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How To Set Up a FICE in China

By Simon Lee from www.pathtochina.com 

Before 11th December 2004, Foreign-invested enterprises (FIEs), i.e. enterprises established by foreign investors in

China (including wholly foreign-owned enterprises [WFOEs] or joint ventures [JV]) were only permitted to import raw materials and semi-manufactures for their own use and to export self-manufactured products directly. In this sense, FIEs generally were not permitted to trade in other products, including products manufactured by their parents and affiliates, causing inefficiencies by compelling the use of oligopolistic trading intermediaries.

 But on 16th April 2004, the new Measures for Foreign Investment in Commerce (MFIC) was promulgated by Ministry of Commerce of the People’s Republic of

China (MOFCOM). According to the Measures, Foreign-invested commercial enterprises (FICEs, one type of FIE) can distribute imported and locally manufactured products through their own wholesale, retail and franchise systems and to provide a host of related services, including storage, warehousing and garage services, inventory management, repairs, maintenance, training and delivery after December11, 2004. It’s considerable progress in the implementation of

China’s WTO commitment to allow foreign-invested enterprises (FIEs) to exercise trading and distribution rights.

Overall, Foreign companies now may choose one of two ways to acquire trading and distribution rights. They can set up a new, standalone foreign-invested commercial enterprises (FICE) or apply to expand the business scope of an existing FIE. Existing manufacturing FIEs, free-trade zone trading FIEs, investment companies, and regional headquarters FIEs may all apply to expand their business scopes. Following are the updated policy of trading and distribution rights:

Details of establishing a FICE under the Measures1. Definition of a Foreign Invested Commercial

Enterprise (FICE) under the Measures. A foreign invested commercial enterprise means a foreign invested enterprise, which engages in following areas:

    1. Agency with commission: selling other owned goods and providing related services by sales agency of goods, broker, or auctioneer or other wholesaler on the basis of contractual relationship.
    2. Wholesale: selling goods and providing related services to retailer, industrial user, commercial user, organizational user and other wholesaler.
    3. Retail: selling goods and providing related services to individual or collective consumer in fixed locations or by means of television, telephone, internet and automat.
    4. Franchise: licensing of trademark, trade name and business mode by entering into a contract with others for the purpose of returns and license fee.

2. Business scope of a FICE

    1. A FICE in retail can engage in following businesses upon approval: Retail/Import of self-operation goods/Purchase and export of domestic goods/other related services
    2. A FICE in wholesale can engage in following businesses upon approval: Wholesale/Agency with commission/Import and Export/ other related services

3. Requirements for establishing a FICE (your could find the detailed information through our site: www.pathtochina.com):

    1. Minimum registered capital shall be in compliance with respective requirements in company law of PRC
    2. Other requirements with respect to registered capital and investment amount of FIE shall be satisfied (Minimum 500,000 RMB [around 65,000USD$] for the wholesale; Minimum 300,000 RMB [around 38,000USD$] for the retail according to company law and Rules for the Implementation of the Law of the People’s Republic of China on Foreign-Capital Enterprises)
    3. The general period of operation of a FICE shall not exceed 30 years, and the general period of operation of FICE located in the middle and western region shall not exceed 40 years

4. Following documents are required for application of establishing a FICE:

    1. Article of Association and Annexes
    2. Bank letter on the credit worthiness of the foreign investor
    3. Copy of Business License of parent foreign company which was certificated by Chinese Embassy (if it’s personal investor, then passport copy certificated by Chinese Embassy is enough)
    4. The identity certificate of the legal representative (i.e. the Chairman) of the FICE
    5. Audit Report of the investor for the very last year
    6. Catalogue of imported and exported Commodities by the probable FICE
    7. Name list of the members of Director Board and Authorization letter of directors
    8. Certificate of land use right or Lease Agreement (required only for enterprises intending to set up stores, to the exclusion of store of less than 3000)

PathToChina.com business registration department was invited to a meeting summoned by the government. The meeting has summarized developments on establishing commercial enterprises under Measures for the Administration of Foreign Investment in the PRC Commercial Sector. The statistics shows that over 600 applications for establishing FICE in Shanghai got approved between January 2006 and July 2006, Compare to last year, it’s total 600 FICEs have been approved in whole year. The FICE applications really increased a lot in this year. Special for some famous international brand, like ZARA a famous fashion brand from Spain, Her turnover reaches 3,500,000RMB during the Chinese golden week (1st of May to 7th of May) and now GAP from USA, H&M from Sweden and C&A from German all get approved to establish FICE in

Shanghai. Are you the next?

Click here for the “Measures for the Administration on Foreign Investment in Commercial Sector” Provided by www.PathToChina.com
Simon Lee is the regional partner of PTC, who has 3 years experience in this industry. You can reach him by simon@pathtochina.com

Shanghai:
Tel: (8621) 5102.5279
Email: sales@PathToChina.com
Suite 9B,

485 HeNan Road(N.) Shanghai
200071

USA:
Tel: (303) 8006616
Email: sales@PathToChina.com
3801E,

Florida Ave.,
Suite 412,
Denver, Co. 80210

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This entry was posted on Wednesday, September 19th, 2007 at 8:49 am and is filed under Foreign-Invested Commercial Enterprise("FICE"). You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

5 Responses to “How To Set Up a FICE in China”

  1. farid ahmad Says:
    September 24th, 2009 at 11:05 pm

    Hi I am a director of my own trading company in afghanistan and i want to open an office there do i need a anule adet report and also a certificate to sign by china embassy or just my passport certified and bank letter is enough thanks bye

  2. Business Setup UAE Says:
    February 22nd, 2010 at 12:51 am

    There is obviously a lot to know about this, setting business, tax, and all the legal issues. thanks

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