PathToChina.com

— A brief Introduction to Types Of business entities in China

You are reading this because you want to find your business solutions in China. If you business is expanding to China, Set up your new business in China, you are looking in the right Place. In this article we will discuss the types of business which you could setting up in China:

as for detailed procedures and fee etc: http://www.pathtochina.com/regcompany.htm

Types of Business setting up in China:

Registration of Representative Office (Rep. Office)
Wholly Foreign Owned Enterprise (WFOE) Registration
Joint Venture
Hong Kong company formation

Before anything, companies should always carry out thorough research of the market. The habitual question amongst would-be investors is the type of business they should seek: a Representative Office, Joint venture or wholly foreign-owned enterprise etc. There is no right answer. Experience suggests a widespread preference for a WFOE amongst Foreign investors in China in recent years.

If you do need decide that a presence is necessary in the market, one easy and cost-effective option is the www.PathToChina.com site, and some other Consultancy companies in China, which allows you to get more information before committing yourself. Following are the brief introduction for types of business.

1. Representative Office in China:
If, having decided, you do need to have a permanent presence, one option is to set up a representative office. Representative Offices are established by foreign companies to engage in business liaison, product promotion, market research, exchange of technology and other permitted activities in China.

Representative Offices could not engage in direct operational activities. It’s prohibit for Rep. Office exporting goods to overseas alone, pay suppliers through Rep. Office’s bank account etc.

If you are thinking about manufacturing or trading in China through a legal entity, the choice is generally between setting up your own wholly owned enterprise or setting up a joint venture or even do Mergers and Acquisition in China.

2. Wholly Foreign Owned Enterprise [manufacturing]:
When looking at the attractions of manufacturing in China weigh up the benefits of subcontracting, or outsourcing, in China. If your company’s manufacturing requirements can be met through an outsourcing operation, this may be the better option. It may be possible to outsource using local manufacturers in China. Much of the myriad of goods on sale in the West bearing a ‘Made in China’ label is manufactured under contract.

In many cases it will not be possible to deal direct with a small Chinese manufacturer; such entities do not possess the all-important license to export the finished goods.

3. trading Wholly Foreign Owned Enterprise in China:
Normally to have a trading WFOE is the better option:
Getting an export/import license has become much easier since March, 2006. It can be organized, and sometimes smaller manufacturers offer low-cost production in conjunction with your Trading WFOE equipped with such a license.

What are the disadvantages of setting up a WFOE?
A disadvantage for an inexperienced investor setting up a WFOE in China is that much of the knowledge, administrative processes and contacts a partner would bring has to be gained the hard way. Strong relationships are a key factor for successful business in China, whether with the local authorities where the enterprise is located or along the supply chain.

4. Consulting and Service WFOE in China:

You could set-up a Consulting WFOE or service WFOE in China if you are looking for provide business services to your clients in China and abroad.
You may find details here: http://www.pathtochina.com/reg_wfoe.htm

5. JOINT VENTURE IN China:
Why chooses a joint venture? What should you look for?

An ideal partner who is honest, entrepreneurial, straightforward in its dealings
committed to the protection of the joint venture company’s IPR
with good market access and local contacts
and bringing with them a first-class workforce and facilities.
What are the problems with going the joint venture route?
(i) Lack of information about the prospective Chinese partner. A foreign company that locates a likely-looking company in China may have little knowledge of the company’s background. In the past it has been hard to gain data about the commercial situation of Chinese companies or to substantiate their descriptions of themselves and their business relationships. This difficulty in carrying out checks to a rigour that would be usual in the West has sometimes meant foreign investors enter into JVs reluctantly, accepting the attendant risks.

However an increasing amount of advice is available nowadays, with Path To China able to make checks on prospective partners and some consultancies that specialize in this area offer comprehensive investigative services, such investigations can provide sufficient information to warn.

(ii) The need to retain comprehensive control. A frequently-cited reason why foreign investors are not attracted to the JV option is a wish to retain comprehensive control over their China production - something a WFOE can offer but not a JV. ]

6. Hong Kong company formation:

Hong Kong, officially the Hong Kong Special Administrative Region is one special administrative regions of China. The territory lies on the eastern side of the Pearl River Delta.

Hong Kong was a dependent territory of the United Kingdom from 1842 until July 1, 1997. Under the policy of “one country, two systems”, the Central Government is responsible for the territory’s defence and foreign affairs, while the Government of Hong Kong is responsible for its own legal system, police force, monetary system, customs policy, immigration policy etc.

Hong Kong remains one of the top twenty trading economies, the world’s third largest financial center.

Hong Kong’s corporate law is strongly based on the British Legal System, the setting up of a Hong Kong is a str. Local businesses are regulated and Hong Kong regards itself as a low tax centre rather than a tax haven. Taxes are levied on proits which is 16.5% since Financial Year 2008/2009. Under special circumstances, a Hong Kong company may even declare business transactions as offshore which are subject o 0% tax in Hong Kong.

As Hong Kong’s role as a major trading and gateway to China mainland and Asia, some companies formed in Hong Kong are for trading purposes generally, while some use it as HQ of it’s operations in China mainland.

Doesn’t like other China cities, Hong Kong has no restrictions on capital transfer in/out of Hong Kong (No Currency Control)

Register a Hong Kong company within 3 weeks and operate it offshore.

http://www.pathtochina.com/hong_kong_company_formation_introduction.htm

Since Beijing hosts 2008 Olympic games, Chinese Government tightened the visa policy. A foreign citizen continue staying and working in China legally means you will need apply for a proper visa while working and invest here.

First, you should know how you apply for a proper visa, you could check www.visainchina.com for more information about types of visa to China.
Currently, F visa is not a good option anymore since government has already make it very difficult to be approved. L visa and Z visa will be the only option, Here is suggestion:

For people who are going to working in Shanghai, Beijing: Apply the 1 year working permit and 1 year residence permit.

You are allowed to apply for work permit and residence as a Legal Representative of a Company or Chief Representative of a Foreign Representative office.

For service in Beijing, Shanghai ：WFOE registration, Representative Office setting up, Joint Venture formation could apply work permit and residence as a Legal Representative of a Company or Chief Representative of a Foreign Representative office.

Note:
Even where all work permit and residence permit requirements are met, clients should not assume that they can gain it automatic. The Chinese immigration authorities, local Labour Bureau of foreign affairs have the right to refuse any person permission to work and residence in China.

This entry was posted on Thursday, April 24th, 2008 at 2:09 pm and is filed under Establishing Business. 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.