Business structure in China

Representation of companies

Representation and Agency

One of the most common ways of setting up a business in China is through a representative office (RO). One of its advantages, as compared with joint ventures (JV) or 100% foreign subsidiaries (WFOE), is that no initial capital is required and the tax treatment is simpler and lower. A RO is a vehicle intended for carrying out activities on account of the parent company, as it has no legal personality of its own.

The Chinese authorities have significantly simplifiedtheprocess for foreign companies seeking to establish themselves in the country. There are also professional firms of consultants and lawyers specialising in establishing companies in China.

Types of companies

In China one can incorporate a 100% foreign company (Wholly Owned Foreign Enterprise or WOFE) and mixed companies (or joint ventures), in this last case companies whose capital is owned by foreign investors or foreign and Chinese investors.

For incorporating both a WOFE and a joint venture, the minimum capital requirement has in general been cancelled.

Before incorporating the company, the Administration for Industry and Commerce should be consulted, as this informs on the procedures and requirements for each type of company (depending on the business that the company is going to do).