Investment Options

Source: Investment Yunfu Published: 11/25/2015 14:49 PM Views: 3845

Representative Office


A Representative Office (RO) is the most basic form of foreign investment in China. Representative Offices are intended to be exclusively a liaison with the Chinese market. Therefore, Representative Offices cannot engage in direct business activities. They are generally established to conduct preliminary market research, carry out quality control over Chinese suppliers and activities of the kind.

 

key regulations

Regulation on the Administration of Registration of Resident Representative Offices of Foreign Enterprises

 



Wholly Foreign Owned Enterprise (WFOE)


A Wholly Foreign Owned Enterprise (WFOE) is a limited liability company established in Chinese territory that is wholly owned and controlled by one or more foreign investors. They have the same status than other Chinese legal persons. WFOEs are the most popular option among foreign investors. They can be utilized as vehicles to carry out a wide number of business activities, including manufacturing, trading and services.They are authorized to engage both in domestic and international trade. Lawful profits obtained by WFOEs may be remitted abroad.

 

key regulations

Law of the People’s Republic of China on Wholly Foreign-owned Enterprises

Detailed Implementing Rules for the Law ofthe People’s Republic of China on Wholly Foreign-owned Enterprises

 



Joint Ventures

Joint ventures are an extremely useful tool to complement capabilities of Chinese and foreign enterprises. After registration, Joint Ventures are considered Chinese legal entities. Previous experience indicates that the Chinese side generally contributes with its market knowledge, existing distribution networks and / or manufacturing capabilities. Meanwhile, the foreign partner frequently contributes with technology, know-how and experience. There are two types of Joint Ventures in China: a) Equity Joint Ventures (EJV) and b) Cooperative Joint Ventures (CJV).

 

Equity Joint Ventures

An Equity Joint Venture (EJV) is an independent Chinese legal person with limited liability. The parties hold equity interests and their losses and gains are proportional to the values of their contribution. Joint Ventures’ operation is usually limited to a fixed period. However unlimited period of operations could be authorized based on special circumstances.

 

key regulations

Law of the People’s Republic of China on Chinese-Foreign Equity Joint Ventures

Implementing Regulations for the Joint Venture Law

Company Law of the People’s Republic of China

 



Cooperative Joint Ventures

Cooperative Joint Ventures (CJV) can adopt the form of an independent legal person with limited liability or a merely contractual joint venture (non-incorporated entity). In case of choosing the second option, partners will personally bear liabilities, as no separate legalentity is created. CJV allow the parties to contribute with a broader spectrum of assets. Profits could be distributed according to what the parties agree and do not necessarily need to correlate with their respective investment.

 

key regulations

Law of the People’s Republic of China on Chinese-Foreign Cooperative Joint Ventures

Detailed Implementing Rules for the Law ofthe People’s Republic of China on Chinese Foreign Cooperative Joint Ventures

 



Foreign Invested Companies Limited by Shares (FICLS)

Foreign Invested Companies Limited by Shares (FICLS) allow foreign investors to divide the capital into shares. This corporate structure is useful to those foreign investor that are seeking to list shares on China’s Stock Exchanges (Shanghai Stock Exchange and Shenzhen Stock Exchange).

 

key regulations

Chapter V of the Company Law

Provisional Rules on Several Issues Concerning the Establishment of Foreign Companies Limited by Shares

 



Foreign Invested Partnership Enterprise(FIPE)

Two or more foreign enterprises or individuals, and foreign enterprises or individuals and Chinese natural person,legal person or other organizations in China are allowed to establish partnerships.China is set to encourage foreign enterprises or individuals with advanced technologies and management experience to establish partnerships in the countryto boost the development of the modern service industry as well as other industries.

 

key regulations

Law of the People’s Republic of China on Partnership Enterprises

http://www.china.org.cn/china/LegislationsForm2001-2010/2011-02/12/content_21908143.htm

Measures for the Administration on the Establishment of Partnership Business by Foreign Enterprises or Individuals in China

http://english.mofcom.gov.cn/article/policyrelease/announcement/200912/20091206704070.shtml

 



Branches of Foreign Enterprises

Foreign companies belonging to certain industries (e.g. commercial banking, oil) may establish branches in China.

 

key regulations

Chapter 9 Company Law of the People’s Republic of China