Author Archive The Incorp China Team

Legalization Process in China Streamlined After Country Adopts Hague Apostille Certification

April 9, 2024 Comments Off on Legalization Process in China Streamlined After Country Adopts Hague Apostille Certification By The Incorp China Team
With China’s adoption of the Apostille Convention, the process of certifying legal documents from fellow Convention members has been made simplified, more affordable, and much faster File photo: Ascannio, ShutterStock.com, licensed.
With China’s adoption of the Apostille Convention, the process of certifying legal documents from fellow Convention members has been made simplified, more affordable, and much faster File photo: Ascannio, ShutterStock.com, licensed.

PALM BEACH, FL – On November 7, 2023, the People’s Republic of China effectively replaced their prior legalization process for cross-border documents by officially adopting the Apostille Convention of the Hague Conference on Private International Law; this event came to be after Beijing previously agreed to the Convention in March of that same year, joining 126 other contracting countries.

The Apostille Convention of the Hague Conference on Private International Law – also known as the Convention of 5 October 1961 Abolishing the Requirement of Legalization for Foreign Public Documents, or simply the Apostille Convention – is an international treaty drafted by the Hague Conference on Private International Law (HCCH). It’s intended use is to greatly simplify and streamline the procedure in which a document that is issued by one of the countries contracted with the Convention can be certified for legal purposes when dealing with other contracted countries.

When a document is internationally certified within the confines of the convention, it is known as an “apostle” or a “Hague apostle.” The effect is comparable to taking a document to a Notary Public and having it notarized; if the document represents a legal agreement between two countries contracted within the Convention, an apostle issued by the origin country is enough to officially certify the document for both parties, with the receiving country not needing to certify it further.

China had used legalization – also known as consular authentication – to certify cross-border documents for decades. Foreign-produced documents previously needed to be notarized and legalized at the Chinese Embassy or Chinese Consulate in order to be utilized in China, and the process was typically complicated, time consuming, and expensive; this had the detrimental effect of making it difficult for non-Chinese investors and companies to conduct business in China.

With China’s adoption of the Apostille Convention, the process of certifying legal documents from fellow Convention members – 126 countries as of March 2024, notably including the United States, the United Kingdom, and the Russian Federation among its members – has been made simplified, more affordable, and much faster; the typical turnaround time for the legalization process was as long as three months or more, whereas an apostle takes as little as 4-14 days to be certified.

By having contracted with the Convention, China no longer needs to legalize foreign documentation via embassies or consulates; this process has now been replaced by an apostille issued by the designated authority in the origin country that will be immediately recognized in the destination country.

As a result of China adopting the Apostille Convention, it has greatly increased its opportunities for foreign investment and business dealings with multiple power-player countries on an international stage.

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Many U.S. Companies Moving Manufacturing to Mexico – Known as “Nearshoring” – Amid Rising Risks of China Reliance

March 6, 2024 Comments Off on Many U.S. Companies Moving Manufacturing to Mexico – Known as “Nearshoring” – Amid Rising Risks of China Reliance By The Incorp China Team
China has long been recognized as the manufacturing giant of the global economy. However, in recent years, efforts by global businesses to optimize supply chains and reduce risks have made the "near-shoring" trend increasingly popular. File photo: Sirtravelalot, ShutterStock.com, licensed.
United States outsourcing manufacturing to Mexico was slow as recently as 2019, but as of July 2023 Mexico made up 15 percent of all U.S. imports – granting it new status as this country’s largest trading partner – with China coming in second at 14.6 percent.. File photo: Sirtravelalot, Shutter Stock, licensed.

PALM BEACH, FL – While China has been the dominant force in global manufacturing for decades now, in recent years a phenomenon known as “nearshoring” – the practice of transferring a business operation to a nearby country, especially in preference to a more distant one – has taken hold of companies in the United States, with many weighing the risks of relying solely on the Asian juggernaut amid numerous concerns, including cost, reliability, and rising U.S./Chinese economic tensions.

As a result of these factors, many American companies are turning their attention to their immediate neighbor to the south – Mexico – for their manufacturing needs, leading to the country as of 2023 surpassing China as the U.S.’s leading trade partner.

In Q3 2023, audits and inspections in Mexico on the part of U.S. buyers showed over a 17 percent degree of growth year-over-year. This has been cultivated by U.S. companies desiring increased supply chain reliability and flexibility resulting in shorter lead times and more affordable transportation costs, in addition to establishing a cooperative economic relationship with one of America’s closest neighbors.

This greater reliance on Mexico came at the tail end of the COVID-19 pandemic; the United States outsourcing manufacturing to Mexico was slow as recently as 2019, but as of July 2023 Mexico made up 15 percent of all U.S. imports – granting it new status as this country’s largest trading partner – with China coming in second at 14.6 percent.

Bear in mind that American companies are not abandoning Chinese manufacturing, far from it; it’s just that many are recognizing the need to add additional options to their existing supply chain as more and more businesses and organizations develop international influence or start operating on an international scale.

For an example of the genesis of this sudden and rapid growth, in February of 2022 Walmart chose a family-run apparel business in Mexico called Preslow over their usual Chinese source to purchase a $1 million order of company uniforms. The reasons made sense- the pandemic had caused the costs of international shipping to skyrocket, and supply chain issues had resulted in ports being jam-packed with incoming transport vessels, resulting in months-long fulfillment delays.

The logic of relying on one country halfway around the world for important goods was beginning to be questioned.

Mexico has been gearing up for the rise of nearshoring; since 2019, the country has grown its industrial space by 30 percent, but is still in the process of assessing and addressing some of their manufacturing weaknesses as well, such as security, power availability, and infrastructure.

U.S. businesses have been taking note of the numerous advantages to dealing with their neighbor to the south for their needs, including the country’s exceedingly close proximity, low labor costs translating to reduced pricing, a proven and reliable industrial base, and – perhaps the biggest reason of all – the fact that all products manufactured in Mexico and imported to the U.S. that are compliant with the United States-Mexico-Canada Agreement (USMCA) are assessed zero tariffs.

Other reasons for the growing popularity of nearshoring have been due to deteriorating economic relations between the U.S. and China; in 2018, the Trump Administration – claiming that Beijing’s aggressive trade practices were a violation of global trade rules – began imposing harsh tariffs on Chinese imports, a move that President Joe Biden continued to support after taking office in 2021.

Since then, the Biden Administration has encouraged American companies to engage in manufacturing with allied countries – called friendshoring – to bring back their manufacturing to the United States – known as reshoring – or, finally, to seek suppliers closer to the country via nearshoring.

In the near future, American companies are expected to continue to diversify their sourcing options, while nonetheless still keeping China as a major partner in a large number of their manufacturing ventures. It will be interesting to see how the industry will reshape itself in the years to come as globalization continues to grow and evolve.

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What is China’s Entrepreneur Visa?

July 31, 2021 Comments Off on What is China’s Entrepreneur Visa? By The Incorp China Team

What type of Visa do I need to setup my business in China?

What type of visa does someone need if they had just set up their company, and planning to stay in China for a long time to complete all the follow-up tasks, but cannot yet be employed by their own business so they can't get a working permit? How could this person legally stay in China during this period?

They could apply for something called China Entrepreneur Visa. This visa is designated as a more flexible way to legally stay in China to make sure things are going in the right direction.

What is an Entrepreneur Visa?

The entrepreneur visa, also known as the Private Residence Permit entrepreneurship visa, was piloted by the Chinese government in 2018. The visa is aiming to attract expert and talented entrepreneurs to start their businesses in China. Foreigners are granted the access to legally stay in China to conduct business activities, e.g., setting up the office, conducting industry research, and other required jobs to set up a WFOE.

Compared to the working permit, which could only be applied with sponsorship from an existing company, an entrepreneur visa allows foreigners to enter and stay in China before their company being set up. Once the company is being established, it could be used as a visa sponsor to apply for a working permit.

Who could apply for the visa?

A Chinese university graduate who is currently enrolled in one of Shanghai’s institutes of higher education and who has the stated intention to engage in part-time entrepreneurship applies with a business or innovation plan. This would usually require the student to have certain skills and have a plan related to government-designated science and technology parks.

A recent graduate (within 2 years) from top universities in the world who have made outstanding achievements in innovation and entrepreneurship.

An investor applies with an innovation plan or a business plan and shows their intent to invest in the plan. 

How to apply for an entrepreneur visa?

The process of applying for an entrepreneur visa is similar to one of applying for other visas. Such as providing university diploma and passport information, undergoing a health check…

Besides the essential documents, the applicant must also submit:

  • An investment certification form: This will often include documents to show the proof of funds if the applicant applies as a potential investor. 
  • An application letter: This would be the business plan and the explanation of the reason for wanting to start a business in China.

The entrepreneur visa would definitely be a great fit for people who wished to start a company in China. Compared to the other types of working visas, an entrepreneur visa would be less costly and more viable.

If you need more information about the visa or any related to registering a business in China, call 561-729-6508 or email robert@incorpchina.com for a free consultation.

Everything You Need to Know About Chinese Accounting Standards

July 2, 2021 Comments Off on Everything You Need to Know About Chinese Accounting Standards By The Incorp China Team

Although the accounting regulation in China is based on the Generally Accepted Accounting Principles (GAAP), which is a system that shares 90% similarities to the IFRS (International Financial Reporting Standard), there could still be lots of differences and hard to handle. One of them would be the “Fapiao” system in China. Fapiao is basically the receipt that is handed to customers upon purchasing a product or service and is created by the government to show proof of tax payment. Companies are required to purchase the software and devices that are authorized to print fapiao to operate businesses.

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Update on the COVID-19 Situation in China

June 29, 2021 Comments Off on Update on the COVID-19 Situation in China By The Incorp China Team

How has the pandemic impacted the Chinese economy?

The pandemic brought a negative impact to the Chinese economy, especially on the traditional service industry and some labor-intensive manufacturing industries. However, China’s outstanding disease prevention measures exceeded the international community’s expectations and China has recovered continuously since March 2020. The economic impact on the Chinese market is short-term and temporary. Nowadays, China’s economy is pushing the world economy.

Figures from the General Administration of Customs show that China’s exports and imports both grew by more than 25% from January to May 2021, compared with the same period last year. Even as much of the rest of the world continues to suffer from the epidemic, China’s orders for foreign trade products continue to grow. China continues to export goods abroad, and also introduces a large number of raw materials and products that meet the needs of the Chinese market. Imports of iron ore, oil, and soybeans were no less than in previous years, while imports of mechanical and electrical goods increased 21.8 percent. The demand power of the Chinese market is growing, which will help other economies recover and give a strong boost to the global economy.

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Everything You Need to Know About Tax Rebates in China

June 28, 2021 Comments Off on Everything You Need to Know About Tax Rebates in China By The Incorp China Team
Everything You Need to Know About Tax Rebates in China

The Chinese government had many policies on tax rebates to encourage foreign companies to enter China as well as foreign professionals to work in China. These rebates are usually on taxes that have been paid, including income tax, import tax, VAT (value-added tax), and many others. However, in order to know the qualification of a tax rebate/tax treaty benefits and to claim such privileges, companies or individuals must complete certain forms and submit them to local authorities.

For business, you will need to first submit all the required documents including the business license and any other applicable operating license to the local tax authorities. And then you will need to complete several forms (all of the forms are in Mandarin Chinese). To key here is to prove that you have paid tax on an item that could have returned them as a rebate, under the VAT exempt, or having a preferential common tax refund rate.

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Tax Bureau

June 7, 2021 Comments Off on Tax Bureau By The Incorp China Team

One consistent feature of our business style at Incorp China is the emphasis we put on going the extra mile for our clients. As a boutique, white-glove China consulting firm, Incorp China prioritizes resourcefulness, close communication, and building personal relationships.

This was recently demonstrated when one client who wanted a Consulting WFOE was not able to travel to Shenzhen to meet local government officials in person, as is required during normal times. Even with vaccines being distributed worldwide, the coronavirus pandemic is not yet over, and traveling to China is explicably difficult as a result.

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How to Set Up a WFOE in China

June 1, 2021 Comments Off on How to Set Up a WFOE in China By The Incorp China Team

Wholly-foreign owned enterprises, or WFOEs (sometimes abbreviated WOFE) is a topic we have written about extensively in this blog series. Unlike most other investment vehicles , a WFOE does not require a foreign company operating in China to have Chinese investors, giving the foreign company the most autonomy over its own affairs.

WFOEs come in three basic forms:

  • Consulting WFOE, which is the easiest to acquire;
  • Manufacturing WFOE, which allows companies to manufacture in China. Because Incorp China is located in Shenzhen, the famed factory city of the world, we are quite familiar with these;

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Post-Covid Tax Cuts in China—Do you Qualify?

May 16, 2021 Comments Off on Post-Covid Tax Cuts in China—Do you Qualify? By The Incorp China Team

As the economic aftershocks of the worldwide coronavirus pandemic are still prevalent, the Chinese government has cut an array of taxes and fees for both large and small businesses. The stimulus has focus on industries particularly hurt, such as high-tech manufacturing, foreign trade, and medical equipment.

These tax cuts amount to RMB 550 billion (about $85 billion) and are not schedule to be fully phased out until 2025. As we have written before in this blog series, some of the stimulus measures end in 2023, the other in 2025.

They were announced by Vice-Premier Li Keqiang in Beijing’s 2021 two sessions (NPC & CPPCC National Committee annual sessions) that concluded on March 11th 2021.

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What is an Internet Content Provider License?

April 23, 2021 Comments Off on What is an Internet Content Provider License? By The Incorp China Team

First, let’s get down to the nitty-gritty of Internet Content Provider (ICP) licensing. What is it? 

An ICP license is an essential prerequisite for attracting customers in the Chinese mainland. As we have written before, it is a registration issued by the state that allows legal operation of China-based websites to legally operate in the country. 

In order to establish and expand your business globally, especially to China, one must  consider the necessary steps to file for a separate legal entities, as well as consolidating electronic commerce, so that your business will thrive- not only are these steps to getting an  ICP License encouraged, but it is also requirement in order to officially set up your site in  China. The only possible exception to this is if your site is not accommodated in mainland China. 

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