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People's Republic of China

People's Republic of China (PRC) is the most rapid growing economy in the world. Since 2001 PRC joined the World Trade Organization (WTO) the economy was boosted up and foreign investors or entrepreneurs are rushing to do businesses in PRC. PRC has a population close to 1.4 billion. Its GDP is over USD$5 trillion. The most popular business entity for foreigners is Wholly Foreign-Owned Enterprise (WOFE).

The official currency is yuan (RMB).

Since 1978, when the reform and market opening-up policy was adopted by the PRC government, the economy of PRC has undergone a significant change. In 2001, PRC joined the World Trade Organization (WTO), and the economy was further boosted up and to attract more foreign investors or entrepreneurs to carry businesses in PRC. Today, PRC is a worldwide economy growth stimulator. It enhances global expansion by increasing output and trading relationships with other countries, and greatly contributing domestic consumption. Nevertheless, doing business in PRC is the new worldwide economic trend, although the complicated procedures and harsh government policies may bar many businesses to enter into PRC market.

Generally there are 5 main types of foreign investment vehicles in PRC: the Representative Office (RO), the Wholly Foreign-Owned Enterprise (WOFE), the Equity Joint Venture (EJV), the Contractual Joint Venture (CJV), and the Foreign Invested Partnership Enterprise (FIPE). However, regarding to setting up a company in PRC as a foreign national, RO and WOFE are recommended to be used.

The Representative Office (RO) - RO is often the gateway for foreign companies to be presence in PRC. Setting up a RO is relatively cheaper, faster, and simpler. However, RO is not permitted to engage in any business activity including signing contract, issuing invoice, or making any profit. It can only undertake market investigation, display, or liaison activities. Further, RO is not considered as a separate legal entity, but merely an extension of foreign company.

The Wholly Foreign-Owned Enterprise (WOFE) - WOFE is now the most popular business structure for a foreigner. It is a separate legal entity with limited liability which can be 100% owned by a foreign national. Setting up a WOFE is more complicated and it takes much more time. The average incorporation time may take up to 3 months to 1 year. Except for some restricted business sectors, which prohibited to be operated by a WOFE, most industries in trading, manufacturing, retails, and services providers are permitted.

Setting up aOFE may require a large amount of different documents, and the documents may vary depending on the business nature of the company. Generally, the documents required are:

  • Feasibility report (describing the feasibility and prospect of business operation)
  • Legal proof of identification of the shareholders, directors, legal representative, or supervisor
  • Certificate of registration issued by the authority of the foreign country
  • Company name’s pre-approval certificate
  • Tenancy agreement and registry office location certificate
  • Shareholders’ credit letter from a bank
  • Import and export details (if applicable)
  • Audit report of the foreign company
  • Capital examination report
  • Foreign company’s shareholders meeting minutes and directors’ resolutions
In addition, doing business in PRC may require different types of license, including:

  • General Business License
  • Organization IC code
  • Carving corporate, customs & financial chops security registration
  • State & local tax registration
  • Foreign exchange registration
  • Import/export license
  • Custom registration
  • Financial registration

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