china wofe

You will find only three paths for foreign investors to begin doing business in China. The choices are simple; you can open a representative office, a wholly owned foreign enterprise or you can run a joint venture with an area partner. Here's 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 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.  wfoe

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

Pros: In principle it is a quick way to begin a business, it allows you to 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 program is more often than not chosen over a representative office in practice. A WoFE lets you run your own personal business in China with total control over practices such as hiring and firing and where you are able to establish your office etc.

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

Pros: In practice it's cheaper to setup than the usual representative office, it provides you complete control over your organization, you can hire and fire staff, creating a WoFE is uncomplicated if a while consuming wofe in china

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

Joint Ventures

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

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

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

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

The very best place to begin if you're looking to setup in China is by talking to an area lawyer who are able to walk you through the options and the costs and give you an insight into local regulations and policies which might influence your decision.