China has become one of the world’s largest economies, a merchandise trader, holder of foreign exchange, and manufacturer. The growth is the result of the economic reforms adopted about 40 years ago, but one unique thing about the entire growth is the opening up of its space to foreign investment. For entrepreneurs, China is a ready ship that they can sail in to become the multinationals of their dreams. So, if you want to catapult your enterprise to the next level, this is the best opportunity and the first step is company incorporation in China.
To register a company in China, there are several business formations that you can select, from joint ventures to wholly foreign-owned enterprises (WFOE). However, WFOEs are the most preferred formation in comparison to joint ventures and branch offices. In this post, we take a closer look at the common type of WFOEs in China. We will also tell you how to register a WFOE in China.
What is a WFOE?
A wholly foreign-owned enterprise (WFOE) is an investment tool or business formation opened by foreigners targeting doing business in China. As the name suggests, you get to own 100% of the company’s shareholding. This differs from joint ventures that require you to enter into a partnership with local Chinese.
With a WFOE, you have absolute control over the decisions of the company, including product development, hiring, and sharing of profits. Making decisions about the business is also easy and fast. Most of the large companies that you hear of in China, especially in the manufacturing sector, are WFOEs.
The Main Types of WFOEs in China
WFOEs in China mainly take the form of limited liability companies and spread across different niches. Here are the main ones:
Consulting WFOEs in China
If you are an expert in a specific area and want to offer your services to other businesses, people, or even government agencies, you can open a consulting WFOE. Because you are selling services, little is required to set up this type of WFOE. Most consulting services in China are in the tech sector, where they help other companies in product development, advisory, and project development. You need to be very good in your area of practice to offer consulting services. Other areas where consulting works well in China include:
- Medicine and medical services.
- Health and fitness.
- Software development.
As we have mentioned earlier, manufacturing WFOEs are the most common, and it is easy to see why – support from the Chinese administration. The country has been encouraging foreigners with lower taxes and free trade areas to come and set up shop in different areas. Most WFOEs in manufacturing focus on electronics, vehicle production, auto parts, and pharmaceuticals. Agri-processing is also coming up very well.
Unlike manufacturing or consulting businesses, trading WFOEs focus on consumer products, such as buying products and selling to the targeted clients. Because of low production costs, products produced in China come at a lower price, allowing traders to acquire them and sell them at a profit. Your trading WFOE might also focus on buying products in China and selling abroad.
Now that you have seen there are so many areas that WFOEs can focus on, it is time to register one. One thing you need to appreciate is that the process of registering a WFOE can be pretty complex because it involves dealing with different offices and preparing a long list of documents. This is why you should consider working with an agency of experts. With an experienced professional holding your hand, the process of company formation in China will be easier, faster, and convenient.
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