Service Areas

Four Phases of the Chinese Business Cycle

The life cycle of a business in China can be grouped into four phases:

1. initial investigation;
2. setup;
3. maintenance, development, and growth; and
4. sale, merger, and public offering.

Professional services are needed at every stage, but the services differ from stage to stage.

1. Initial investigation
   
   The initial investigation of a business opportunity is a critical step that lays the foundation for what is to come. The initial investigation into setting up business in China involves
   • assessing initial feasibility, including whether the project will be approved by the authorities;
   • determining possible locations within China;
   • structuring and planning tax (income tax, value-added tax, business tax, and customs duty);
   • developing projections of income and cash flow, and a critical path of tasks to be done;
   • visiting China; and
   • identifying joint venture partners and preliminary negotiations with them (if the business is structured as a joint venture).

We can assist in all of these areas, through our contacts in Hong Kong and China. In particular, we can

• assess the overall feasibility, based on experience with similar situations;
• advise on possible locations;
• advise on tax matters, especially income tax exemptions;
• review projections and advise on cost estimates;
• advise on the overall process; and
• find joint venture partners and make introductions.

2. Setup

The second phase involves setting up operations in China. To establish the business, the following will be needed:

• developing a feasibility plan to submit to various government bodies for approval,
• negotiating tax incentives with state and local tax authorities,
• obtaining various approvals,
• finding a physical location and negotiating a lease or purchase of land-use rights,
• incorporating a corporation,
• setting up an accounting system,
• hiring staff,
• setting up banking facilities, and
• making various tax and other filings (including foreign exchange clearances).

Our fundamental approach is to provide a professional adviser in China who is dedicated exclusively to the client in a one-on-one relationship. This person will be a locally established individual with business experience who is retained by our Hong Kong associates to oversee an agreed-on list of tasks critical to the project.

We also advise on Canadian tax issues concerning

• deductibility of initial startup losses,
• ownership of the China business,
• characterization of the China income,
• withholding tax issues,
• application of the Canada-China tax treaty, and
• repatriation of income back to Canada.

3. Maintenance, development, and growth

Clients typically need ongoing assistance with a host of issues, including

• tax filings and remittances;
• accounting;
• legal issues (copyright, contracts, leases, and annual directors' minutes),
• government filings; and
• labour and staffing issues.

Our representatives are available to support clients through these issues.

4. Sale, merger, and public offering

Clients may also require advice and assistance to

• expand into other areas and locations;
• seek mergers or joint venture partners, or go public;
• sell the business;
• obtain financing; and
• buy other entities.

We advise on the Chinese and Canadian tax consequences of a sale of the business in various formats.