Virtual Offices in Beijing can no longer be Registered Addresses

May 18, 2018

Virtual Offices in Beijing can no longer be Registered Addresses

May 18, 2018

The registered address you have applied has been registered by many companies already, which has caused safety issues. According to the government request, related government bureaus are going to pursue safety checks recently. Please apply again afterwards. Thank you for your cooperation.

 

Recently, a lot of companies received the notice above when they tried to register a company with either a virtual or real office address that were rented from office-sharing companies. Since November 2017 several offices of the Administration of Industry and Commerce (AIC) in Beijing, have called for a pause of company registrations with office-sharing addresses. It started with the AIC office in the Chaoyang district and after this the offices in the district of Haidian and Fengtai followed suit.

What is a virtual office? What is office-sharing? Why did the AIC call this pause? In this article, we are going to answer these questions for you.

 

What is office-sharing and what is a virtual office?

Office-sharing places is are areas where many companies can be registered. It provides registered addresses to entrepreneurs, who do not have many funds available to rent office space in the company’s initial stage. At this time, they register their company in this state-approved office-sharing area. They could choose to rent a small private office room.

The office-sharing companies also provide two-square-meter work place with just one table and one chair. Entrepreneurs could rent this table as an “office room”, which is called “virtual office”. Each table has its number as an office room number. Consequently, the company registered on such “virtual office” is considered registered on “virtual addresses”. In Europe, some people register their company under mail box addresses. This is a similar idea. The office tenants could decide if they would like to work there or just use the address for company registration.

 

History of  virtual offices in Beijing and office sharing

In 2014, Prime Minister of China, Li Keqiang, mentioned the importance of “entrepreneurship and innovation” during his speech at the Summer Davos Forum. Later in 2015, during the Executive Meeting of the State Council, with support from the government, the country started to encourage entrepreneurship funding, and to provide preferential policies to office-sharing.

Due to these circumstances, many students set up their companies after they graduated from university. The atmosphere of innovation and entrepreneurship continues to rise to this day. According to the latest statistics released by the State Administration for Industry and Commerce, in the first three quarters of 2017, the number of newly registered companies in China was 14.146 million, an increase of 16.7% year-on-year. On average, 51,800 new companies were established each day.

Consequently, the demand for virtual offices in Beijing and other Chinese cities has increased dramatically. Office-sharing became extremely popular for those entrepreneurs who did not want to spend much on renting an office, but still needed to obtain an address to register their company. However, under the fast development of office-sharing, problems started to occur.

 

Why did the government call for a pause?

Beijing AIC Chaoyang Sub-bureau has issued a document about stopping the registration of companies with office-sharing or virtual addresses. This document stated that the establishment of office-sharing areas has played a positive role in improving the entrepreneurial environment and reducing the initial cost of start-up companies. However, it has recently been discovered that the organizers of those office-sharing areas have failed to implement the main responsibilities according to related regulations and have not implemented a unified tax service management system.

Furthermore, due to the poor management in some office-sharing areas, there are a large number of registered addresses which are inconsistent with actual office addresses. Office sharing companies have provided too many virtual offices in Beijing and too many of these  have been used for registration. Business bureaus experienced a hard time keeping track of those companies. Moreover, the office-sharing companies did not manage their tenants well, so the companies registered in office-sharing areas encountered problems with taxation.

There was no exact answer with regards to when the pause for registering with virtual offices in Beijing is going to end. Therefore, many people interpret this pause as a signal that the government will further strengthen the management of office-sharing areas.

The author of this article also encountered the same challenges while she was assisting clients to register their WFOE in China. The same issue happened in Beijing, Shanghai and Ningbo. Consequently, as foreign investors, if you want to set-up your WFOE in China, a legal and valid registered address is extremely important. If you would like to know more about how to register a company in China or any other corporate solutions, please feel free to contact us. We are glad to share our knowledge and assist you through the challenges.

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What happened in the year 1421?

From 1421 to 1423, during the Ming Dynasty of China under Emperor Zhu Di (朱棣) the fleets of Admiral Zheng He (鄭和), commanded by the Chinese captains, discovered Australia, New Zealand, the Americas, Antarctica, the Northeast Passage; and circumnavigated Greenland.

Due to this endeavour we can conclude that “1421 is the year that the Chinese discover the world”.