Also in the news...
PM secures new agreement with EU to benefit British people
UK secures new agreement with the European Union to support British businesses, back British jobs, and put more money in people’s pockets.
Get your overseas professional qualifications recognised as a refugee in the UK
Guidance on how to get your professional qualifications from overseas recognised by a UK regulatory body.
IP in China
Information to help you protect, manage and enforce your intellectual property (IP) rights in China.
IP in Indonesia
Information to help you protect, manage and enforce your intellectual property (IP) rights in Indonesia.
What is a barrier to goods
If you’re exporting goods, trade barriers can include:
Business In China Explained: Wholly Foreign Owned Enterprises
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.