It is also important to mention here that China is currently the largest manufacturer in the world. Despite this, China’s labor costs are far much lower than those in most developed countries like U.S., Germany, and UK. This makes it a perfect place to manufacture products which require vast scale or high labor. Corporation China will help you to easily navigate everything you need to know about China’s manufacturing sector.
For you to have a manufacturing in China and operate it successfully, you should ensure that you are not running into any product quality or safety problems. We have dedicated this post to explaining to you how to go about starting a manufacturing business in the world’s second largest economy. We will explain to you the steps you will need to take to start your business.
Setting up a manufacturing business in China can be a daunting process. The country now imposes strict rules and guidelines for setting up any factory in its territory. For example, it imposes several anti-pollution, local transport, local energy supply, and safety issue regulations which you will have to comply with when setting up any new factory. You need to comply with all these rules and regulations even if the proposed location of the factory is somewhere in a well-known industrial zone.
Let’s get straight to the process of setting up a factory in this country. Discussed below are what are usually required to start a factory:
Find a location
First, you need to hit the ground in search for the best location for setting up your factory. The search for the factory’s location is something that should begin as soon as it can be. But it is important to note that finding a location is not possible until all the general plans for your manufacturing business are completed. The industrial zone operator or local government will first require you to have and provide a general business plan for your factory and a general plan first. They will check out your plans before considering the whole feasibility of the proposed factory operations within their district.
Some districts might find it unusual to have some types of factories in their area. On the same note, some places are usually great locations for almost all types of factories. For example, Shandong or Dongbei are usually most preferred locations. You will also find that some districts will approve of your factory to be located in their area. Also, some districts are less concerned and are not that strict about feasibility issues and the effect on the environment.
Form a Wholly Foreign Owned Entity (WFOE)
After the process of determining the factory location is complete, the relevant authorities will require the company to form a WFOE. This is simply a Chinese legal entity. The requirement rule is specifically applicable for manufacturing businesses being set up by foreigners.
Wholly Foreign Owned Entity is abbreviated as WFOE. This is a 100 percent foreign owned subsidiary. So, it is not only a requirement, but also a great step. There are 2 sets of different procedures for the application of a Wholly Foreign Owned Entity formation:
Formal process for factory formation
The formal process is the standard process for forming a company in China. This process is focused heavily on obtaining several documents from your home country. You need to start this process as early as you can because it time consuming and tedious. Detailed rules usually depend on the district in which the factory will be set.
The approval process for setting up and operating a manufacturing business locally usually involves several issues/steps, such as:
- Feasibility study conducted by a certified local professional
- Will the building housing the factory be rented or owned
- Environmental impact statement written by a qualified local professional
- Other safety and environmental reports as maybe be required
Begin of operations
After the approval of the formal process of factory formation is complete, it is now time to get started. Acquire the necessary machinery and any other equipment needed to get the factory up and running. Procure for manufacturing materials either from the local producers from abroad. Hire stuff and get started. Ensure that you are adhering to safety standards at all times during the operations.
If followed accordingly, the above steps will help eliminate any misunderstandings and also the potential for any unexpected costs.