Prospective China investors beware: pitfalls of doing business in the mainland

With economic uncertainty continuing in Europe and the United States, an increasing number of companies and individuals arrive in Hong Kong looking to do business on the mainland.

While setting up a business is fast and straightforward in Hong Kong, the process can become complicated on the mainland.

Serviced-office provider Bridges Executive Centre highlighted the pitfalls of establishing an enterprise over the border in one of its recent seminars for expatriate business clients. Setting up a business on the mainland can take roughly three to six months, according to the seminar's speaker, Alvan Liu, of law firm Alvan Liu & Partners.

Some mainland consultants who are well-connected with officials may be able to arrange permits faster, but such speed may come at the cost of contravening some laws or regulations, which may cause problems later for the company or individual, says Liu, a solicitor and attesting officer appointed by the Ministry of Justice of the People's Republic of China.

"The investor has to bear in mind that the consultants cannot give legal advice, and if the set-up goes beyond a standard incorporation, lawyers should be instructed," he says.

Entrepreneurs planning to invest

on the mainland should first identify whether the industry of their interest is encouraged, permitted, restricted or prohibited.