The freelancer shall first register their own company (WFOE or JV). Services companies are the most adequate for freelance activities, because of their service-oriented scope. On the opposite side, industrial companies may offer very few opportunities for freelance work.
Second, in order to work legally in China, the freelancer needs their company to apply for a work permit for themselves.
The work permit (labor contract description) shall allow the freelancer to work on different projects (consultant, web designer, trainer, designer, writer… etc.)
-The Foreigners Guide to Work/Hire Legally in China (Tianjin )
-Work Permit Explained, Application Process in China (Tianjin)
While this system may look like workforce dispatch, it is not, as long as the freelancer does not engage in extra labor-relations and makes sure to stay within the boundaries of their work permit.
In a traditional freelancer system, the contracts can be concluded between a customer (company or person) and a freelancer (person). Hoewever, in this model contracts will always be concluded between a customer (company or person) and the freelance company.
Contracts will generate company income, the company will pay VAT, the company will emit official invoices and pay company taxes.
Regardless of company income, the company will give a monthly salary to the freelancer (as stipulated in the labor contract registered with SAFEA), will pay taxes and social security for the freelancer, and may pay the freelancer an annual bonus or dividends.
An important fact is that foreign individuals do not pay taxes in China on dividends and that may be the reason why most freelancers choose to own their own company (company shall distribute dividends to shareholders only).