Registered capital for foreign invested enterprises (FIEs) in China is an important issue for foreign investors to know. When establishing a FIE in China, investors face a number of strategic considerations that can have long-term effects on their businesses including determining the right amount of registered capital to commit to the company.
Brief introduction to registered capital
Registered capital is the initial cash investment dedicated by the shareholder(s) to a FIE, investment that is registered with China’s Administration for Industry and Commerce (AIC) and, once injected, instrumental to begin operations. This is not to be confused with the total investment prescribed to the company, also stipulated in the articles of association, which not only encompasses registered capital but also the possible foreign loan amount that can be lent to the FIE.
In most cases, registered capital funds the FIE until it begins generating enough income to cover its expenses, which can often be a matter of years. China’s strict foreign exchange controls mean injecting additional capital to fund operational expenses can be challenging during the early stages of a business.
Minimum required Registered Capital by Law
Formally, China eliminated statutory registered capital requirements in March 2014 with the updated Company Law. According to the law, foreign investors can choose how much capital to inject upon setting up a WFOE, as well as the period of contribution, and the AIC will approve the amount and time-frame on a case-by-case basis.
Under the Company Law, companies are mainly incorporated in the form of limited liability companies or joint-stock limited companies. For limited liability companies, the minimum authorized capital is lowered to RMB30,000. For joint stock limited companies, the minimum authorized capital requirement is RMB 5 million. One-Person Limited Liability Companies are allowed according to the new company law, and its minimum registered capital contribution shall be no less than RMB100,000.
However, these legal requirements do not have much relevance in practice. The Ministry of Commerce has considerable discretion when approving a company and the generally requires higher levels of registered capital than the minimum legal requirements.
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If you have further inquires, please do not hesitate to contact Tannet at anytime, anywhere by simply visiting Tannet’s website english.tannet-group.com, or calling Hong Kong hotline at 852-27826888 or China hotline at 86-755-82143422, or emailing to tannet-solution@hotmail.com. You are also welcome to visit our office situated in 16/F, Taiyangdao Bldg 2020, Dongmen Rd South, Luohu, Shenzhen, China.
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