China has various rules and regulations designed to make it difficult for foreigners to directly control businesses there. It is possible to purchase a business through foreign holding companies controlled by Chinese citizens or through other methods of investment. If you want to purchase a business in China, be prepared to cut through a lot of red tape and go through some intensive negotiations with Chinese nationals. The language and cultural barriers can only add to the challenges. If you're prepared to face them, read on.
Determine whether you would like to convert your target business into a Wholly Owned Foreign Enterprise (WOFE) or run it as a joint venture with Chinese nationals. The latter choice is easier to pull off, but it reduces the level of control that you have over the foreign business. In fact, a joint venture gives sole ownership of the shares to the Chinese partner along with legal proprietorship. This is a risky choice unless a trusting relationship has already been built.
Contact the local Municipal Bureau of Commerce. You will need to get the necessary permits and ensure that the business conforms to local regulations. You will need to apply for an Approval Certificate to establish the legality of your acquisition.
Learn more about Chinese business culture, or hire a consultancy firm to do it for you. Chinese business is based more on personal business relationships than on adherence to contracts. If you or your employees are not willing or able to do the research and training necessary to acclimate to Chinese culture, a consultancy firm specializing in mediating relationships between Chinese and western businesses can be invaluable.
Contact the Municipal Administration for Industry and Commerce to get a license for your business. You will also need to show your level of capital investment into the business in excess of the minimum required amount.
Acquire legal counsel. The Chinese regulatory environment is still hostile to foreigners, and one misstep could lead to your business being heavily fined or even seized. Consult a law firm specializing in services to foreign businesspeople to ensure that you comply with all regulations.