Blog written by FEMA Expert – your guide to FEMA & China entry

1. Introduction

The Shanghai Cooperation Organisation (SCO) has evolved from a security‑oriented forum into a powerful economic and connectivity platform, especially after the 2025 Tianjin summit that stressed trade and investment cooperation till 2035. For Indian startups in China or planning to enter China, these developments translate into more openness for cross‑border collaboration, logistics and technology projects across the Eurasian region.

At the same time, any outward investment from India into a Chinese entity must strictly follow India’s Foreign Exchange Management Act (FEMA) and the Overseas Investment Rules and Regulations, 2022, under the RBI framework. This blog, written by FEMA Expert, explains how Indian startups operating in China can register, structure and fund their Chinese entities legally, and how a FEMA Expert hand‑holds you from idea to fully compliant operations.

2. What Is SCO and Why It Matters for Startups

The SCO today includes China, India, Russia, Pakistan and several Central Asian states, with newer members like Iran and Belarus joining to deepen Eurasian integration.[1][2] Recent SCO meetings emphasised a Development Strategy till 2035, reduction of trade barriers, investment facilitation and proposals such as an SCO development bank and settlement systems to support intra‑SCO trade.[7][1][2]

For Indian companies in the Chinese market, this means:

• Stronger political backing for regional trade and supply‑chain projects
• More focus on technology, infrastructure and industrial cooperation among member states
• Better ecosystem for funding, logistics and partnerships across SCO borders[7][1][2]

These macro signals encourage Indian businesses expanding to China, but each startup still has to follow China’s company law and India’s FEMA‑ODI rules at the micro level.

3. Business Opportunities in China After SCO Meetings

China remains the technological and manufacturing anchor in the SCO, and recent summit outcomes highlight cooperation in AI, digital trade, infrastructure and green technology.[7][8][2] Attractive spaces for Indian tech startups in China include:

• SaaS and B2B technology for logistics, manufacturing and cross‑border commerce
• AI and automation solutions for industrial and supply‑chain applications
• EV components, electronics and advanced manufacturing
• Fintech, reg‑tech and cross‑border payments (subject to local financial regulations)[7][8]

As SCO members commit to improving trade facilitation and connectivity, the ease of doing business for Indian entrepreneurs in China can improve through better customs processes, funding platforms and digital infrastructure provided your legal structure is sound.[1][2]

4. Types of Business Entities Startups Can Register in China

Foreign investors, including Indian startups in China, typically choose among three primary structures:

1. Wholly Foreign‑Owned Enterprise (WFOE)

• 100% foreign‑owned limited liability company.
• Full control over operations, hiring and invoicing, suitable for tech, services and export‑oriented models.

1. Joint Venture (JV) with Chinese Partner

• Shared ownership between an Indian and Chinese entity.
• Useful for sectors with restrictions or where local relationships and licences are critical; foreign investors usually must hold at least 25% capital.[9][10]

1. Representative Office (RO)

• Non‑profit structure; cannot issue invoices or earn revenue.
• Ideal for early‑stage market research and partner development; simpler, with no registered capital requirement.[9][10]

For most control‑focused Indian startups operating in China, a WFOE is preferred, while JVs work better in sensitive or heavily regulated sectors, and ROs suit very early exploratory stages.

5. Step‑by‑Step Process to Register a Startup in China

A typical registration path for Indian companies in the Chinese market is:

1. Market research & feasibility

• Study demand, local competitors, regulations and data/IP issues.

1. Choose business structure

• Decide WFOE vs JV vs RO based on sector, control and FEMA implications.

1. Name pre‑approval

• Apply for name reservation with the local Administration for Market Regulation (AMR).[11]

1. Prepare incorporation documents

• Articles of association, lease agreement for office, shareholder details and business scope.

1. Business license application

• Submit to AMR, and if needed, to sectoral regulators (e.g. tech, finance).[11]

1. Company chops (official seals)

• Register and obtain legal representative and company seals, which have binding legal effect in China.

1. Bank account opening

• Open RMB and foreign‑currency accounts for capital injection, operations and future repatriation.

While this happens in China, FEMA Expert parallels the process in India by structuring ODI, preparing RBI filings and coordinating capital remittance in line with FEMA.

6. FEMA Regulations for Indian Startups Investing in China

Under FEMA, outward investment in a foreign JV or Wholly Owned Subsidiary is governed by the Overseas Investment Rules and Regulations, 2022 and RBI’s Overseas Investment Directions.[4][5][6] For Indian businesses expanding to China, key points are:

• ODI covers equity and certain debt/guarantee instruments in foreign entities.[4][6]
• Commercially justified investments within the prescribed financial limit can usually be made under the automatic route, subject to conditions.
• Sensitive sectors, structures or jurisdictions may need prior RBI approval.
• Round‑tripping or structures that circumvent Indian law/tax are prohibited.[4][13]

How FEMA Expert helps and guides you:

• Evaluates whether your China entity (WFOE/JV) qualifies for automatic route or requires approval.
• Advises on ODI vs LRS structuring, holding companies and capital layering.
• Prepares and vets ODI forms, bank documentation and declarations, reducing the risk of FEMA breaches and penalties.[4][6]

7. Documents Required for Startup Registration in China

From the China side, authorities generally seek:[9][10][11]

• Passports and KYC details of Indian founders/shareholders.
• Certificate of incorporation, PAN and board resolutions of the Indian parent.
• Detailed business plan and feasibility/profit projections.
• Lease agreement for registered office premises in China.
• Articles of association, JV contract (for JVs) and details of capital contribution.

From the India–FEMA side, Indian startups in China should prepare:

• Board resolutions approving overseas direct investment.
• ODI forms, valuation reports (if applicable) and banker certificates.
• FEMA declarations, UIN (Unique Identification Number) applications and reporting formats for APR/FLA returns.[4][5][6]

Many documents must be notarised, apostilled and translated into Chinese, where FEMA Expert coordinates with Chinese and Indian professionals to avoid rejection or delays.

8. Taxation & Financial Compliance in China

Once Indian startups operating in China are registered, they must comply with local tax, accounting and audit norms:

• Corporate Income Tax (CIT) – Standard rate is around 25%, with possible preferential rates for high‑tech or encouraged sectors depending on location and qualification.[11]
• VAT and local surtaxes – Charged on goods and most services, with specific rates and thresholds depending on business scope.[11]
• Transfer pricing – Transactions with the Indian parent must be at arm’s length, backed by documentation, to avoid adjustments and penalties.
• Accounting & audit – Books must be kept under PRC GAAP and annual audits completed for WFOEs and JVs.[11][12]

FEMA Expert typically works with tax advisors so your China structure supports both profit generation and efficient dividend or royalty repatriation to India.

9. Challenges for New Startups Registering in China

Despite SCO optimism, Indian entrepreneurs in China face several practical hurdles:

• Complex and evolving regulations, including negative lists, cybersecurity and data rules.
• Language and cultural barriers that affect contracts, hiring and negotiations.
• China’s capital controls and India’s FEMA rules simultaneously affecting fund flows and repatriation.
• FEMA non‑compliance risk from wrong structuring, delayed ODI reporting or unapproved guarantees/loans.[4][13][6]

FEMA Expert’s role is to anticipate these bottlenecks and design a compliant, tax‑aware route into the Chinese market.

10. How a FEMA Expert Helps Startups Enter China

A FEMA Expert is your cross‑border strategist and compliance partner for Indian companies in the Chinese market:

• Structuring investment legally – Chooses between direct WFOE, JV, holding‑company route or hybrid structures after mapping FEMA, tax and business risks.
• RBI & FEMA compliance – Handles ODI forms, liaises with authorised dealer banks, and manages clarifications or approvals from RBI where needed.[4][6]
• Risk reduction – Flags prohibited or high‑risk round‑tripping, improper guarantees or related‑party transactions that can draw scrutiny.
• Capital flow planning – Designs how and when capital is injected, how inter‑company loans or guarantees are structured, and how profits are repatriated.
• Long‑term compliance roadmap – Sets up calendars for Chinese annual filings, Indian APR/FLA returns and board reporting to keep Indian startups in China consistently compliant.[4][5]

In essence, FEMA Expert converts a complex India–China regulatory puzzle into a step‑by‑step playbook.

13. FAQs

Q1. Can Indian startups legally register in China?
Yes. Indian startups can establish WFOEs, JVs or ROs in China, subject to sector‑specific restrictions and negative lists.[9][10][11] The investment must also comply with FEMA’s Overseas Investment Rules and RBI’s ODI regulations.

Q2. Is RBI approval mandatory for investing in China?
Not always. Many genuine business investments fall under the ODI automatic route, within specified net worth‑based limits, though sensitive sectors or structures may need prior approval.[4][5][6] A FEMA Expert assesses your model and advises on the correct route.

Q3. What is the minimum investment required?
Registered capital requirements for WFOEs have become more flexible, and in some sectors there is no strict minimum, while JVs require at least 25% foreign capital contribution.[9][10][11] From the FEMA side, the investment must be financially prudent and within your ODI limit.

Q4. How long does registration take?
A straightforward WFOE can usually be set up in about 2–5 months depending on sector and city, while JVs can take 5+ months, and ROs often only a few weeks.[9][10] Parallel FEMA and ODI planning may add a few weeks if approvals are needed, so early planning with a FEMA Expert saves time.

Q5. Is a Joint Venture safer than a WFOE?
A JV can provide local access, licences and networks, especially in restricted sectors, but adds governance and partner‑management risk.[14][9][10] For many Indian tech startups in China, a WFOE offers clearer control and IP ownership, with FEMA‑compliant structuring by FEMA Expert.

15. Call to Action

If you are an Indian startup in China or planning to enter the Chinese market after the recent SCO momentum, this is the right time to structure your move carefully.

Consult FEMA Expert to:

• Evaluate WFOE vs JV vs RO for your sector and risk appetite.
• Get a customised FEMA‑ODI compliance checklist and capital‑flow plan.
• Set up a consultation to design a legally robust, tax‑efficient roadmap for your China expansion.

With a FEMA Expert guiding you, your entry into China can be ambitious, compliant and sustainable.