Seeing China for what it really is...
Thinking of establishing a Foreign Invested Enterprise (FIE) in China? Well, take a step back and think again… First you should answer this question: “What is your exit strategy?”
Simply put, as part of your establishment process, you should also identify the possible exit scenarios/strategies and write them into the business plan that accompanies the business license application.
Why you may ask? If they are already defined during the application process, then they have already been approved by the Chinese government and the obstacles to exit will be less severe than if there were no such provisions taken.
The Chinese government does not like FIEs being shut down and promised FDI being pulled back. Bank accounts being closed down and money repatriated before they have been used in China. If everything is described in detail however, giving scenario descriptions on the different possible situations that would result in the business being closed down and investments pulled back, you should reduce your lawyer fees significantly.
It also means that it will be easier (as long as you have conducted business and yourself in a legal manner) to close up shop cleanly and thereby have a chance to come back into China in the future, instead of the company being blacklisted. If you were in a leading position (it is a myth that only the legal rep. can get into a heap of trouble if laws are broken), you may also be running the risk of finding yourself personally blacklisted, i.e. not even able to get as much as a tourist visa to China.
AND, by thinking of how you might want to exit the investment and China in the future you might find yourself in a position where you will have to rethink your establishment strategy since not all entry stragegies are “ideal” in terms of the best possible retreat tactic should an exit be necessitated early on in the investment cycle.