Deciding to set up a WFOE (or other investment vehicle) in China is just the first step. Where you base that WFOE matters — and can significantly influence cost, speed to market, regulatory ease, access to talent and long‑term growth potential. In this post, I explore how to choose the right region — from established urban giants to emerging inland hubs — and why the location decision is as strategic as the business model itself.
China is vast. What works in Shanghai may not work in inland provinces. Factors such as labor costs, regulatory environment, proximity to supply‑chains, infrastructure, risks, and local incentives vary widely across cities and regions. In many cases, the choice of location can make or break a business plan.
At Tannet‑Group we view location selection not as a checkbox, but as a strategic decision that shapes the company’s trajectory.
Shanghai remains a global financial and business hub; it offers top-tier infrastructure, access to international shipping, logistics, finance, talent pool and mature regulatory systems. Companies here benefit from connectivity (air, sea, rail), international exposure, and a dense network of suppliers and service providers.
For WFOEs aiming for export, international trading, or high-end manufacturing, Shanghai offers stability and prestige — but comes with significant costs: higher labor and real estate costs, stricter compliance, and higher expectations.
Shenzhen is sometimes the go-to location for firms producing electronics, consumer‑tech, or goods requiring quick prototyping and proximity to supply‑chains. Its proximity to Hong Kong adds an additional layer of logistics flexibility and international connectivity. Shenzhen combines relatively lower costs than Shanghai (in certain industrial zones) with supply‑chain advantages and fast‑moving manufacturing ecosystems.
For new entrants seeking agile manufacturing setups, quick turnaround, and easier export logistics — especially electronics, parts, assembly — Shenzhen often presents a balanced option.
China’s investment strategy has shifted. With initiatives to promote industrial development beyond coastal megacities, several inland or central/northeastern regions have become attractive options — especially for firms in advanced manufacturing, green energy, agro‑processing, or heavy industry.
These hubs often offer: lower land and labor costs, generous local incentives (including subsidies, tax breaks, cheaper industrial land), and government support aimed at balanced regional development. For businesses sensitive to overhead and seeking scale over urban frills, inland hubs can offer strong ROI potential.
Also, for industries like clean‑tech manufacturing, renewable energy components, heavy equipment or energy‑adjacent production — inland regions may match or exceed coastal zones because of resource proximity, supportive local policy, and lower cost base.
The “right” region depends on what your business seeks. For example:
We walk clients through these trade‑offs. Instead of “defaulting to Shanghai”, we analyze your product, target markets, capital plan, and long‑term vision — then map to the region that gives highest probability of success.
In recent years, China’s regulatory environment has become more uniform — foreign investors generally receive the same treatment as domestic firms, especially outside sectors on the negative list.
Furthermore, the updated catalogue of encouraged industries opens up many sectors for foreign investment — and regional governments often sweeten the deal. Prefectures and provinces may offer preferential land pricing, subsidized utilities, easier licensing, or tax breaks to attract foreign enterprises.
This means investors have real leverage: by aligning business objectives with regional incentives, they can optimize setup costs and operating expenses while benefiting from supportive policy environments.
Choosing a less‑crowded inland zone may reduce competition, cost pressure and regulatory bottlenecks. It can also diversify risk — especially in an era when global trade tension, rising labor costs, or supply‑chain disruptions can hit coastal exporters hard.
Meanwhile, spreading operations across regions (or hedging with dual sites — say a coastal export hub + an inland manufacturing site) might offer stability and flexibility, albeit with greater operational complexity.
We don’t just set up your company. We help you choose where to do business. Our services include:
There’s no “best” Chinese city or region for every business. What’s best depends on what you produce, how you sell, your target markets, your budget and your growth outlook.
For some, the established ease and prestige of Shanghai or Shenzhen will win out. For others, inland hubs or regional zones will deliver better margins, incentives, and long-term value.
With strategic planning and informed decision-making — ideally with a partner conversant in both foreign capital needs and China’s regional realities — a WFOE location can become a powerful advantage rather than a gamble.
If you’re weighing options, Tannet‑Group can run a custom location‑match analysis based on your business plan — one that looks beyond cost and into long-term growth potential. Contact us today.