Registered capital is one of the most misunderstood aspects of setting up a company in China. Since the 2014 reform that shifted China from a paid-in to a subscribed capital system, the rules have fundamentally changed. This guide explains how registered capital works, how to determine the right amount, and the capital injection process.
What Is Registered Capital?
Registered capital (注册资本) is the total capital that shareholders commit to contribute to the company. It represents the company's financial foundation and the shareholders' liability limit. In China, the registered capital is recorded on the Business License and is publicly visible on the National Enterprise Credit Information Publicity System.
Subscribed vs Paid-In Capital System
Old System (Before 2014): Paid-In Capital
Under the old system, companies had to deposit the full registered capital before registration. A capital verification report (验资报告) from a CPA firm was mandatory. This created significant cash flow pressure for startups.
Current System (After 2014): Subscribed Capital
The 2014 Company Law reform introduced the subscribed capital system:
- Shareholders declare the total registered capital and a contribution deadline (up to 30 years, or longer in some cases)
- No upfront deposit is required
- No capital verification report is needed for registration
- Capital can be injected gradually over the contribution period
- The registered capital appears on the Business License
How to Determine the Right Registered Capital
Factors to Consider
- Operational needs: Capital should cover at least 6-12 months of operating expenses (rent, salaries, taxes, supplies).
- Industry requirements: Certain industries (banking, insurance, construction, freight forwarding) have statutory minimum capital requirements.
- Credibility: A higher registered capital enhances credibility with banks, suppliers, and customers. Many Chinese companies check registered capital as a trust signal.
- Government bidding: Government procurement projects often have minimum registered capital thresholds.
- Visa applications: Some cities require a minimum capital (e.g., RMB 100K-500K) to sponsor foreign employee work permits.
Recommended Capital by Industry
| Industry | Recommended Capital (RMB) | Reasoning |
|---|---|---|
| Consulting/Advisory | 100,000 - 500,000 | Low fixed costs, minimal equipment |
| Technology/R&D | 500,000 - 2,000,000 | Salaries, equipment, potential HNTE application |
| Trading/Import-Export | 500,000 - 1,000,000 | Inventory, customs bonding, credit lines |
| E-commerce | 500,000 - 1,000,000 | Platform deposits, inventory, logistics |
| Manufacturing (small) | 1,000,000 - 3,000,000 | Equipment, facility, raw materials |
| Manufacturing (large) | 3,000,000 - 10,000,000+ | Scale-dependent, environmental assessment |
| Food & Beverage | 500,000 - 2,000,000 | License requirements, equipment, deposits |
| Education/Training | 1,000,000 - 3,000,000 | Regulatory minimums vary by city |
Capital Injection Process
Step 1: Open Foreign Exchange Capital Account
After WFOE registration, open a Foreign Exchange Capital Account (外汇资本金账户) at a Chinese bank authorized to handle foreign exchange. You will need:
- Business License
- Foreign Direct Investment (FDI) registration with SAFE/bank
- Articles of Association showing capital amount
- Shareholder details and identification
Step 2: Remit Capital from Abroad
The foreign shareholder remits the capital in foreign currency (USD, EUR, HKD, etc.) to the Foreign Exchange Capital Account. The remittance must include a clear payment purpose such as "Capital contribution to [Company Name]."
Step 3: Foreign Exchange Settlement
Upon receiving the foreign currency, the bank converts it to RMB at the prevailing exchange rate. The RMB funds are deposited in the company's RMB Capital Account (资本金账户). This conversion is subject to SAFE's foreign exchange registration.
Step 4: Capital Verification (Optional but Recommended)
While not legally required, obtaining a capital verification report (验资报告) from a CPA firm is recommended for:
- Bank loan applications
- Government bidding requirements
- Future capital increases or corporate restructuring
- Visa applications for foreign employees
Step 5: Transfer to Operating Account
Once the capital is verified and settled, transfer the RMB funds from the Capital Account to the RMB Basic Account (基本户) for daily operational use. The bank will monitor usage to ensure funds are used for legitimate business purposes.
Capital Usage Rules
Registered capital can be used for legitimate business expenses:
- ✅ Office rent and utilities
- ✅ Employee salaries and social insurance
- ✅ Equipment and inventory purchases
- ✅ Marketing and business development
- ✅ Loan repayment (with bank approval)
- ❌ Personal use by shareholders
- ❌ Investment in restricted sectors without approval
- ❌ Direct real estate speculation
Capital Increase
If you need to increase registered capital after establishment:
- Board/shareholder resolution approving the increase
- Amend the Articles of Association
- File amendment with AMR (3-10 business days)
- Update FDI registration with SAFE/bank
- Remit additional capital through the Foreign Exchange Capital Account
- Complete settlement and verification
The process typically takes 4-6 weeks.
Capital Reduction
Reducing registered capital is more complex than increasing it:
- Board/shareholder resolution
- Prepare debt clearance statement or debt guarantee arrangement
- Publish a public notice in a designated newspaper (45-day creditor objection period)
- File amendment with AMR after the 45-day period
- Update tax and SAFE registrations
- Repatriate excess capital through approved foreign exchange channels
The entire process takes 2-3 months.
Industry-Specific Minimum Capital Requirements
| Industry | Minimum Capital (RMB) | Regulatory Basis |
|---|---|---|
| Commercial banks | 1,000,000,000 | Commercial Banking Law |
| Insurance companies | 200,000,000 | Insurance Law |
| Securities firms | 50,000,000 - 500,000,000 | Securities Law |
| International freight forwarding | 500,000 (3M for sea) | MOFCOM regulations |
| Construction (Grade 1) | 50,000,000+ | Ministry of Housing |
| Third-party payment | 100,000,000 | PBOC regulations |
| Healthcare/Medical institutions | Varies by province | Local health authority |
Common Mistakes to Avoid
- Setting capital too low: Capital of RMB 10,000 may look unserious to partners and banks. Even if legally allowed, set a practical amount.
- Setting capital too high: Under the 2024 Company Law, you must pay the full amount within 5 years. Setting capital at RMB 50 million when you only need RMB 500,000 creates unnecessary obligations.
- Mixing capital with personal funds: Registered capital must flow through the company's formal accounts. Personal transfers or side payments violate Chinese law and can result in penalties.
- Using capital before registration is complete: Capital cannot be used before the bank account and FDI registration are finalized.
- Forgetting to verify capital for special purposes: If you plan to apply for government projects or bank loans, obtain a capital verification report proactively.
Conclusion
China's subscribed capital system offers flexibility, but the 2024 Company Law reform requires more disciplined capital planning with a 5-year contribution deadline. Set your registered capital at a level that balances credibility, operational needs, and your ability to inject funds within the required timeframe. Proper capital management ensures smooth banking, tax compliance, and business credibility in China.
For help estimating your ideal registered capital based on your business plan, use our WFOE Cost Calculator.