China Market Entry: Operating Without a Local Entity

Summary:
International companies can start commercial activity in China before company registration in China. Contracts can be signed locally, invoices can be issued in RMB, goods can be imported, and employees can be hired through a licensed local structure. Through local operations management services, Companies  maintain control over logistics in China and  HR.

Operating Without a Local Entity

Companies can sell in China without establishing a local entity by using a local operational services. This setup allows companies to:

• Sign sales and purchase contracts locally
• Issue RMB invoices (fapiao in China)
• Collect payments from local customers in RMB
• Transfer funds to the overseas HQ after local taxes are paid
• Import goods and manage customs clearance

These activities are carried out under an existing business license while the overseas company manages the commercial activity.

To manage local transactions, invoicing, and import processes, companies use
China import and export

Sales, Invoicing, and Payment Collection

Sales contracts are signed locally in China. Invoices are issued in RMB according to the contract terms. Payments are collected from local customers based on the issued invoice. Contract, invoice, and payment match.

The same structure is used to collect payments and transfer funds to the overseas HQ after local tax requirements are completed. The overseas HQ monitors the selling price and transaction costs.

Import and Logistics

Goods are imported into China according to product classification and documentation. The process includes HS code classification, required licenses, customs clearance, and VAT handling. After import, goods are transferred to local warehouses or delivered to customers.

Warehousing service in China is used to store inventory and prepare deliveries. Local stock is used to support sales and manage spare parts or recurring orders.

Employment and HR Management

Employees in China are hired through a licensed employer. Without a local entity, foreign companies cannot sign labor contracts or register employees for social benefits directly. Employment is managed through an employer of record China (EOR).

The EOR manages the legal employment framework, including:

• Signing labor contracts according to China labor law
• Monthly payroll processing in RMB
• Individual Income Tax (IIT) filings
• Social insurance and housing fund contributions

The EOR handles the legal and administrative requirements while the overseas company manages the employee’s daily work.

To manage employment and payroll locally, companies use
HR services in China

Control Over Local Operations

Local operations are managed with control over contracts, financial records, and company documentation. Company chop usage is controlled for contracts and official documents. Financial records are maintained and available for review.

The overseas HQ monitors local activity, payments, and logistics.

Transition to Company Registration

Formal company registration in China is considered after local activity is established. At this stage, sales are in place, employees are working, and logistics processes are active. The existing operation provides the basis for setting up a China WFOE.

Closing Note

PTL Group provides the local platform used to support these activities, allowing companies to operate in China before establishing a local entity.