How To Open A Company In China As A Foreigner (He Actually Did It Many Times)

Hey there! If you’re thinking about starting a company in China as a foreigner, you’re in the right place.

In this article, I’ll walk you through the process with insights from Simon Sostri, an entrepreneur who has successfully established multiple companies in China.

He is one of the co-founders of Eco Brothers, a great packaging company company based in China.

With firsthand experience, Simon understands the ins and outs of setting up a business in this dynamic market.

He runs a packaging company in China that helps e-commerce businesses with their packaging needs.

Whether you need high-quality packaging for your products or want to explore manufacturing options, he’s got you covered.

Before we dive into the details, don't forget to check out my special offer below!

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Now, let's begin!

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How To Open A Company In China As A Foreigner

Meet My Guest – Simon Sostri

Vova: Hi Simon! Great day to you.

Can you introduce yourself and tell us a little about what you do? 

After that, we can dive into the steps and explain everything to our readers.

Simon: Sure, Vova!

Hi everyone! It’s really great to be here. I’m Simon, and I came to China about five years ago. 

Since then, I’ve opened a few companies in different cities, and today I’m here to share my experience with you. 

What to Expect in This Guide

Simon: I want to talk about how to open a company in China, how complicated it can be, how much it costs, and what the ongoing costs are. 

I’ll also explain what benefits come with opening a company here.

I know a lot of people have fear when it comes to this topic. 

First of all, it’s China. The language is different, and it’s far away from many countries, so it seems complicated. 

Many small and medium-sized traders don’t even think about opening a company in China. 

Instead, they simply pay their suppliers and run their businesses without worrying about legal involvement in China.

But I believe this way of thinking can change. 

Benefits of Running a Company in China

Simon: There are real benefits to having a company in China. 

Apply for Tax Refunds

One of the main benefits is taxes. 

When you travel and buy something in a foreign country, you often see a tax refund desk at the airport. 

This is because foreigners usually don’t need to pay taxes on their purchases in that country. 

The same idea applies to trading.

So, when a company exports goods from China, whether it’s a foreign company or a local one, it doesn’t have to pay tax on those exports. 

Every year, by the end, our company applies for a tax refund on the taxes we’ve paid. 

Let me explain how this works.

Suppose that we bought a pen for one dollar. 

Now, when we buy this pen, the factory adds a 13% tax to the cost. 

So, we pay the factory for the pen, plus the 13% tax on top of the price. 

But here’s the thing: we don’t just pay the factory for the pen itself. 

We also add our margin on top of that price.

At the end of the year, we apply for a tax refund from the government for that 13% tax we paid. 

This refund is for the tax on goods we export out of China. 

Does that make sense so far?

Vova: So, you're saying that one of the main benefits is getting the 13% tax refunded as a foreigner?

Simon: Yes, exactly. 

When I buy goods from any factory in China, I am supposed to pay a tax on those goods. 

It doesn't matter which factory I buy from or what product I am buying, the tax is part of the cost. 

When goods are exported from China, they are taxed, and that’s where the 13% comes from. 

Once the year ends, we can apply for a tax refund.

For example, let’s say you’re an Amazon seller and every year you buy goods in China worth $100,000. 

Out of that $100,000, about 13% of it could be refunded. 

So, if you bought everything in China for $100,000 and all of it was exported, you could ask for that 13% refund every year. 

Many traders don’t realize this, and that’s a huge opportunity for savings.

For example, sometimes when you ask a factory to sell you something, they give you a price that includes not only their margin but also an additional 13% tax, which they can get refunded later. 

So, if you have your own company in China, you can get that 13% tax refund directly instead of letting the factory or the trader make that money. 

This is a major benefit of having your own company in China: you can apply for the tax refund at the end of each year for the goods you bought.

Pay in Local Currency

Another advantage is that you pay in the local currency. 

When you pay in Chinese Yuan, it saves you a lot of trouble and avoids the issues that can come with converting currencies.

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Get Good Service

Simon: Additionally, having a company in China changes the way factories treat you. 

When you visit a factory and tell them you have a company and will pay in Chinese Yuan, they know you’re not just a small trader. 

They may treat you differently, perhaps with more respect. 

They could even offer you better pricing when you buy goods through your own Chinese company. 

That’s why I think having a company in China is really important.

Should You Open a Company in China

Simon: "But does it really fit my needs and if so, how much does it cost?” You might be wondering about that, right?

Well, if you are a small trader buying goods from China, let’s say you buy around $10,000 to $20,000 worth of goods every year, it probably doesn’t make sense to open a company in China for those smaller amounts. 

I would say it starts making sense when your purchases are above $60,000 to $70,000 a year.

For smaller volume traders, it’s not really necessary to set up a company because there are running costs involved. 

Managing a company also takes time and effort. 

You Must Read: How to Avoid Overworking Yourself And Prioritize Well-being?

If your trade volume is low, it may not be worth it.

However, if you are purchasing goods worth around $50,000 or more each year, then it starts to make sense to open your own company.

Vova: Cheers, man!

So, it might be more suitable for people who are already getting some results and are buying goods worth maybe $50,000 a year. 

But how much does it cost to actually run a company in China?

How Much Does it Cost to Actually Run a Company in China?

Simon: Well, if you go to a typical agency, the cost can be quite high. 

It might range from $4,000 to $6,000. 

However, if you know the right people or go to a local agency, you can get a much better deal — sometimes up to 90% cheaper. 

There are companies out there that specialize in helping foreigners set up businesses, but their prices are usually quite high.

On the other hand, there are also decent local companies that can help you set up your business for a much lower cost. 

For example, you might pay anywhere from $1,000 to $1,500 to register and open your company. 

That's the general cost for the whole process of setting up a business in China.

Now, there are some additional costs to consider when running a company in China. 

These are the ongoing, yearly costs. 

For example, you will need an accountant to handle your finances. 

If your business volume is not too high, the cost for an accountant is usually around $800 to $900 per year. 

However, if your business is larger and the workload for the accountant increases, the price can go higher. 

Generally speaking, though, the cost for accounting is around $800 to $900 per year.

In addition to the accountant, you will also need to pay for an address service, which usually costs about $400 to $500 annually. 

This address is required for your company’s registration. 

So, in total, the basic yearly costs to run the company in China are around $1,500.

Now, there’s one more important point we should mention. 

You can’t just do this process from abroad. 

You have to travel to China in person. 

The process of setting up the company requires you to be in China for about a week or maybe 10 days. 

Once the process is complete, you can return home.

So, the total cost to open a company is usually about $1,500 for the initial setup. 

After that, the yearly running costs are around $1,500 as well. 

This is the normal price range you should expect to pay.

However, be aware that some companies might charge much higher prices, anywhere from $5,000 to $8,000. 

This is extremely overpriced. 

The fair price for setting up and running a company in China is usually around $1,500, so keep that in mind.

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On top of that, you’ll have to pay recurring fees each year to keep everything running smoothly. 

That’s a lot to consider, but it’s helpful to know the details.

Step By Step Approach to Start a Business in China

Simon: Now, would you like to add anything else about the process? 

Vova: I also wanted to ask about the steps involved. 

For example, do we fly to China first? 

Do we fill out certain forms first? 

If you could walk us through the process step by step, that would be really helpful. 

Simon: Sure, let's talk about the process itself. 

If you plan to go to China to set up your company, the first thing you need to do is buy your plane ticket and bring your passport with you. 

That’s pretty much it.

You also have to choose a name for your company, which is a straightforward step. 

You’ll need to decide on a few details for your company license, like what type of business it will be. 

Is it a service business? 

Is it an export business? 

If it’s a service business, you’ll need to specify what services you will offer. 

If it’s an export business, you’ll need to mention what type of products you’ll be exporting. 

These are things that are pretty simple, and the agency you work with will guide you through the whole process without any trouble.

One important thing they’ll ask is what your company’s initial capital will be. 

This is the amount you’ll list when setting up the company. 

Most of the time, this number doesn’t really affect anything, so don’t worry too much about it. 

For example, you could say your company has $100,000 as its initial capital, but that doesn’t mean you have to actually put that amount of money into the company once it’s set up. 

It’s just a number on paper — it doesn’t have a real impact.

Overall, the cost of actually setting things up is not very high. 

In my opinion, it’s only a few hundred dollars to get the company running. 

The costs for keeping the company active are also quite low. 

For small and medium-sized businesses, the benefits of having a company in China are pretty good. 

Of course, if your business is bigger, the advantages of setting up a company in China become even clearer.

Vova: So, how do we actually go about this? 

Do we start by contacting a company that can help us? 

Do they provide an outline of what we need to do? 

I’m just curious, what was your process like? 

Simon: Well, for me, I speak Chinese fluently, so I handled everything on my own. 

I didn’t even hire an agency to help me. 

I walked through every step of the process myself. 

Of course, if you're a foreigner in China and don’t speak Chinese, you can’t do it all by yourself. 

You’ll need to hire someone to handle it for you. 

That’s because when you go to government offices, they won’t speak English, and it will be really difficult to manage without Chinese language skills.

But if you decide to hire someone, whether it’s because you don’t have the time or for any other reason, here’s how the process works. 

First, you give them the name you want for your company, tell them what kind of business you’re planning, and provide your passport. 

After that, they will go to several offices, like the export office and the customs office. 

These are the main places they will visit, and that’s pretty much it. 

Once you provide the basic information, everything else is very straightforward. 

The whole process is simple and easy to follow.

Vova: Got it.

Simon: So, it’s pretty simple. 

It takes around 7 to 10 days to open a company. 

Once that’s done, the next step is opening a bank account. 

A bank account is necessary because, without one, you can’t really do business. 

How to Open a Bank Account in China

Simon: Many agencies will help you with this as part of their service. 

Usually, if you hire an agency to set up your company, they will also help you open a bank account.

When they provide this service, they usually work with certain banks they’ve had long-term relationships with. 

This means they already have arrangements with those banks, and opening the account won’t add much to the overall cost. 

For example, if the agency charges you $1,500 to set up your company, the bank account is often included in that price.

However, it’s important to ask a few questions when you open the company. 

You should find out if the cost includes setting up the bank account, the company address, and other services. 

Some agencies will also charge extra for things like the yearly fee for using the address or managing the company. 

It’s best to clarify these details upfront so there are no surprises later. 

But overall, the process is easy and straightforward.

Zero Tax Zones in China

There’s also a major benefit to setting up a company in China: China has special free trade zones. 

In these zones, companies that have yearly revenue of up to $1 million do not have to pay any taxes. 

Once your company’s revenue exceeds $1 million, you will need to start paying taxes. 

This is a great advantage for businesses starting out.

But, I should mention that these rules don’t apply everywhere in China. 

China is a huge country with many different provinces, and each province has its own rules. 

For example, I have opened companies in two different provinces: one in Shanghai and the other in Kunming, which is in Yunnan province. 

While there aren’t major differences between the two, there are some small details that can vary depending on the province. 

So, when you’re considering where to open your business, keep in mind that rules might change from one place to another.

Quick Recap

Vova: Perfect! So, to summarize, the cost can range from a few thousand dollars to a smaller amount for the ongoing costs of keeping it running. 

The whole process usually takes about 7 to 10 days. 

It’s not very complicated, but if you don’t know Chinese, you won’t be able to do it on your own. 

In that case, you would need to hire someone to help. 

If you go through an agency, all you need to do is provide them with your basic details, and they will take care of everything. 

This is usually how things work when you use an agency, and it makes the process much easier. 

And just to remind everyone, you don’t handle company registrations directly, but you do offer packaging services for e-commerce sellers. 

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So, yeah, is there anything else you’d like to add before we finish this guide?

Simon: Nothing really important to add. 

A Few Last Words

Simon: I just want to say that any company dealing with China, whether they have a small or large amount of trade, should seriously think about setting up a company there. 

It can help increase revenue. 

There’s a lot to gain from doing this, and honestly, there’s nothing to lose.

Vova: Yes, that 13% can add up to a significant amount of money. 

So, if the cost of running the company, plus the effort involved, is worth it to you, and if your business is growing, you will end up saving or making a lot of money. 

It really depends on how you look at it.

Simon: Exactly,. 

You know, Vova, there are some companies in China that rely entirely on that 13%. 

These companies know that a lot of foreigners don’t have a company set up in China. 

So, they buy goods directly from factories, and they don’t add any extra margin to the prices. 

Instead, they rely on the tax refund they get every year, which is 13%. 

They run all their trades through their own company, and the 13% tax refund is their main profit. 

That’s how they do business.

Vova: Awesome, man, that's great! 

I know a group called The Game-On Group, led by Chen Saban. 

I’m not sure if they handle company registration, but they might be helpful in setting up a company in China. 

Anyways, thank you for your time and contribution, Simon!

I truly appreciate you sharing your valuable insights today and I’m sure that our readers will find them incredibly useful.

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Conclusion

Starting a company in China as a foreigner may seem tough at first.

However, with the right information and support, the process can be surprisingly smooth.

Clear guidance, a few key steps, and a bit of patience are all you need.

For e-commerce sellers, this can actually be a smart move.

You'll not only enjoy tax benefits but also get greater control over your operations, payments, and supplier relationships.

Partnering with reliable companies is crucial, especially if you don't speak Chinese.

For high-quality packaging solutions, I highly recommend EcoBrothers.

Mention my name, Vova Even, when you contact them, and you'll receive a complimentary insert with every order.

👇 Click below to explore EcoBrothers and claim your bonus! 👇

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Until next time.

Best,

Vova :)