When setting up a business in China, you need to consider what Chinese corporate structure to use. Before the Chinese company structure can be determined, it is best to think through your China strategy to determine which China business structure will work best for you.
Some questions to consider:
- Do you want simply to sell into China?
- Do you need a Chinese partner or will you try to go it alone?
- Do you require an entity in mainland China?
- Do you need to invoice locally for products and services?
- Do you plan to trade, manufacture, offer services, or some combination?
- Do you need the help of a Chinese company to provide access to distribution?
Once you have defined your strategy, then you can determine the legal form for your entity. Foreign investors have several choices for structuring a China enterprise:
The China Representative Office:
The China Representative Office is the least dynamic of the entities for establishing a foreign presence in China. The China RO can facilitate market entry and coordinate sourcing activities and marketing, but it is a toothless entity that has little control over the movement and sale of goods and services. However, for initially ‘testing’ your China market strategy, this is a low-cost, low-risk approach.
The China Joint Venture:
If both you and your Chinese partner’s goals, contributions and responsibilities are mutually understood, the China Joint Venture can be a cost effective and successful structure. This option is often best for businesses that have products/services or a unique value proposition that needs to match with a Chinese based company that can bring distribution and cultural/market know-how. This is by far the most common and practical method to enter China, unless you have the financial and human resources to establish a company on your own and hire local talent. Even Proctor and Gamble began in China as a JV in the mid-1980’s before they established their own entity.
The China (WFOE Wholly Foreign Owned Enterprise):
Incorporating as a China WFOE has become the investment vehicle of choice for the international investor wanting to manufacture, service or trade in China. In addition to the China WFOE’s expansive business scope, it is popular because you have 100 percent foreign ownership and control, security of intellectual property rights, your own internal structure, and domestic sales and profit repatriation.
China Investment Opportunities:
For investors wanting to benefit from the economic rise of the largest global emerging market in the world, our advisory services include introducing you to the procedures and policies of establishing company and representative offices, legal and regulatory requirements, due diligence, banking relations and other requisite services. Many US-based venture capital, private equity, and investment banking companies have established China offices to invest in Chinese companies, and US/China joint ventures. CUBD will assist your company in navigating through the labyrinth of China’s financial industry to find the right partner for your venture.
To learn more about company registration and setting up a business in China, contact us
