china wofe

There are only three paths for foreign investors to start working in China. The options are simple; you are able to open an agent office, a wholly owned foreign enterprise or you are able to run a joint venture with an area partner. Here's a brief guide to each and their pros and cons. wfoe

Representative Office

A representative office requires an established overseas entity which will 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 will 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's not allowed to sell products in China or to hire and fire staff (any staff you'll need is going to be selected by the area authority and will cost you more than if you might hire direct).

Pros: In principle it is a quick solution to start 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 choice is almost always chosen over an agent office in practice. A WoFE enables you to run your own personal business in China with total control over practices such as for instance hiring and firing and where you can establish your workplace etc.

Due to the level of control granted to the owners many expatriates swear blind that here is the only or easiest way to accomplish business in China. However it's worth being aware that there are certain sectors in which WoFE's may not be set up and others where the competitive nature of your business may be severely damaged by being wholly foreign owned.

Pros: In practice it's cheaper to create when compared to a representative office, it gives you complete control over your business, you are able to hire and fire staff, establishing a WoFE is uncomplicated if a while consuming

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

Joint Ventures

A Joint Venture is just a commercial entity that is jointly owned and managed with a Chinese investor and a foreign one. There's been a massive number of media attention directed at the difficulties faced by early investors in the country 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 may be sure barriers to business simpler to overcome. wofe in china

Pros: Qualify for subsidies, simpler to overcome bureaucracy, will certainly have better connections for working inside of China

Cons: Can be quite a nightmare of culture clashes, partners must 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 create in China is by conversing with an area lawyer who are able to walk you through the options and the expenses and give you an insight into local regulations and policies which may influence your decision.