Outsourcing Production to China

December 2004 China Briefing

In this issue we look at outsourcing your production to China, including processing agreements, converting processing agreements to your own invested manufacturing operations, and examine the application procedures for setting up a manufacturing plant in China. Multinationals are finding "export processing trade" a very effective, low-risk approach to sourcing manufactured products in China and we look at the implications of this. The main article “Entering Into Processing Trade Agreements in China” is by Sabrina Zhang, Regional Partner, and Mark Duan, Lawyer, Dezan Shira & Associates Beijing office, and details the benefits of such arrangements to the foreign investor, and describes the two main forms of processing trade, detailing guarantee deposit accounts, categories of goods, China customs duty and VAT issues. Alberto Vettoretti, Regional Partner, Dezan Shira & Associates South China, contributes “Outsourcing Manufacturing Operations To China” , describing Processing & Assembly Factories (LLJG) and agreements with them, processing fees, the conversion of LLJG to wholly foreign owned enterprises, as well as details of establishing a wholly foreign owned enterprise directly to manufacture, produce or assemble goods in China.