NewsCase StudiesEvents

Business In China Explained: Wholly Foreign Owned Enterprises

Also in the news...

An Appraisal of Business Potentials and Legal Framework in Nigeria’s Solid minerals Sector

Nigeria is richly endowed with a variety of solid minerals of various categories varying from precious metals to stones and also industrial minerals. Much of these minerals are yet to be exploited. Statistically, the level of exploitation of these minerals is very low in relation to the extent of deposits found in the country. Recent policy reforms have brought the solid minerals sector to the fore. The emphasis is on encouraging massive foreign investor’s participation in the sector.

Holiday Hack: More Than Double Your Holiday Leave in 2018

Most employees in the UK are entitled to around 28 days of paid leave annually, but with some strategic planning you can more than double your leave in 2018!

2017 Saudi Update

AEI Saudi is a market entry consultancy that helps foreign businesses to succeed in the Kingdom of Saudi Arabia. The below is a quick update on what has been going on and why now is the perfect time for your business to consider exporting to Saudi:

How can Paul Beare Ltd help their clients when setting up in the UK?

Key points for setting up in the UK beginning with the client's objectives through to pension obligations, human resources, employment contracts and VAT.

UK Company Structures available for entities expanding into the UK

A high-level overview of the different types of UK legal structures available for overseas companies setting up in the UK including: branch, Ltd Company, Subsidiary Company, Partnership and Joint Venture.

Business In China Explained: Wholly Foreign Owned Enterprises

Back to News

This form of set-up is becoming increasingly more popular with investors, due its nature of maximum control: there is no prerequisite involvement from Chinese investors.

Wholly Foreign Owned Enterprises (WFOE) are, in essence, limited liability companies set-up in China through foreign investment exclusively. This form of set-up is becoming increasingly more popular with investors, due its nature of maximum control: there is no prerequisite involvement from Chinese investors.

However, the permission to establish a WFOE is seldom granted in comparison to Joint Ventures.

They are generally only allowed if the nature of business mean either half the yearly output is exported, or if operations depend heavily on contemporary technology that is beneficial to China.

As with Joint Ventures, WFOEs generally need to balance their foreign exchange and are permitted to operate in facilities aside from those regulated by the Foreign Management Bureau. As a licit entity in China, a WFOE is allowed to sign separate contracts with the Chinese government, which enables the right to rent buildings, use land and benefit from utility services.

The independence from external Chinese control may seem good, but is also perhaps why so many fail: there is no Chinese partner to help you through the process, such as government approval, regulatory issues, logistics, etc. Likewise, when it comes to forging the necessary relationships which help accelerate profits, you'll be out there on your own, starting from scratch.

Other factors that must be weighed against your company's sovereignty include Chinese labour. Different locations will have different rulings, but all are similar in intention: your company may be required to employ nationals.

The registration capital required also varies for a WFOE. It depends on the type of venture you intend to set up and the location you choose to do so. The minimum amount, however, is RMB 1,000,000 (approx 」85,000).

Another facet to consider is your business scope: if you deicide to follow other pursuits, contrary to those outlined when applying for your business license, you first have to obtain permission from the Chinese authorities.

It's a paradox: being constrained by freedom. And it's a hefty choice to make. Will you relinquish some control for the benefits of a local partner, or retain complete control with a WFOE and run the risk falling at the first hurdles?

Investigate Joint Ventures and Representative Offices before making any rash decision.

You are not logged in!

Please login or register to ask our experts a question.

Login now or register.