Business China

How Does a Company Registered in Hong Kong Operating in the Mainland?

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Companies registration in Hong Kong are subject to the ordinance of the Hong Kong Company instead that of the mainland and that’s why Hong Kong Company cannot be listed and operating in the mainland. Hong Kong Company can divide into two kinds in general, one is offshore operation and another is local operation. As a general rule, customers doing foreign trade will operating in the mainland through the offshore company, while the local company will open an office in Hong Kong and hiring local employees to conduct business in there. There are several ways for offshore company that was registered in Hong Kong to operate in the mainland.

1.The form of brand authorization

This is the most cost-effective and most commonly used method. The form and operation of authorization is very simple which is to sign licensing agreements with domestic companies in the name of the foreign company, and claiming to the outside that the foreign company will manage the Hong Kong companies’ daily matters in domestic in full authority, of course, it can be operated in the form of trademark authorization.

For example: Let’s say there is an enterprise from the garment industry, after it has registered a company in Hong Kong, it can change the words on the tags attached to the clothes into: Hong Kong XXX Clothing Enterprise Produced or Hong Kong International Group Authorized Production etc. Hence, during the selling process, the salesperson can tell her clients that this is a Hong Kong brand, which has a better quality than that of the ordinary clothing. Thus, the price can be sold higher from a few dollars to a few hundred dollars. Chinese consumers are inclined to buy brand product, and Hong Kong company brand can give consumers a sense of trust. Everything can be done in this way, whether it is selling watches, clothes, shoes, hats, etc.

2. Established representative office of the Hong Kong Company in the domestic

If the purpose of operating in the mainly land is merely for business connection or customers and suppliers’ connection, then register an office is one of the cheapest ways to do. Representative office generally can separate accounting, also may not be accounted for separately and that goes for tax registration too. Its business is similar to the commitment regulated by the civil law, which is only for business contact, and generally don't form purchase and sale relationship with the customers directly and separately. The requirements for offices vary from region to region, with some requiring more than two years registration, some requiring local residents to be directors of the company. The representative office only provides serves such as a reception, consulting, but they cannot conduct business. The general customer registration representative office is used to conduct business.

3. Establish Sino-foreign joint venture (or wholly foreign-owned enterprise)

To establish a Sino-foreign joint venture is to come back to invest in China in the name of your registered offshore company so you can claim legally that your products are joint venture products. The result, of course, is that the costs are higher and the procedures are more complex. First of all, the company need to be certified, the company need certification documents issued by the Chinese embassy in the local or representative office (Hong Kong company’s notarization can be arranged by Business China). The main problem here is the capital verification, because when returning to China, foreign investors have to take foreign exchange in the form of foreign exchange, and the proportion of foreign capital is generally not less than 25%. Local policies might differ slightly.

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