Property laws in China

The scale and lack of familiarity with the Chinese real estate market combined with the need to negotiate a myriad of new laws and financial rules, as well as culture and language difficulties, make finding, buying or leasing premises one of the key challenges in establishing a business beachhead in China. While ownership of land for Chinese nationals is currently under review, no foreigner can currently own land in China. Generally, Australian businesses can get land use rights through a WFOE or a JV.

Land and buildings are designated industrial, residential or commercial in China. Requirements for leasing property will depend on the business structure of the venture being set up. For example, WFOEs must have their planned place of business leased prior to submitting an application to establish a business. These regulations are becoming increasingly strict. Few jurisdictions or types of entities allow for the use of ‘virtual offices’ (effectively, letter boxes), so the investor may be required to rent in the district in which they are registered. It is vital to review all of the regulations prior to signing leases as these can be very difficult to break and authorities can be inflexible.

Real estate agents can be very helpful not only in finding, leasing or buying commercial or residential premises, but also in undertaking registration, sourcing furniture and fittings, and completing installation. There are many international and local Chinese agencies from which to choose, but investors should always check that the agency they are considering engaging has a licence. Furthermore, they should seek to make direct contact with the agency rather than using third parties that will charge a commission. Law firms can also help with translating lease documents. Such translations may not be enforceable in a court, but it is critical for prospective foreign investors to ensure they understand what they are signing.

The use of serviced offices in China is an option for people starting up a business, especially for those who have a limited budget. These established offices are often accompanied by bilingual secretarial support that takes care of routine needs such as communications, mail and courier services, freeing up executives to focus on establishing their business.

To lease premises (which is a requirement for WFOEs and representative offices), it is necessary first to ensure that the nominated office or building is allowed to be used in this way. Most cities only allow representative offices in top-quality buildings. Investors should also make sure that the location is in an area approved for carrying out the type of business proposed. It is recommend that before entering into any negotiations that businesses research all aspects including market rental trends (particularly in the chosen areas), best locations and projected property developments. Note that leases generally run for two or three years.

Want to learn more? Explore our other China information categories or download the China Country Starter Pack.