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 consultant office, a wholly owned foreign enterprise or you are able to run a shared venture with a nearby partner. Here is a brief guide to each and their pros and cons.

Representative Office

A consultant office requires an established overseas entity that ought to have already been trading for at the least two years (though this is 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. 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 is prohibited to sell products in China or even to hire and fire staff (any staff you'll need will 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 begin a business, it enables you to 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 approach is typically chosen over a consultant office in practice. A WoFE allows 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.

As a result of the amount of control granted to the owners many expatriates swear blind that this is actually the only or simplest way to complete business in China. However it's worth being aware there are certain sectors by which WoFE's may possibly not be setup 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 gives 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 usage of certain sectors, cannot qualify for state grants or subsidies which might be commercially damaging especially 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 by way of a Chinese investor and a foreign one. There's been a massive amount of media attention fond of the difficulties faced by early investors in the country when starting a shared 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 might ensure barriers to business simpler to overcome. china wofe

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

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

The most effective place to start if you're looking to create in China is by conversing with a nearby lawyer who is able to walk you through the options and the expense and offer you an insight into local regulations and policies which might influence your decision.