China Wholly Foreign Owned Enterprise (WFOE)

China Wholly Foreign Owned Enterprise (WFOE)

China Wholly Foreign Owned Enterprise (WFOE) is a common investment vehicle for mainland China-based business. The unique feature of a WFOE is that involvement of a mainland Chinese investor is not required, unlike most other investment vehicles. WFOEs are limited-liability corporations organized by foreign nationals and capitalized with foreign funds. This can give greater control over the business venture in mainland China and avoid a multitude of problematic issues which can potentially result from dealing with a domestic joint venture partner.

The capital to be subscribed in lump sum as contemplated in the Articles of Association could be paid up within 10 years from the date of issue of Business License. But if you need to apply for the visa, the capital shall be paid up at least 50% firstly while the following could be paid up in the following within 10 years.

Advantages of China WFOE

The advantages of establishing a WFOE include, but are not limited to:

1. Independence and freedom to implement the worldwide strategies of its parent company without having to consider the involvement of the Chinese partner;

2. Ability to formally carry out business rather than just function as a representative office and being able to issue invoices to customers in RMB and receive revenues in RMB;

3. Capability of converting RMB profits to US dollars for remittance to its parent company outside of China;

4. Protection of intellectual know-how and technology;

5. No requirement for Import / Export license for its own products;

6. Full control of human resources

7. Greater efficiency in operations, management and future development.

Business scope of China WFOE

One of the most important issues in WFOE application is business scope. Business scope needs to be defined and the WFOE can only conduct business within its approved business scope, which ultimately appears on the business license. Any amendments to the business scope require further application and approval. Inevitably, there is a negotiation with the approval authorities to approve as broad a business scope as is permitted. Generally business scope includes investment consulting, international economic consulting, trade information consulting, marketing and promotion consulting, corporate management consulting, technology consulting, manufacturing, etc. With China's entry into WTO, more and more business is open to WFOE especially in Trading, Wholesale and Retail business.

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