Today the most common and preferred method of investing in China is to create your company’s wholly owned Chinese subsidiary, referred to as a Wholly Foreign-Owned Enterprise (“WFOE”). WFOE’s are suitable for ventures requiring a foreign company’s large capital investment or application of proprietary technologies or methods. Setting up a WFOE is cumbersome and requires multiple levels of government approval and licensing.
These companies operate much more like true subsidiaries of their foreign parent companies, free of the shared ownership and management which is required with JV’s. They also are allowed to make direct investment in most types of industries and property in accordance with State (Central Government), Provincial and local law. However WFOE’s still are strictly regulated and not allowed to invest in certain sectors reserved for government ownership. In addition, WFOE’s can be somewhat restricted in repatriating profits and prior invested capital from their China operations.
Most often a US company creating a WFOE will seek the assistance of an experienced Chinese law firm or a US law firm with offices in China. AT WTG we’ve worked with those professionals and can point you in the right direction for which ever city you are considering for your China headquarters. And of course we can help in obtaining suitable office and factory space anywhere in China, as well as helping with your due diligence evaluation of property, equipment, business partners and Chinese markets.