How can I set up a company in Shanghai?

Unfortunately for most foreigners out there, only Chinese nationals can legally set up a company in China, meaning you'll have to get a Chinese partner who can put their name and signature on everything (including the bank account.) Needless to say, make sure you find someone you trust. If things do go pear-shaped, you WILL lose to the local.

The registration process usually takes two to three months, and has to be approved by the Government, which may put limits on the scope of your business. As if that wasn't fun enough, you have to report to lots of government departments, such as the Ministry of Commerce, the State Administration of Industry and Commerce, and several tax departments (national, municipal, local.) Upon success, you'll have to give ongoing reports to the government, which can be a real drag. More info on set up a company in Shanghai this link.

Some people set up a company in Hong Kong (which is much cheaper) and then operate in Shanghai without a proper business license or registered rep office. This evades the monthly 10% business tax, but can land you in a lot of hot water if you get caught. More info in this thread.

As if that wasn't enough, you'll need 500,000 RMB startup capital. This would be a problem, but apparently there are companies who can arrange to "transfer" that sum to your account for a short time, and then take it back. This sum may be less outside of Shanghai, for example in Beijing it's about 10,000 USD.

Really, the key things are guanxi, (your relationships and network with other people) patience, a tolerance for a lot of red tape and really doing your homework.

Useful Links

• Setting Up WFOE and Rep. Office in Shanghai
• Business Asia: Is China worth the effort?
• Setting up shop in India/China
• FAQ: Setting up a business in China
• China Business Guide 2005 [Book]
• Setting up a business in China, part 2 @ Beijing Review [Can't find part one]