With a population of more than 1 billion people and steady economic growth, the People's Republic of China has become one of the most attractive emerging markets in the world. It is currently the second largest economy in the world. Moreover, it is expected that China's accession to the World Trade Organization will cause a further wave of investment inflows from foreign companies.
There are two main areas of opportunity for starting a business in China. The first one is intended for manufacturers or those who supply goods for export. China's cheap and increasingly sophisticated workforce, excellent transportation and port services have led to a diverse range of products at very competitive prices. Secondly, China's rapid economic development has created a growing market for agricultural and industrial raw materials, high-tech components, capital goods and professional services.
Establishing a representative office in China is still not an easy task, taking into account the complexities of operating activities, the viability of the business and the cost structure. We can help our customers to move smoothly and successfully into the Chinese market. Our comprehensive approach can ensure that customers make the right choice and help them at all stages of determining the best location, operational structure, office, etc.
If you are interested and want to take your first step to China, do not hesitate to contact us.
List of services provided:
1. Assistance in finding office space
2. Establishment of offshore/Hong Kong companies as the parent company for operations in China
3. Establishment of either a representative office in China, or a WFOE, or a joint venture
4. Opening of bank accounts
5. Accounting and preparation of audit reports
6. Legal services
Organizational and legal forms of companies in China
There are three recognized forms of business organizations available to foreign investors in China. These are:
1) Joint Venture (JV)
A joint venture is a business agreement in which participants create a new commercial organization or formal contractual relationship and share investment and operating expenses, management responsibilities, as well as profits and losses.
Chinese authorities encourage foreign investors to use this form of company to familiarize themselves with advanced technologies and new management skills. In return, foreign investors can benefit from low labor costs, low production costs and a potentially large share of the Chinese market. Joint ventures are sometimes the only way to register in China if certain business activities are still controlled by the government. For example, restaurants, bars, construction, car manufacturing, etc.
2) An enterprise wholly owned by a foreign state (WFOE)
An enterprise wholly owned by a foreign state is an economic entity created in China exclusively with the participation of foreign capital, it is completely under foreign control and does not have any official participation of Chinese ownership. In order for a foreign company to issue receipts and export goods from China, it must be able to legally register as a local company or WFOE. WFOE is created as a limited liability organization and represents individual legal entities and is taxed in accordance with local legislation.
WFOE are generally able to control their own governance through a charter, and the usual minimum paid-up share capital starts at 1 million yuan (approximately US$ 140,000), however, some provinces offer lower capital requirements to attract more foreign investment. Many foreign investors find this type of company attractive because of full control and 100% ownership.
3) Representative Office
The simplest and most cost-effective method of establishing a useful business presence in China is a representative office. The choice of location for the initial representative office is usually determined by basic market and product research in China. The most likely choice for a representative office are such famous cities as Shanghai, Beijing, Guangzhou and Shenzhen. It should be noted that a foreign organization can open more than one representative office in China.
A representative office is a legal entity engaged in commercial activities that do not lead to a direct profit for the office. They are allowed to act as partnerships or sole proprietors in China because they are not recognized as legal entities. However, they are allowed and encouraged to carry out "indirect operational activities", such as maintaining business contacts, product introduction, market research and technology exchange. These activities should be preparatory and additional, marketing research of the local market, provision of business information and sales support for the headquarters. A foreign company applying for a representative office must be legally registered in its country of origin for at least 12 months.