company incorporation in this jurisdiction. To contact our company, please fill in the feedback form.