Starting a Business in China | How does a foreigner start up a Business in China?
Thanks to the support of China Classifieds, HongFangLaw had the opportunity to present an insight into the Chinese IPR system alongside some case studies to reveal some of the steps in starting and running a successful company in China.
The event took place at Mixpace·Amyitis in Shanghai on Thursday July 18th, 2017. The objective of the event was to enlighten foreign individuals and businesses on how to start and run a company in China.
In total, 5 speakers were invited to offer their professional expertise on the steps in starting and maintaining a business in China. The topics covered were as follows: the ways to attract and retain talented staff, HR and payroll, tax and accounting, insights into joint ventures (JV), WFOE set up, and intellectual property rights acquisition and protection in China.
Our partner, Mr. Zhang Xu was invited to give some insights into the Chinese IP system and provide essential awareness on the steps foreigners must take to secure their IP rights in the Chinese market.
Speaker: Zhang Xu
Zhang Xu introduced the Chinese IP system to the audience who wanted to know the steps required to successfully start a business in China. He briefly revealed the origins, history and meaning behind Intellectual Property Rights (IPR). Specifically, he revealed the importance IPR plays in the world of business as these rights ensure a certain monopoly within particular time frames and territories.
Accordingly, he revealed the different angles IPR can be protected, whether it is through a trademark, a copyright or a patent. However, the emphasis in his speech was to distinguish the different practical reality between the Western hemisphere and the Eastern hemisphere in IP law. Notably, Zhang Xu stressed that China’s trademark system operates under a first-to-file doctrine.
Therefore, the entity that files their trademark first, theoretically, is granted the exclusive trademark and this provides the registrant strong legal protection for its use in China. As a consequence, this system provides the opportunity for trademark squatters to arise. This is extremely important to understand for any foreign entity who wishes to start business in China.
Importantly, in Zhang Xu’s presentation he unveiled a checklist of 5 key points a business should be attentive about in regards of IPR when entering the Chinese market.
- Ensuring your trademarks have been registered in China with proper classes;
- Ensuring your contract with business partners and employees include the necessary clauses for trade secret/know-how/trademarks/traded dress;
- In the case where your trademark has been squatted by others, ensure you have other prior rights in place, such as the copyright;
- Ensure that key trademarks are integrated in your mail signature and disclaimers, for prior usage;
- Develop a centralized intellectual property portfolio.
In support of his speech, Zhangh Xu showed some very typical case study to all the audiences for their better understanding how the IP situation is in China.
In addition to Zhang Xu, four additional speakers covered different topics when elaborating on the steps on how to start a business.
Speaker: Yolanda He (CEO/Founder of CBA Consulting)
Yolanda covered WFOE set up, tax verification, cost of employment and annual compliances.
In regards to tax verification, Yolanda stressed that tax verifications must be done within 30 days after the company registers. After the tax is verified, the company must file tax in the following month and every month during the company’s operation period. It is crucial not to miss the deadlines with tax verifications as it will pose major problems to the company and the legal representative. As a result, she admitted that the payroll will look very different to a foreign employee compared to a Chinese employee.
Speaker: Julia Polyakova (Account Manager at Fesco Adecco)?
Julia highlighted, that students from Chinese universities look for these top 5 attributes as an ideal employer from: good reference for future career, competitive base salary, high income in the future, career progression and professional training and development.
Julia explained that the most common reason why companies fail to retain their talented staff is because there isn’t scope for career progression. In other times, it can be because there isn’t an increase in salary, or a lack of learning and development.
Speaker: Zach Lichtblau (Partner at Bonnard Lawson)
Zach provided an insight into the structures of joint ventures (JV) and revealed some of the advantages and disadvantages in starting a JV.
He explained that some of the reasons why people set up a JV are because it is relatively easy to start and receive local support. Other reasons can also include legal restrictions and complementary interests. Also, he elaborated on different type of JVs, where he explored Equity Joint Ventures and Cooperative Joint Ventures. He also allocated some time describing a WFOE in the context of China.
Speaker: Marco Pearman-Parish (President at Yingke Global)?
Marco Pearman-Parish provided an insight in HR and gave some practical advice on how to control risk when hiring staff.
Specifically, he covered the importance of contracts where he elaborated on some potential risks in not giving someone a contract in an appropriate time, and the possible backlash that can occur. Similarly, he also covered the potential risks when contracts are given and advised that there should be appropriate strategies in place to ensure the company manages its affairs in the most professional way.
The conclusion of all speakers initiated a break, and the opportunity to have dinner while networking.? Shortly after, everyone returned to start the panel discussion where several questions were floored to the speakers.
If you would like some more personalized review of the event from us, please kindly let us know by writing to:?public.relation@hongfanglaw.com. Thank you.
