What Manufacturing Businesses Should Confirm Before Setting Up
Author: Junanda ConsultingReviewed by: Junanda Service Team2026-09-19
What sets a manufacturing business apart from a trading or service company is that it needs premises on which production is actually permitted, a set of environmental and safety approvals it can realistically obtain, and a full management framework built around equipment and employment. If these conditions are not confirmed before incorporation, the usual consequences are a factory that has been leased but cannot secure an environmental impact assessment, equipment that has arrived but cannot be powered up, or production that has started only to find that a required licence was never granted. This article works through the preconditions one by one.
Site Selection and Factory Premises
Site selection is the first gate for a manufacturer, and the essential question is whether the land can be used and whether the building can produce.
- Land nature: confirm whether the plot is designated as industrial land use right or something else. Buildings on collective construction land or agricultural land can generally not be used for industrial production and operation without restriction.
- Ownership and permitted use: ask the lessor to provide the property ownership certificate, and check whether the planned use of the building covers industry or production.
- Lease contract: make the lease term, rent, division of fire safety and environmental responsibility, ownership of improvements and installed equipment, and early termination clauses explicit.
- Industrial park requirements: where the business moves into an industrial park, understand the park's access restrictions on industry category, production capacity and emissions.
Site selection also means looking separately at what can be used now and what can be expanded later. Check whether the area, clear height, floor loading and load-bearing capacity of the existing factory building can accommodate the equipment to be installed; whether sensitive receptors such as residential areas or water source protection zones nearby might affect later approvals; and whether transport and logistics conditions can support raw materials coming in and finished goods going out. Once these factors conflict with approval requirements, the cost of adjusting later is far higher than the cost of asking one more question at the outset.
Environmental Impact Assessment, Fire Safety and Pollutant Discharge
Construction projects are generally subject to classification management according to their degree of environmental impact, falling into preparation of an environmental impact report, an environmental impact form, or online filing of an environmental impact registration form. The specific category is determined by the classification management catalogue currently in force.
| Management category |
Typical situation |
Main work involved |
| Report |
Greater impact |
Commission a qualified entity to prepare it and submit it to the ecology and environment department for approval |
| Form |
Moderate impact |
Prepare the form and submit it to the ecology and environment department for approval |
| Registration form |
Very limited impact |
Complete online filing by the enterprise itself |
Two points are worth noting. First, the environmental impact assessment should generally be completed before construction begins, and starting work without approval may attract penalties. Second, where the nature, scale, location or process of the project changes significantly, re-approval may be required.
On fire safety:
- Where the fire safety design of a construction project requires review under the applicable rules, the review should be completed before construction starts.
- After completion, fire safety acceptance or filing must be carried out, and the project is subject to spot checks.
- Fire compartments, escape routes and fire safety facilities in production workshops, warehouses and office areas should match the production process.
- Where flammable, explosive or hazardous chemical materials are involved, fire safety requirements are stricter.
On pollutant discharge and environmental acceptance:
- Pollutant discharge permit: under the national pollutant discharge permit management rules, discharging units that fall within the scope of management should apply for a pollutant discharge permit or complete pollutant discharge registration, so that discharge is carried out under permit.
- Environmental acceptance: construction projects that require supporting environmental protection facilities should carry out acceptance in accordance with the rules once completed.
- Ongoing compliance: after production begins, self-monitoring, an environmental management ledger and periodic reporting are also required.
Work Safety, Industry Access and Production Licences
Work safety is a step no manufacturer can avoid.
- Work safety conditions: where the production, storage or use of hazardous chemicals is involved, the corresponding safety licence or filing is normally required.
- Safety facilities: safety facilities should be provided as required and designed, constructed and put into use together with the main works.
- Systems and personnel: establish a work safety responsibility system and emergency response plan, and appoint a safety management body or full-time safety management personnel.
- Special operations: personnel in roles such as electrician, welder, forklift operator and crane operator must meet the requirement for certified operation of special equipment and operations.
Some industries are subject to access and licensing requirements that need to be confirmed in advance:
- whether the project falls within a category restricted or to be phased out under national industrial policy;
- whether the product requires an industrial product production licence;
- whether China Compulsory Certification (CCC) applies;
- whether the activity belongs to a special industry requiring prior approval.
Where any of these apply, they should be verified with the competent authorities at the site selection and investment decision stage rather than later.
Utilities, Equipment and Workforce
On energy and utility connections:
- Confirm whether the power supply capacity available at the industrial park or site can carry the load of the production equipment. High-power equipment may require a capacity increase.
- Verify in advance the connection conditions and costs for water, drainage, steam and compressed air and other utility works.
- Energy-intensive projects may be subject to energy conservation review.
On equipment procurement and fixed asset accounting:
- Retain the contract, invoice, payment voucher, acceptance note, and transport and installation records for equipment purchases.
- Record equipment as a fixed asset promptly once it arrives at the plant, and determine the depreciation period and method.
- Where installation and commissioning are required, whether installation costs are included in the original value of the fixed asset should be handled in accordance with the accounting standards.
- Where imported equipment is involved, attention should also be paid to customs declaration and the documents relating to customs duty and VAT.
On employment:
- Production line employment involves labour contracts, social insurance, and the management of working hours and overtime.
- Personnel in special operations and hazardous roles must hold the relevant certificates, and annual training records should be kept.
- Where a post involves occupational disease hazards, occupational health examinations and hazard notification should be carried out as required.
Tax Registration, Invoicing and Input VAT
- Taxpayer status: manufacturers typically have substantial input VAT, so the point at which to register as a general VAT taxpayer usually needs to be assessed.
- Invoice management: the invoicing system, tax control equipment and invoice collection should be assigned to a designated person.
- Input VAT credit: special VAT invoices obtained for equipment, raw materials and services should be verified and credited promptly, with attention to the compliance of the supporting documents.
- Tax type registration: complete the relevant tax type determinations and filing preparations in line with actual operations.
It is worth remembering that for a manufacturer, the period from incorporation to start of production often spans several months. Pre-operating expenses, equipment commissioning and trial production incurred during that period should be distinguished in the accounts from the operating expenditure of the business once formal production begins, and the supporting documents should be filed separately by category so that later accounting and review are straightforward.
Grants and Technical Upgrade Programmes
Policy support available to manufacturers tends to concentrate on technical transformation, smart manufacturing and green manufacturing. The general route is to follow the application notices issued by the local competent authorities, prepare project materials against the stated application conditions — including project filing or approval documents, investment vouchers, equipment lists and financial information — and submit them within the application period set out in the notice. The specific conditions, materials and forms of support are subject to the latest notices issued by the competent authorities in the year concerned.
Self-Check Checklist
This article is general business information prepared by Junanda Consulting. Specific policy positions, tax rates, deadlines and procedural requirements are subject to the latest official versions issued by the competent authorities. To understand how these requirements apply to your business, please contact Junanda Consulting for further information and support.
