Setting Up Distribution Center in China

Various Factors to Consider

Proximity to Factories, Airport or Seaport

Logistics costs tend to be upto 5% of the material costs. In china, companies spend 20% of their operating costs in logistics, this is high compared to the west where only 10% is the norm. Therefore this is the segment where companies attempt to reduce in China.

Taxation Implication

Most of the foreign owned company still cannot perform its own importation process.



When setting up an entity in China, you have a few choice where you choose to setup office Non-FTZ/FTZ/BLP/EPZ

Difference in FTZ( Free Trade Zone ), BLP ( Bonded Logistics Park ) and Economic Processing Zone ( EPZ ) play a part in deciding which is best for the business going to be setup there.


Currently there are only three BLPs, Shanghai and TianJing in China

Operating Level

Non-FTZ

Limited or no trading license, need joint venture with local partner in order to trade. Therefore, usually, it will be an independent sales office with no trading rights.

FTZ

Allows trading done within FTZ, value added services, storage and exhibition and other business activities.

BLP

Encourages transshipment, global procurement and distribution in the BLP.

Operating Level

Non-FTZ

All goods arrived must go through the usual customs clearance process, in which VAT and import duties need to be applied.

FTZ

All transaction in the zone is tax free. All imports into the FTZ and all export out of the FTZ are free from imort duty and imort licence. EDI are needed to be linked to the customs system.

BLP

All privileges of FTZ. Export clearance/Customs clerance are all done within one single transaction.


GMP - 药品生产质量管理规范