China’s entry into the World Trade Organization marked the beginning of a significant change for investors and enterprise in China. The government of China has allowed entry into the market through the formation of Wholly Owned Foreign Enterprises (WOFE) and Representative Offices.
China is one of the world’s fastest growing economies and is an exciting jurisdiction in which to incorporate a company however it must be remembered that China also has disadvantages associated with emerging markets. These include an immature legal system and poorly enforced laws. Before proceeding with the formation of a WOFE company you should seek expert advice from Talent spot in order to formulate the best possible structure for your situation.
Wholly Foreign Owned Enterprises (WFOE)
The main benefits of WFOE are as follows:
- Freedom to implement the strategies of its parent company without having to consider the involvement of a Chinese partner
- Able to formally carry out business rather than just be a representative office
- Can convert profits to any currency for remittance to its parent company outside of China
- Protection of intellectual property rights
- No import / export licenses required
- To set up a WFOE the investor doesn’t have to have been established for 2 years unlike when setting up a Representative Office
Representative Office
A Representative Office may engage in the following activities:
- Conducting research and providing data for its potential clients and partners
- Conducting research for its parent company in the local market
- Liaising with local contacts
- Acting as coordinator for parent company in China
- Making travel arrangements for parent company representatives in China
The main benefits of a Representative Office are:
- Enables a company to conduct thorough market research into an emerging market prior to committing funds for a fixed term
- A Representative Office serves as a presence in China, to establish a brand / product
- Demonstrates a long term commitment to the Chinese market thereby promoting trust in prospective business partners
