An Introduction to Doing Business in China 2026 – New Publication Out

An Introduction to Doing Business in China 2026, the latest publication from Dezan Shira & Associates is out now and available for complimentary download through the Asia Briefing Publication Store.

China will enter 2026 amid a complex global environment. Geopolitical tensions, particularly in China-US relations, continue to shape trade and investment flows, while local competitors intensify pressure on foreign firms. Yet, despite these challenges, China remains indispensable for global investors.

With a population of over 1.4 billion and a growing middle class, China presents a consumption potential unmatched by most emerging markets. Retail sales reached RMB 41.2 trillion in the first 10 months of 2025. Meanwhile, China’s integrated manufacturing ecosystem and logistics infrastructure provide efficiency and resilience that few markets can replicate. China offers unmatched speed in product development, new technology adoption, and supply chain efficiency – capabilities that often set global standards. For many firms, being in China is not just about serving local customers; it’s about staying competitive worldwide and anticipating future rivals.

This explains why 53,782 new foreign-invested enterprises (FIEs) were registered in the country in the first 10 months of 2025, up 14.7 percent year-on-year, despite total foreign investment dipping during the same period. Foreign investors are still entering China, though they are doing so more cautiously.

In terms of noticeable regulatory changes for doing business in the country, 2025 saw the release of new government procurement rules favoring domestic products (effective January 1, 2026); tax supervision tightened, and compliance became critical; data governance advanced with the Cybersecurity Law amendments and personal information protection audit rollout. Moreover, key actions indicated that China increasingly emphasizes the importance of using compliant service providers, whether legal, tax, or bookkeeping.

An Introduction to Doing Business in China 2026 equips investors with up-to-date and practical insights into market entry, regulatory compliance, and operational strategies under evolving conditions. Whether you are planning expansion or optimizing existing operations, this guide helps you navigate China’s opportunities and challenges with clarity and confidence.

Doing Business in China 2026 covers:

• Establishing and Running a Business
• Tax, Audit, and Accounting
• Human Resources and Payroll
• Cybersecurity and Data Protection

Within these chapters, we discuss a range of different topics that affect doing business in China, including investment models, intellectual property considerations, key taxes applicable to foreign companies, various types of employment contracts, and a chapter explaining the evolving data and cybersecurity compliance requirements in China.

Special Focus: Why Global Companies Continue Investing in China

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China remains a vital and irreplaceable market for global companies, even as the business landscape evolves and operational challenges increase. The country’s unparalleled scale, speed, and innovation capacity – anchored by a vast consumer market, highly efficient supply chains, world-class infrastructure, and a skilled workforce – continue to offer competitive advantages that are difficult to replicate elsewhere. Emerging policies such as strengthened “Made-in-China” procurement requirements further reinforce the strategic importance of maintaining a strong local manufacturing footprint. For forward-looking executives, the priority is not withdrawal but smart adaptation: optimizing operations on the ground, aligning with local policy direction, and leveraging China’s unique strengths to maintain global competitiveness.

Vast and dynamic domestic market

China remains one of the most compelling consumer markets globally, driven by its vast population, rising incomes, and structural shifts toward urbanization and consumption. With GDP reaching US$18.8 trillion in 2024, China is the world’s second-largest economy and a critical engine of global growth. More importantly, consumption is increasingly central to this story: retail sales ranked second globally, and household spending now accounts for over 60 percent of GDP growth, signaling a transition toward a consumption-led economy.

The country’s middle-income population exceeds 400 million, creating a demand base larger than the entire population of the United States. Rising purchasing power reinforces this trend, with per capita disposable income climbing to US$5,740 in 2024, up 5.3 percent year-on-year. Urbanization adds another layer of opportunity: 67 percent of China’s population lived in cities in 2024, and this figure is projected to reach 70 percent by 2030, concentrating consumers in high-density hubs that favor modern retail, services, and digital ecosystems.

Beyond scale, China’s market is dynamic. E-commerce penetration continues to lead globally, and digital payment adoption exceeds 90 percent, enabling rapid shifts in consumer behavior. Premiumization, health and wellness, and sustainability are emerging as dominant themes, particularly among younger demographics such as Gen Z, who prioritize quality, authenticity, and eco-friendly products. These trends, combined with government policies aimed at boosting consumption, position China as not just a large market but a strategic arena for innovation and competitive advantage.

Global manufacturing capacity

China’s manufacturing dominance remains formidable, accounting for around 30 percent of global production output. This strength is anchored in the world’s most comprehensive and integrated industrial ecosystem, covering all categories in the UN system. From raw material sourcing to component manufacturing and final assembly, this interconnected structure delivers unmatched efficiency, scalability, and cost advantages on a global scale.

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A key enabler of this leadership is China’s vast labor market, supported by a workforce that is generally more experienced, better educated, and better resourced than many Asian peers. This depth of human capital sustains high productivity and allows rapid adaptation to advanced processes, including precision engineering and automation-driven production lines.

China’s logistics and infrastructure network further reinforces its manufacturing capacity. The country offers a stable power supply, increasingly supplemented by renewable energy sources, an advantage for businesses facing stricter carbon footprint requirements. Its world-class shipping hubs, extensive expressway and high-speed rail systems, and multimodal corridors such as the China-Europe Railway Express and New Western Land-Sea Corridor ensure both cost efficiency and speed-to-market and supply chain resilience.

Beyond traditional sectors, China has evolved into a hub for high-tech manufacturing, including electric vehicles, semiconductors, robotics, and renewable energy equipment. Strategic initiatives like Made in China 2025 and subsequent industrial policies have propelled the country up the global value chain, enabling large-scale production of complex, high-technology products. This capability positions China as a critical node in global supply chains, offering foreign investors access to advanced production networks and innovation ecosystems that are difficult to replicate elsewhere.

Innovation and R&D competitiveness

China has rapidly emerged as a global innovation powerhouse, reshaping technology standards and accelerating product development cycles worldwide. In 2025, China ranked 10th in the Global Innovation Index, up from 14th in 2020, marking its first entry into the top 10.

This progress is backed by sustained investment: R&D spending reached 2.68 percent of GDP in 2024, making China the world’s second-largest R&D investor in absolute terms. The country’s innovation ecosystem benefits from a vast talent pool, producing over 5 million STEM graduates annually and employing more than 7 million full-time R&D personnel, the largest globally. These resources enable China to lead in critical fields such as AI, biotechnology, advanced manufacturing, and green technologies.

China’s innovation advantage is not just about scale – it’s about speed and integration. Domestic firms excel in rapid product development and digital adoption, often compressing design-to-market timelines from months to weeks. This agility, combined with deep integration between research institutions and industry, allows breakthroughs to move quickly from lab to large-scale production.

Trade and investment agreement framework

China has actively built an extensive network of international agreements to facilitate trade and investment, including bilateral investment treaties (BITs), free trade agreements (FTAs), and double taxation agreements (DTAs). These frameworks have significantly shaped regional trade flows and supply chain integration, reinforcing China’s role as a central hub in Asia’s economic architecture.

Currently, China has signed 23 FTAs covering 30 countries and regional blocs, including ASEAN’s 10 member states, providing preferential market access and tariff reductions. In addition, 10 FTAs are under negotiation, with 7 more under consideration, signaling continued expansion of China’s trade footprint. On the investment side, China maintains 110 BITs in force, with another 17 signed but pending implementation, offering foreign investors greater protection and predictability. Furthermore, 114 DTAs have been concluded, reducing tax burdens and mitigating double taxation risks for cross-border businesses.

For European companies, China serves as a strategic gateway to the Regional Comprehensive Economic Partnership (RCEP), the world’s largest trade bloc. Leveraging RCEP through China allows firms to capitalize on tariff advantages, benefit from China’s advanced industrial base and comprehensive supply chains, and seamlessly connect with other member states. This positioning enables businesses to expand across Asia more efficiently and integrate into one of the most dynamic regional economies globally.

Market reform and opening up

China continues to advance market-opening reforms aimed at attracting high-quality foreign investment and improving the overall business environment. These efforts include relaxing market access restrictions, streamlining regulatory processes, and signaling a long-term commitment to openness.

A cornerstone of these reforms is the revision of the Negative List for Foreign Investment Access, which specifies industries subject to special administrative measures. The 2024 Negative List marked a major milestone by removing all restrictions on foreign investment in China’s manufacturing sector and pledging further liberalization in critical service industries such as telecommunications, education, and healthcare.

In line with these commitments, China introduced several pilot programs to expand foreign participation in high-growth sectors. In September 2024, foreign investment was permitted in cell and gene therapy across four free trade zones, alongside approval for wholly foreign-owned hospitals in nine major cities. In October 2024, another pilot program allowed 100 percent foreign ownership of data centers and value-added telecommunications services in Beijing, Shanghai, Hainan, and Shenzhen.

These measures create significant opportunities for foreign investors, particularly in biotech, healthcare, and digital infrastructure sectors that are central to China’s innovation-driven growth strategy. By easing entry barriers and fostering competition, China reinforces its commitment to attracting global capital and accelerating technological advancement in key industries.

China investment outlook 2026

China offers unique speed, scale, ecosystems, and capabilities that are difficult to replicate elsewhere. Its deep manufacturing base, integrated supply chains, abundant engineering talent, and vast consumer and industrial markets allow companies to experiment, scale, and commercialize new products more quickly than in most other economies. These advantages provide a strategic edge that continues to anchor foreign investors to the market. For many companies, staying in China has become a defensive necessity rather than an expansion driven solely by superior profit potential.

Against this backdrop, foreign investment is expected to continue flowing into China, and the number of newly established foreign-invested enterprises is likely to keep rising. While sentiment is more cautious and geopolitical factors persist, companies still view China as essential to maintaining global relevance and operational resilience.

See also:

• China’s Economy in November 2025: Year-End Review and 2026 Outlook
• CEWC 2025: China Emphasizes Boosting Domestic Consumption, Proactive Fiscal Policy in 2026
• Beyond Zero Tariffs – What Hainan’s New Customs Zone Means for Industry, Investors, and the Island

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