So if you want to come to Shanghai or the YRD, what type of structure should you use? You can choose from Representative Offices (RO), Wholly Foreign Owned Enterprises (WFOE), Joint Ventures (JV), and the new Foreign Invested Commercial Enterprises (FICE). These are explored in more detail in our new book, but we summarise the main characteristics of each here.
When choosing an appropriate investment vehicle, many factors must be considered., as these will lead to different legal and tax considerations. You will need to address questions such as :
- do you require an entity in mainland China or is a Hong Kong incorporation sufficient to reach your aims?
- do you need to invoice locally for services or products?
- are you getting a feel for the market or have you decided to commit on a larger scale operation?
- are you planning to set up a production-oriented entity or do you need only a representation in the country to carry out liaison activities?
- is the sector you are investing in fully opened to foreign participation or do you astill require a local partner?
- would you need to conduct the business alone, or would you require a Chinese company clipping in with assets or distribution networks?
- could the foreign enterprise itself carry out the business directly or through the medium of a separate, sometimes unrelated, entity in China?
The answers to these questions, and good professional advice, will inform your decision on the right structure.