The free market policy is a policy that most countries are working towards. The benefit of this policy is that it will make the import and export activities within countries to be fast and easy and it will also promote foreign investment which is a good thing for any economy.

Hong Kong has been successful in this and it known to be one of the best free market cities in the world. In Hong Kong, you can invest and run your business comfortably without facing any extra charges or costs in the name of you are not an original residence of Hong Kong. Apart from this, you will be able to export your good and services to other countries fast and this easily and this is the main reason why most foreign investors go for countries that have the free market policy.

One thing with the free market policy is that there is a quick movement of goods at the ports, both in and out. This makes it very easy for your products to react to the intended market at the right time as scheduled. Countries that have not yet opened up for the free market policy are actually depriving their economy from growing. Hong Kong is open and ready to do business with any country in the world because this is one of the advantages of the free market policy. There are also some countries that do not agree to trade with countries that are not operating under the free market policy.

In Hong Kong, your investment has a higher chance of being successful because your market will be expanded. The Asian market according to the international business reports is one of the markets that have not yet been tapped properly and most investors are actually targeting it. You should know that Hong Kong is located right at the heart of Asia and there is no way better way than using Hong Kong as your gate way to the rich Asian market. With the free market policy in Hong Kong, you can easily trade and expand your business to the rest of Asia.

Hong Kong is open to any type of business and it provides you with all the tools necessary for your business to expand and reach out to the rest of the world especially the rich Asian market. It is very difficult for you to access the Asian market directly without going through Hong Kong because things like the free market policy and professionals for your business growth may not be available for you let alone good communication.

Overview of the Pilot FTZ
Shanghai Pilot FTZ is a regional free trade zone established by the PRC
Government in Shanghai, with an area of approximately 28.78 km2 covering
four zones, namely Waigaoqiao Free Trade Zone, Waigaoqiao Bonded
Logistics Park, Yangshan Bonded Port Area, and Pudong International Airport
Comprehensive Free Trade Zone. The Pilot FTZ, focusing on service industry
and trading industry, and system innovation, will promote the reform in and
opening of six industries, i.e. financial service industry, shipping service
industry, commerce and trade service industry, professional service industry,
culture service industry and social service industry. Moreover, new service
models and administrative and management systems will actively be tested in
the Pilot FTZ in order to create an international business environment in which
the rule of law is upheld.

System Innovation

From:http://www.conpak.com/Interpretation-of-Policies.html

Negative List Management
The negative list management of the Pilot FTZ represents a significant breakthrough for the foreign
investment system in China. Traditional investment management list tells the investors “what they can do”
while the negative list tells “what the investors cannot do”, indicating that the investors are allowed to do
anything other than those listed on the negative list. According to “Catalogue of Industries for Guiding
Foreign Investment” and relevant laws and regulations, the municipal government of Shanghai issued the
first negative list on 1 October 2013, setting out 1,069 subcategories and 190 clauses of regulatory measure.
Although the items set out in the negative list are generally the same as current restricted and prohibited
items, the government officers have stated that the negative list would be modified in due course based on
the laws and regulations for foreign investment and the needs for the development of the Pilot FTZ, and
therefore it is still expected that the negative list will enhance the flexibility of investment.
Filing System for Offshore Investment
A filing system is adopted for the administration of establishment of enterprises carrying out oversea
investment by the enterprises in the Pilot FTZ and the general items of overseas investment. Previously, the
enterprises had to go through rigorous examination and approval procedures and complicated application 4
Filing System for Offshore Investment
A filing system is adopted for the administration of establishment of enterprises carrying out oversea
investment by the enterprises in the Pilot FTZ and the general items of overseas investment. Previously, the
enterprises had to go through rigorous examination and approval procedures and complicated application
formalities for oversea investment, bringing much uncertainty to the investment plans. Upon the
implementation of the filing system, the relevant formalities will be streamlined which helps the enterprises
expand their businesses into international markets.
Financial Reform
The Opening and reform of financial industry is also a bright spot of the Pilot FTZ, and the details of which
are as follows:
– Allow the conversion of capital account items and separate accounting on the condition that risks are
– controllable.
– Encourage financial institutions to exercise their rights of self-pricing to gradually promote the
– marketization of interest rate.
– Allow carrying out cross-border RMB business to boost the cross-border use of RMB
– Establish an appropriate foreign exchange management system for the development of the Pilot FTZ to
facilitate trading and investment
– Allow different types of financial institutions to be set up in the Pilot FTZ to build an international
trading platform
In the Pilot FTZ, banks are not subject to the restriction of “one branch only in a city” and are allowed to
set up “branches” rather than “sub-branches”. Currently, ICBC, Bank of China, SPD Bank and Bank of
Shanghai have set up branches in the Pilot FTZ while those foreign owned banks and insurance companies
such as Citibank, HSBC, BEA and Standard Chartered Bank have also set up points of service one after
another.
So far, no details for the financial reform in the Pilot FTZ have been announced and the extent of opening
up is still uncertain. In view of the fact that only the interest rate for deposit has not yet been liberated in the
process of interest rate marketization, the market expects that the PRC Government is likely to launch the
marketization interest rate first. Moreover, the financial innovation of the Pilot FTZ will also promote the
development of offshore financial services.
Mode of Supervision and Control
A mode of supervision and control under which the first line* is opened and the second line* is controlled,
and goods within the FTZ are freely moved is implemented in the Pilot FTZ. The first line mainly focuses
on checking and controlling people entering in or coming out of the zone and the checkpoint authorities are
only responsible for necessary inspection and quarantine control. On 9 October 2013, the policy of
“importation before declaration” was adopted in the Pilot FTZ, permitting an enterprise to directly transport
the goods into the zone with import manifests and make declaration with the competent customs office with
an imported cargo record list. Meanwhile, the goods may also be freely moved within each special customs 5
controlling areas and across those areas within the Pilot FTZ. Enterprises set up in the FTZ will not in
principle be subject to regional restriction, and they are allowed to make investment or carry out business
activities outside the Pilot FTZ. However, if specific regulation requires the completion of relevant
formalities, the enterprise should follow such regulation. This new mode of administration is a breakthrough
of the administration modes adopted in other comprehensive bonded zones, significantly facilitating the
movement of people and goods and lowering import and export cost of cargos.
Note: The rst line: national boundary
The second line: domestic industry sectors
Reform on Business Registration System
To create a fair business environment, a reform on business registration system has been implemented in
the Pilot FTZ with following actual measures:
– Business licenses of the same type will be issued to the enterprises set up in the FTZ except those
– enterprises under business licenses for a rural specialized cooperative association as a legal person and
– business licenses for privately or individually-owned business.
– A pilot registration system for subscription for registered capital is implemented in the Pilot FTZ under
– which the industry and commerce bureau only registers the registered capital or total capital subscribed
– by all shareholders or the promoters and no paid-up capital of a company will be registered. A
– shareholder’s liability to a company with limited liability is limited to the amount of capital contribution
– subscribed by such shareholder. A shareholder’s liability to a company limited by shares is limited to the
– shares subscribed by such shareholder.
– The requirements of minimum registered capital of RMB 30,000 for a company with limited liability,
– RMB100,000 for a company with limited liability with sole shareholder and RMB5 million for a
– company limited by shares are waived in the Pilot FTZ.
– Normal production and operation activities may be carried out by an enterprise set up in the Pilot FTZ
– once it has been registered with a industry and commerce bureau and obtained a business license.
– However, for an enterprise which carries out permitted business activities, it must obtain the business
– license and a permit or an approval before the commencement of such activities.
– A pilot system for public announcement of annual reports will replace the annual check system and an
– enterprise may submit its annual report to the industry and commerce bureau and disclose the same to
– the public through the credit information public announcement system. An enterprise which fails to
– comply with the requirement will be included in the unusual operation list (經營異常名錄).
– An application for business registration can be made either on site or online. Such applications will be
– collectively collected, and relevant documents will be collectively dispatched to the applicants, by the
– industry and commerce bureau.
It is worth noting that, upon the reform of business registration system, shareholders of a company may on
their own determine the subscribed capital contribution and the mode of and deadline for contribution. No
minimum registered capital is required. Enterprises may need to consider whether corresponding
adjustments have to be made to their future investment plans.6
Establishment of a legal system
An arbitration court was established on the Pilot FTZ on 22 October 2013. As a platform for arbitration of
international business disputes, the arbitration court provides such legal services as arbitration consultation,
initial proceedings and trial. However, in addition to the establishment of legal institutions, legislation is
also an important part for the establishment of the legal system for the Pilot FTZ. It is essential to determine
how the power of law making is granted and how the local laws of Shanghai are made in line with the
development of the Pilot FTZ.
Tax policies
As at 31 October 2013, two tax policies for the promotion of investment and five tax policies for the
promotion of trade were introduced, details of which are as follows:
– Income tax on gain on asset valuation from such asset restructuring as external investment using
– non – monetary assets earned by an enterprises or an individual shareholder may be paid by installments
– within a 5 year period.
– The policy for paying individual income tax by installments is adopted for equity incentives granted by
– an enterprise to highly skilled employees of the enterprise or to attract those talents in short supply by
– means of shares or capital contribution.
– A project subsidiary under a financing leasing company or under a financial lease company is admitted
– into the scope of export tax refund for financing leasing.
– A duty should be levied on the goods produced, processed and sold to the mainland market by an
– enterprise through the second line based on relevant imported parts or the actual status of declaration and
– inspection.
– No tax is imposed on the machines and equipment imported by manufacturing enterprises or
– manufacturing service enterprises.
– The tax refund policy for the port of departure has been improved.
– Value added tax preference for imported cargos will be granted on the aircrafts with aircraft load of over
– 25 tons purchased oversea by domestic leasing companies or their project subsidiaries and leased to
– domestic airlines.
Moreover, if in line with the tax reform and international practice, the PRC Government will study ways to
improve the tax policies appropriate for overseas equity investment and the growth of offshore business,
and to establish a categorized supervision model for monitoring goods based on their status. In response to
the call for a 15% tax rate for enterprise income tax on the Pilot FTZ, the government officials replied that
the time had not matured. From this point, we can see that the reform of the Pilot FTZ pays emphasis on the
system rather than the policies, which indicates the shift in the PRC’s development direction .

With in-depth understanding of Chinese market of foreign investors, many of them tend to set up wholly foreign-owned enterprise to do business. Setting up wholly foreign-owned enterprises will not only enable the investors to increase marketing decision and response speeds, but also provide the greatest security for the investors to protect their scientific research confidentiality and keep centralized management intact. Meanwhile, foreign investors contribute by installment towards the registered capital, where the first installment shall be paid in an amount at not less than 15% of the statutory capital within 90 days from the date of issue of the business license, and the last installment shall be paid up within 2 years.

Required Documents for Incorporation mainly includes:

1. The feasibility study report
2. Articles of association
3. Enterprise Name Approval in Advance Notice
4. The application for foreign investment company incorporation signed by the proposed legal representative
5. Meetings Record
6. The investor’s entity qualification certificate or the natural person’s ID card
7. The appointment letters and ID cards of directors, supervisors and managers
8. The legal representative’s appointment letter and ID card
9. Certificate of assessment of capital
10. Lease contract or certificate of property rights
11. Documents or certificates for earlier setup examination and approval

Taxes Involved in the Operation of Wholly Foreign-owned Enterprise in China:

1. Corporate Income Tax: generally the tax rate is 25%; the high tech enterprises with key aided enjoy 15% preferential income tax; those enterprises qualified for small profit enterprises enjoy 20% preferential income tax.

2. Tariff, and Value-added Tax on Importation: foreign investors carrying out investment in related file or projects, shall be entitled to first taxation, and then refund, of tariff and value-added tax or enjoy the tax exempt.

3. Value-added Tax, and Consumption Tax:  The foreign investment productive enterprise being a general taxpayer shall be entitled to “Exemption, Credit and Tax Rebate” of taxation or “Collection First and Refund Later” on the self-managed export, or export on consignment, of its self-produced goods. Meanwhile, during the process of export sales, they can enjoy the tax exempt of value-added tax.

The foreign capital investment enterprise shall be exempt from tariff and value-added tax on importation and consumption tax payable on the goods imported by the trade method of processing materials supplied by customers, and processing imported materials, and exempt from the value-added tax on production and consumption tax on the exported goods produced by it. While, to those foreign capital investment enterprise categorized as “encouraged” shall be entitled to full refund of the value-added tax payable on the home equipment, falling within the scope of the Exemption Catalogue, and purchased within its aggregate investment.

4. Individual Income Tax: Foreign nationals are entitled to a monthly exemption of RMB4800, with the remainder subject to individual income tax at 3-45%. Foreign nationals are exempt from individual income tax payable on the interests from saving deposits with financial institutions

5. Staff Social Security: The enterprise will make a certain social security contribution for its employee at a percentage of the employee’s monthly salary, of which the base and proportion are calculated differently due to different living standards in different regions.

Schedule of Taxation Involved in Foreign Enterprises in Major Industries(china taxation http://www.conpak.com/China-Taxation.html)

Taxation	Tax Rate	Taxation Involved in Various Industries					Linkage
		Manufacturing	Commerce	Services	Processing with materials, processing according to samples and assembling parts supplied by investor or clients and conducting compensation trade	Representative Office
Value Added Tax	17%			–	–	–	Click for Value Added Tax details
Business Tax	3%-20%	–	–		–		Click for  Business Tax details
Consumption Tax	3%-45%		–	–	–	–	Click for Consumption Tax details
Corporate Income Tax	15%-25%						Click for Corporate Income Tax details
Real Estate Tax	1.2%						Click for  Real Estate Tax details
Land Value Added Tax	30%-60%						Click for  Land Value Added Tax details
Stamp Duty	0.005%-0.1%						Click for Stamp Duty details
Customs Duty	As provided by the Customs			–	–	–	Click for Customs Duty details
Individual Income Tax	3%-45%						Click for Individual Income Tax details

The establishment of a company in China is one in all the primary curtails facets of doing business in China, if your company’s arrangement is not set up properly. It is not being structured properly or doesn’t deliver the accurate licenses or authorities it can be incurable for your business or in the least case scenario limit its capacity to develop and reach China. China is still an area with each opportunity and risks in the eyes of most investors attributable to factors like political and cultural backgrounds. Our China company formation facilities are personalized to benefit foreign entrepreneurs coming into the China markets to lawfully and legitimately conduct business.               

Meanwhile 1978, once China released its doors to the outside world, China has appreciated marvelous annual economic growth. It’s currently the second largest economy within the world and therefore the world’s single largest recipient of foreign direct investments among evolving countries. China’s concurrence to the World Trade Organization is widely estimated to create an extra wave of internal investment from foreign corporations because the terms of entrance to new sectors of the China economy area unit increasingly liberalized. Before starting a business in China, you have got to know what the options are. Foreign Investors generally start a business existence in China in one amongst five ways. These are totally Foreign Owned Enterprise (WFOE), Joint Venture, Partnership Enterprise (PE), Honk Kong Port Company and Representative Office. The variances between each of that square measure abridged here those five modes of business presences in China. The investment of capital amount essential for a remote owned entity in China differs reckoning on location and the nature of the business. 100% foreign company possession is allowable in China but the business activities of which a remote company will have interaction in are heavily regulated and restricted to those declared on your company business license. A Foreign invested in Partnership Enterprise (FIPE) may price a try if investors don’t need to invest a great deal of capital to determine a business in China. We don’t request to be grasped all things or to simply accept add areas where others could offer a more robust service. We will investigate your inquiries fastidiously we have a tendency and that will allow you to comprehend at once if we believe your substance is doubtful to make the results you desire or others would signify you better.

Launching an incidence in China remains an exciting expertise for unwary organizations, even with our proficiency and expertise we will seek the way for prospective market competitors. China has three standard kinds of business establishments offered to foreign investors who would like to build their companies.

China which is one of the most populated countries has a good economy. It also has a fast growing economy. One can observe that a lot of products from this country are being exported all over the world. For these reasons, a lot of businesses are being established of formed in this country. Setting up a business is not that complicated and people from other countries can consider setting up a business in China.
Wholly Foreign Owned Entity (WFOE) is the one which is most commonly used or formed by foreigners. A lot of businesses of such kind are being established as China’s economy continues to grow over the years. Many foreigners consider forming a Wholly Foreign Owned Entity as it the one which has the least complicated process of formation. The steps on forming a WFOE in China are stated on the following paragraphs. These steps can be one’s guide on forming a WFOE in China so that problems that you can encounter on such process can be minimized. Furthermore, one who wants to have his own business in China can also have a faster and easier formation of a company.
The first step on the formation of a WFOE is to determine the legal parts of your business. One shall be sure that the form and the business activities of your company are legal with regards to the government in China. You won’t want to establish an illegal company without you knowing it.
The owner of a WFOE on China is required to provide all the necessary documents. These include proper documentation from the owner’s country and also a document which will prove the financial capacity of the owner of the WFOE. Make sure to provide all of these documents.
Other necessary documents are the Articles of Incorporation or its corresponding document for other forms of business, a business license, a certificate of status, a bank letter with regards to the investor or owner’s company and a description of the company’s activities.�
Make sure that you will be able to submit all of these documents on the right form. The first four documents shall be submitted in Chinese while the last one is not required to be in Chinese. Despite of this, it is required to have a summary of the letter in Chinese.
After this, one must have the approval of the Chinese government for the business. This is very important and one can do so by submitting the necessary documents which include the Articles of Association, Lease, Feasibility Study, proposed personnel salary and benefit budget and other necessary documents. Complying with all of these is very important because doing so is mandatory.