Entrepreneurs battle red tape to do business in China

Moves by the Chinese Government to put business visa rules on a more formal legal footing – accelerated in the lead up to the Olympics – are throwing up new challenges for entrepreneurs seeking to do business in China.

Entry to China was once a relatively informal process, with entrepreneurs able to visit and work in China and even run businesses on a basic $130 tourist visa. It did require a six-monthly trip outside the country – usually a quick dash to Hong Kong – but was easily accessible and relatively cheap.

According to University of Sydney expert in Chinese law Vivienne Bath, however, the rules on doing business in China are now being implemented and enforced on a much more professional basis.

“Depending on the business sector you were looking to enter, it was once possible to set up a business by relatively informal processes. In building or construction, for example, there was a simple registration process, but that’s no longer possible. So it has become more complicated, but like any system it’s just a matter of understanding the rules,” Bath says.

This new formal approach is also making it harder to meet visa requirements, according to Forbes.com. An entrepreneur looking to run a business in China today must have a “Z” class working visa. Getting hold of one appears to be the immigration law version of breaching the Great Wall, with up to $10,000 in legal fees, $5000 in filing fees and a minimum sum of “capital” held in a Chinese bank required as a minimum.

Dan Harris, a US-based China law specialist, told Forbes there is no alternative to getting the correct visa, with foreigners caught without the right paperwork likely to be fined up to $720 per day and having their visa stamped “has to leave China within 10 days”.

Entrepreneurs that get the dreaded stamp can all but abandon any hopes of getting another visa in the future. And, according to Harris, without proper papers, “the police could close you down in one day”.

The level of official scrutiny seems set to only increase as the Beijing Olympics approach, with reports that China stopped issuing multiple-entry visas around the start of April and will not resume issuing them until after the Olympics.

Australian Foreign Minister Stephen Smith has acknowledged that new restrictions on multiple entry visas to China could be making it more difficult for business owners.

“I understand the general motivation, which is to make some changes in the run-up to the Olympics,” Smith says. “But I think it is important that there is clarity, it is important that the Chinese authorities understand the potential practical on-the-ground difficulties that it’s causing, and we’ll continue to take the issue.”

According to Harris, the best way to get a visa is to make connections with local government authorities before applying – simply lodging an application could mean a very long wait and no guarantee of a positive outcome.

Bath agrees that relationship building can still be important in China. “It helps to know the people who will be in charge of projects. That doesn’t mean you need to give enormous gifts or that sort of thing because generally they are very professional, but if they know and trust you they could look more kindly towards business applications,” she says.

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