china wofe

You can find only three paths for foreign investors to start conducting business in China. The options are simple; you are able to open a representative office, a wholly owned foreign enterprise or you are able to run a joint venture with a local partner. Here's a brief guide to each and their pros and cons. wofe in china

Representative Office

A consultant office requires an established overseas entity that ought to have now been trading for at the least couple of years (though this can be circumvented by buying an "aged" off the shelf company). Occasionally this requirement is ignored by the licensing authorities but you can find no guarantees of this.

The representative office is allowed to determine an identity in China and to conduct negotiations with local businesses and pay invoices. It is banned to offer products in China or even to hire and fire staff (any staff you will need will undoubtedly be selected by the area authority and will cost you more than if you could hire direct).

Pros: In principle it's a quick way to take up a business, it lets you work in China legally

Cons: In practice it's expensive, you lack control over your workforce, and you can't sell anything locally

Wholly Owned Foreign Enterprise (WoFE)

We're told by Chinese lawyers that this method is typically chosen over a representative office in practice. A WoFE allows you to run your own business in China with total control over practices such as for instance hiring and firing and where you are able to establish your workplace etc.

Because of the degree of control granted to the owners many expatriates swear blind that this is the only or best way to accomplish business in China. However it's worth being aware that there are certain sectors where WoFE's may possibly not be setup and others where in fact the competitive nature of your business might be severely damaged by being wholly foreign owned.

Pros: In practice it's cheaper to set up than the usual representative office, it includes you complete control over your business, you are able to hire and fire staff, establishing a WoFE is uncomplicated if a little time consuming

Cons: Lacks use of certain sectors, cannot qualify for state grants or subsidies which can be commercially damaging especially if your business is in a "five year plan" focus area

Joint Ventures

A Joint Venture is just a commercial entity that's jointly owned and managed by a Chinese investor and a foreign one. There's been a huge quantity of media attention directed at the difficulties faced by early investors in the united states when starting a joint venture.

Certainly it's not the easy selection for conducting trade in China however joint ventures offer enormous opportunities for anyone ready to overcome the cultural hurdles, they qualify for subsidies in priority sectors and are well regarded by the state which can be sure barriers to business better to overcome. china wofe

Pros: Qualify for subsidies, better to overcome bureaucracy, will definitely have better connections for conducting business inside of China

Cons: Can be quite a nightmare of culture clashes, partners need to be chosen carefully or you are able to end up getting two organisations under one roof, need a high-level of co-operation and communication to be successful

The very best place to start if you're looking to set up in China is by conversing with a local lawyer who can walk you through the options and the expense and give you an insight into local regulations and policies which can influence your decision.