Based on the World Bank’s Ease of Doing Business Report, starting a business in China involves 7 procedures which require minimum 22 working days of follow-up with various agencies including local administration of industry and commerce, police department, tax bureau and social welfare insurance bureau etc. Currently, China ranks 93 out of 190 in “starting a business” in the Ease of Doing Business Index.
Chinese government is simplifying procedures of setting up business in China
On 14 August 2018, the State Council of China rolled out detailed plans on administrative streamlining of government functions. In one of the action plans, the State Council urged all regions to actively implement actions of eliminating unnecessary government approvals, cutting approval times, reducing registration times for company set-up, and deepening tax reform for enterprises.
At the end of 2018, the total time required to set up a new company in China shall be reduced by half. Meanwhile, the account opening requirements will be further relaxed by cancelling the application of “Account Opening Approval Certificate” with the People’s Bank of China. In the future, instead of going to different governmental agencies to register company information one at a time, it may just require submitting all information in one go. It seems China is poised to level up their ranking in starting a business.
Strengthening post-supervision is underway
On a different note, businesses in China are subject to strengthened regulatory supervision at the post-set-up stage. Governmental agencies are working together to streamline their information sharing and exchange by merging their systems and databases.
In June this year, the local tax bureau and the national tax bureau have merged into one single tax bureau in cities such as Shenzhen, Liaoning, Shandong and Qingdao. In Shenzhen, the local administration of industry and commerce, namely the Market and Quality Supervision Commission, has started sharing enterprise information with Shenzhen Tax Bureau. As a result, if a company has mismatched information in the two government agencies’ system, it will be requested to update the information before the government resumes rendering services to the company.
Furthermore, when a company fails to update information or make necessary filing notice in time, it may be marked as “irregular” in the National Company Credit Information System, an online resource that provides free information about companies to the public since 2014.
In conclusion, even though China is making efforts to facilitate the start-up of businesses to encourage investments, investors should also pay attention to the post-start-up regulatory environment. With regulators’ “learn as they go” practices, companies that are already set up in China must keep a close eye on the frequent updates of local compliances.