china wofe

You will find 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 a nearby partner. Here is a brief guide to each and their pros and cons.

Representative Office

An agent office requires an established overseas entity which will have now been trading for at the very least couple of years (though this is often circumvented by buying an "aged" off the shelf company). Occasionally this requirement is ignored by the licensing authorities but there are no guarantees of this. wofe in china

The representative office is allowed to establish an identity in China and to conduct negotiations with local businesses and pay invoices. It's not allowed to offer products in China or to hire and fire staff (any staff you'll need will undoubtedly be selected by the area authority and will be more expensive than if you could hire direct).

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

Cons: Used 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 typically 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 are able to establish your workplace etc.

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

Pros: Used it's cheaper to create than the usual representative office, it offers you complete control over your organization, you are able to hire and fire staff, setting up a WoFE is uncomplicated if some time consuming

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

Joint Ventures

A Joint Venture is really a commercial entity that's jointly owned and managed with a Chinese investor and a foreign one. There's been a massive number of media attention given to the difficulties faced by early investors in the country when starting a joint venture.

Certainly it's not the easy option for conducting trade in China however joint ventures offer enormous opportunities for those willing to overcome the cultural hurdles, they qualify for subsidies in priority sectors and are well regarded by the state which can make certain barriers to business more straightforward to overcome. china wofe

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

Cons: Could be a nightmare of culture clashes, partners have 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 best place to start if you're looking to create in China is by conversing with a nearby lawyer who can walk you through the options and the costs and offer you an insight into local regulations and policies which can influence your decision.