What are the Legal Requirements to Doing Business in China?
First Steps to Expanding into China
If your foreign company is looking to expand into China, there are a few basic things you will want to consider.
In this article, we'll review a few of these crucial requirements.
Get a Chinese Entity
If you work for a business, the odds are that your company’s lawyers have a business license filed away somewhere safe.
Just as your company must have a business license to operate in your country, the same is required in China.
To grow your business in China, you will need a Chinese entity. There are different forms of entities that you can consider; the three most common options include Representative Office, Wholly Foreign-Owned Enterprise, and Joint Venture.
Establishing a business entity in China is more complicated than in the United States and other countries. It requires the organization to follow concrete steps, which could result in delays if not correctly followed.
Setting up a business in China generally takes three to six months and involves various government authorities. The procedures may differ depending on the industry your business is in and the entity type.
Apply for your ICP License
If you plan to have a website in China, you will need an ICP license.
ICP stands for Internet Content Provider. An ICP license is a state-issued license legally required to host and operate a website in China.
You may have read or been told that an ICP license is optional. If you want an online presence in China long term, an ICP is a must.
Types of ICP licenses
There are two types of ICP licenses depending on the nature of your business:
Informational (Bei’an) ICP:
As the name implies, this type of ICP is for informational and non-commercial websites.
The Bei’an ICP license is the standard license, available to foreign-owned entities: Representative Offices (RO), Joint Ventures (JV), or Wholly Foreign Owned Enterprises (WOFE).
Commercial ICP:
For any website that operates an e-commerce website in China.
Thus, if you generate revenue from advertising or online sales and perform business that requires payments using your platform, you will need this ICP license.
To learn more about getting an ICP license, please feel free to contact us.
Understand how the Great Firewall of China will Impact your Business
The Great Firewall helps China to control the Internet Gateways where traffic moves between China and the rest of the world.
Just as the Great Wall once protected China from the Mongol hordes, the Great Firewall now ‘protects’ Chinese netizens from the perils of foreign influence. Any website operating in mainland China must be subject to Chinese government oversight and censorship, and the only way the Chinese Communist Party (CCP) can ensure this is if those websites are hosted on Chinese servers. Any website operating from servers outside mainland China cannot be ordered to do or change or remove anything by the CCP, so their solution is the Great Firewall – that is, they simply block things they don’t like and track any users attempting to distribute or access such data.
You may have heard that tech giants like Google or Facebook don't work in China. Even if your company isn't a search engine or social media giant, you'll want to be aware of how the Great Firewall might impact your day-to-day business operations.
Many popular web technologies are not supported and do not work in China. Here are a few examples of everyday technologies that do not work in China.
Non-Chinese Hosting Providers (ie. AWS, Azure, Google Cloud, Etc)
Popular Ecommerce platforms (ie. Shopify, Salesforce Commerce, Etc)
Foreign Hosted APIs
Content Management Systems (ie. WordPress, Drupal, Contentful, and other headless CMSs)
If your company plans to have a web presence, please ensure that your web technologies are compatible in China's unique web ecosystem.
Personal Privacy Laws
If your business requires collecting Chinese citizens’ personal or sensitive data for ‘important business purposes,’ you should be aware of China’s Personal privacy laws.
China’s Personal Information Protection Law, also known as the PIPL, is China’s first comprehensive data protection law. It is still relatively new. The law went into effect on November 1, 2021.
Similar to Europe’s GDPR, the PIPL helps form the framework that gives China’s government a broad enforcement capability—resulting in a more regulated environment for international businesses operating in China.
One big difference from the GDPR, the PIPL specifically states that personal data must not be transferred outside of China.
With international businesses in mind, China provides a way for you to transfer sensitive data across borders legally. The cross-border data transfer requires a security review by the Cyberspace Administration of China (CAC).
Launch into China with Confidence
We understand that bringing your business to China can be challenging, frustrating, and even anxiety-inducing. That's why we started ChinaPro Consulting.
We have helped companies on nearly every continent expand into China. Our China Pro's will help you develop a custom roadmap to help you confidently launch in China.
Are you looking to your company to China? Not sure where to start? Don't hesitate to get in touch with us. We are happy to help.
