Wholly Foreign-Owned Enterprise
Doing business in/with China after 2020
China's GDP has experienced unrivalled development for the past four decades. As the world's second-largest economy with great potential in consuming power, China is shifting away from a pure manufacturing and export-driven country towards being a service- and consumption-focused economy. China now has both domestic and international two grand economy cycles to go in the past decade gradually.
Entrepreneurs and foreign businesses that wish to expand into the China market need to fully understand the local culture, business landscape, and the overall framework of regulations and policies.
Why Do Business in China
The scale of the Chinese middle class (300 million people) is far beyond that of any other Asian jurisdiction: a projected 70% of the China population are expect to become middle class by 2030. China is entering a new chapter of retail, becoming more digitized and consumer-driven, with a greater focus than ever on improving the shopping experience.
Over the past 10 years, China has become the largest e-commerce market in the world. Online retail and the ubiquitous e-com businesses covering both products and life services are entrenched in daily lives due to always-on smartphone usage, and includes everything from high fashion to automobiles.
What You Need to Know Before Entering the China Market
Like anywhere in the world, B2B partnerships always require a clear strategy, ongoing continuous two-way communications (with the B2B partnership prospects platforms
as well as with our clients in the daily business operations), engaged connection, commercial and partnership development activities, commercial strategy and contract negotiations, and of course, patience and a little bit of luck.
Be culturally sensitive and treat each city like a new jurisdiction
Doing business in different regions of China is like doing business in different jurisdictions. The same national tax regulations may be interpreted and applied in radically different ways by the respective local authorities. For instance, certain business regulations can be very different in Beijing as compared to Shanghai to Shenzhen or Hong Kong. Entrepreneurs have to become familiar with the unique characteristics of each region and plan specific strategies according to practical implementation of national corporate, labor, and fiscal policies.
Entrepreneurs have to become familiar with the unique characteristics of each region and plan specific strategies according to practical implementation of national corporate, labor, and fiscal policies.
Common Types in China & Why WFOE
Common Types of Foreign Investment in China
Corporate establishment / registration / incorporation in China for foreign enterprises is usually possible via three main company types. These are Wholly Foreign-Owned Enterprises (WFOEs), Joint Ventures (JVs), and Representative Offices (ROs). Each investment form has its own merits and drawbacks and the right choice for you will depend on your business organization's goals and strategy for China market access.
The need for a local presence and WFOE
In light of the most recent regulatory developments, a trusted local presence has become crucial for coping with local requirements. From initial tax filing to ad hoc applications with local customs officers or overseas bank transfers, it is becoming increasingly necessary for WFOEs to identify a trusted professional agent that will act in good faith as their chosen local representative.
Wholly Foreign-Owned Enterprises
Widely accepted as the most popular entity for doing business in China, WFOEs are investment vehicles entirely owned by foreign (ie, not Chinese) natural and legal persons. WFOEs are limited liability companies (LLCs) with shareholders held liable for the company's debts or liabilities only up to the registered capital under the new Foreign Investment Law of China since the beginning of 2020. They are the most viable option for foreign investors whenever revenues and profit-making activities have to be undertaken directly and without local partners involved at a shareholder level.
What is the minimum investment required to set up a WFOE?
Different industries have different registered capital requirements (equity and investment) for WFOEs but since the Company Law update in 2014 in China, minimum registered capital indications have been abolished, with there being no minimum investment to set up a WFOE provided that activities do not involve a regulated industry (ie, securities, insurance, or banking). Even with the recent liberalization, it is highly suggested you evaluate the blueprint of similar investments in the same industry and consider the registered capital as the main financing wallet of the China venture, being the total amount dedicated to actual working capital.
For more details about doing business with / in China, find out more in TRL Insights here.
China WFOE Setup
Wholly Foreign-Owned Enterprise (WFOE) Setup in China includes WeChat Business Account Setup Process (A typical WFOE pre-registration and post-registration process in Shenzhen in 2020H1, please note it is subject to change following the latest central and local municipal regulations.)
China Business Entity Registration with Certificate
China Business Bank Account Setup & Verification
Company Physical & Electronic Stamps
Business Tax Account Setup
Business Registration & Address Service
Social Insurance & Local Enterprise Employment Account Setup