Permitted business activities are activities that a business is legally authorized to conduct by its formation documents. In China, the designation and filing of business activities restrict the products or services businesses can legally provide, and all entities are required by law to file their business activities with the appropriate agency and not operate outside the permitted business activities.
Business activities in China can be categorized into two main types: licensed activities and routine activities.
While businesses operating in China are not subject to any specific review or approval processes to engage in routine business activities, they are required to obtain either prior approval or subsequent approval to engage in licensed business activities.
When requesting prior approval, companies are required to obtain any necessary licenses to engage in their chosen business activity prior to receiving their entity formation documents, whereas post approvals are subject to a review, which can be requested after a company completes the necessary filings for their primary activities.
Business Activity Filings
Companies should consider both their current and potential future operations when registering their business activities.
Under Chinese law, all new companies formed are required to include their specific industry type in their registered entity name. Therefore, businesses must prioritize their primary business activity in their filings and ensure that it properly aligns with their entity name in a concise yet descriptive manner.
Foreign Investment
The permitted business activities that an entity that has foreign investors may be authorized for is limited by China’s Foreign Investment Law, and specifically the Market Access Exceptions List. The list creates exceptions to China’s free market access and provides that certain business activities, such as telecommunications, are prohibited if the entity has any foreign investors, and other fields also have different restrictions. The government office processing filings for entity formation and licensing is prohibited from allowing investors market access in those fields.
Comparative Law
In the Delaware General Corporations Law, the most frequently used US entity formation statute, there is no restriction on what industries an entity may be involved in on the face of the entity formation documents. Rather, a company will typically state it operates for any lawful purpose, and those lawful purposes are determined subsequently by licensing authorities.
Relevant Laws
Foreign Investment Act of China (& Administrative Regulations)
Investment Access Exceptions List
Rules for Forming Investment Companies
Further Reading
See our comprehensive resources on China’s Foreign Investment Law. and an overview of FDI regulation in our Foreign Investment Law FAQ.
Translation Guide
See also our guide explaining these cultural concepts as they appear in translation.