Setting Up a Company in China
WFOE, Joint Venture or free trade zone entity — how China's three main foreign investment structures differ, the Negative List, and what the registration process actually involves in 2026.
China remains the world's second-largest economy and the largest manufacturing base — access to its domestic market or supply chain is a strategic imperative for many multinationals. The Foreign Investment Law (2020) replaced the WFOE, JV and FICE laws with a unified framework, and the Negative List now defines the sectors where foreign ownership is restricted or prohibited. Outside the Negative List, 100% foreign ownership is legally permissible.
Main foreign investment structures
| Structure | Ownership | Best for |
|---|---|---|
| WFOE (Wholly Foreign-Owned Enterprise) | 100% foreign | Manufacturing, technology, professional services, trading |
| Equity Joint Venture (EJV) | Foreign + Chinese partner (% negotiated) | Restricted sectors requiring local partnership |
| Representative Office (RO) | 100% foreign (parent) | Market research, liaison — cannot trade or invoice |
| FTZ Entity | 100% foreign (in FTZ) | Cross-border trade, financial services, reduced red tape |
The Negative List
China publishes an annual Negative List for Foreign Investment (national and FTZ versions). Activities on the Negative List are either restricted (requiring a Chinese partner or capped foreign ownership) or prohibited (no foreign investment permitted). The 2024 Negative List reduced restrictions in manufacturing to zero — all manufacturing activities are now open to 100% foreign ownership. Remaining restrictions cluster in financial services (banking, insurance, securities), media, telecommunications, education and healthcare. Activities outside the Negative List require no pre-approval and use a simple registration system through MOFCOM and SAMR.
Key tax facts for 2026
| Parameter | Rate |
|---|---|
| Corporate income tax (CIT) | 25% (standard); 15% for High-Tech Enterprise (HTE); 15% in Hainan FTP |
| VAT (增值税) | 13% (goods); 9% (real estate, transport); 6% (services); 0% (exports) |
| Withholding tax | 10% on dividends to non-residents (reduced by treaty) |
| Individual income tax | 3–45% progressive |
Free Trade Zones
China operates 22 Free Trade Zones (FTZs), including Shanghai, Shenzhen Qianhai, Guangdong, Tianjin, Chengdu and Hainan. FTZs have their own Negative Lists (shorter than the national list), streamlined customs, cross-border RMB settlement and — particularly in Hainan Free Trade Port — a reduced CIT rate of 15% for substantive enterprises in encouraged sectors. The Hainan FTP is China's most ambitious free-zone project and is designed to eventually become a fully free-trade island by 2035.
The registration process
- Check the Negative List for your sector — determine whether 100% foreign ownership is permissible or a JV is required.
- Choose the business scope carefully — Chinese company registration specifies permitted business activities in the business licence; operating outside this scope is a compliance risk.
- Register with the State Administration for Market Regulation (SAMR) or local counterpart for the Business Licence.
- File for record with MOFCOM (for foreign-invested enterprises outside the Negative List: registration, not approval).
- Obtain the Unified Social Credit Code — China's single business identifier combining the business registration, tax and customs codes.
- Register with the State Taxation Administration (STA) for CIT and VAT.
- Open a RMB basic account and, if required, a foreign exchange capital account at a Chinese bank (SAFE registration may apply).
- Register with local Social Insurance and Housing Fund authorities for employees.
Frequently asked questions
Can a foreigner own 100% of a company in China?
Yes, for all activities outside the Negative List. The 2024 Negative List removed all manufacturing restrictions. Remaining restrictions are in financial services, telecoms, media, education and healthcare. Within FTZs, the restricted list is shorter still.
What is the corporate tax rate in China?
25% standard rate. Companies certified as High-Tech Enterprises (HTEs) pay 15%. Entities in Hainan Free Trade Port in encouraged sectors pay 15%. Small and low-profit enterprises qualify for reduced rates on the first RMB 3 million of taxable income.
What is a WFOE?
A Wholly Foreign-Owned Enterprise — a limited liability company in China wholly owned by one or more foreign investors, with no required Chinese partner. It is the most common structure for foreign businesses operating in China outside restricted sectors.
How long does China company registration take?
For a straightforward WFOE in an unrestricted sector, SAMR registration typically takes 5–15 business days. Adding tax registration, bank account opening and SAFE registration brings the end-to-end timeline to 4–8 weeks. Restricted sectors or FTZ applications may take longer.
Official sources
- State Administration for Market Regulation (SAMR)
- Ministry of Commerce — Foreign Investment
- State Taxation Administration
- Foreign Investment Law of the PRC (2020)
- Negative List for Foreign Investment (2024 edition)
This guide is general information prepared by ARM Management and is current as at July 2026. It is not legal advice; the Negative List, tax rates, business scope rules and FTZ regulations change frequently. Confirm with MOFCOM or a China-qualified advisor before incorporating.
Enter China's market through the right structure, the first time.
ARM Management advises foreign investors on WFOE formation, business scope, FTZ entity selection and China tax structuring — from pre-entry assessment through to operational compliance.