Incorporating a Company in China: What Option Do Canadian Entrepreneurs Have?

If you are a Canadian entrepreneur, you probably look out into the horizon and think of how to grow your investment into a multinational. One of the methods that you should consider is incorporating your business offshore, and one of the top options is China.

China is one of the fastest emerging markets, and it offers a number of opportunities for Canadian investors. The jurisdiction’s fast-growing economy and huge market are just two of the primary reasons why you should consider opening a business in China. To take advantage of this high-potential jurisdiction, the first step is company incorporation. So, what options for company incorporation do you have?

Wholly-Foreign Owned Enterprise (WFOE)

As the name suggests, a WFOE is a type of business formation that allows 100% ownership by foreigners. Unlike other types of business formations, such as joint ventures (JV), a WFOE does not require you to get a local Chinese partner. Because of this, it is the most preferred business formation by Canadians and other foreigners running businesses in China. Here are other advantages of registering a WFOE in China.

• Gives you total control over your business.
• Decision making in a WFOE is faster compared to joint ventures.
• You do not have to share profits with a local partner.
• The company gets legal recognition under Chinese laws as a local company.

Joint Ventures

Another common type of business formation that a Canadian entrepreneur might consider is a joint venture (JV). If you opt for this model, it implies that you need to get a local Chinese partner before registering the company. Note that the Chinese partner is required to have a bigger shareholding, meaning that you will have less control over the business decisions. Furthermore, you will also need to share profits with the Chinese partner. However, there are unique benefits that come with opening a joint venture.

• A joint venture allows investors to get access to restricted industries.
• With a joint venture, it is easy to penetrate the Chinese market by taking advantage of the already established supply networks of the local partner.
• Because you are pooling resources together with the Chinese partner, it means more funds will be there for research &development and marketing. These two attributes might be all that you need to grow your business to the next level.

NOTE: Investors are being encouraged to shift their joint ventures to shift their current joint ventures into WFOEs.

Representative Office (RO)

A representative office (RO), as the name suggests, is only opened to represent your Canadian parent company in China. This means that it is pretty simple to register and does not need a registered foreign capital. However, a RO comes with major limitations, including the following.

• The company cannot conduct business deals.
• Cannot directly employ staff.
• It is not allowed to collect money from clients.

Nevertheless, a RO is considered a good option, especially if you are looking for new clients, suppliers, brand marketing, and market research.

Once you have identified the preferred company formation, the next step is incorporation, which we must say can be pretty complex. However, this should not stand on your way to getting into this lucrative market. The best way to register a company in China faster and more conveniently is through an agency.

Top Three Investment Opportunities for Canadian Investors in China

With its growing market, a wide range of industries, and blooming spending power, China is no doubt a wide choice for a Canadian seeking to invest offshore. However, it is important to take a closer look and understand the available opportunities before setting off to incorporate a business in China. This post highlights the top three investment opportunities that you should consider as a Canadian.

Agri-Food and Consumer Goods

The potential of agri-food and consumer foods niches is correlated to the fast growth of the middle class in China. Today, China’s consumer tastes are becoming more complicated with a strong bias to premium offerings. As you work on the details for company registration in China, you need to appreciate that the lower segment is pretty overcrowded with a lot of local products. Therefore, consider introducing high-quality products and market them as premium products.

When drawing your strategy, it is also crucial to think about China’s e-commerce market. It is one of the largest in the world, accounting for over 40% of the total e-commerce spending on the globe. Therefore, it will be a great idea to leverage e-commerce platforms to reach more Chinese.

Automotive Industry

China is one of the largest automotive industries in the world. Indeed, all Original Equipment Manufacturers (OEMs), from Toyota to Ford, have some presence in China. So, if you are already selling to any of the OEMs back at home or in another country, it will be a good idea to consider doing business in China.

Today, there is a huge push for electric vehicles to address the problem of air pollution. Therefore, there is heavy research & development in areas such as connectivity, autonomous driving, and smart vehicles. Canada possesses strengths in these areas and a focus into the niche would be a great idea.

Gas and Oil Technology Services

In 2019, China surpassed the US as the largest oil importer. To address the serious problem of pollution, China is promoting the use of gas as an important alternative source of fuel. Again, Canada has well-established supply chains in areas of clean energy, and you can thrive as a service provider or equipment supplier.

To grow faster, it is advisable to avoid direct competition with local equipment manufacturers, but focus on working with them. A number of the companies in the gas and oil firms actively source some of the parts and products away and resell in the market. So, if you can provide them with the products they want, they will prefer to source the products from your company in China instead of abroad.

If you are a Canadian entrepreneur, China is a land full of potential. All that you need is identifying it and going for it. Once you have identified the best opportunity, move to the next step, which is registering a company in China. To make the process easier, faster, and more convenient, consider working with an agency. These are firms of experts specialising in company registration and will also come in handy to help you during the early period of establishment.