E-commerce, cross border trade, exporting, licensing, commercial agents, distributors, strategic alliances, joint ventures, overseas manufacturing, or sales subsidiaries are just a few possible entry methods; however, entering China will inevitably involve learning new laws, regulations, and procedures as well as taking into account global legal and tax issues.

A foreign company’s registration in China might be difficult because it requires consent from numerous regional offices and authorities. 

Business entities in China:

  • Representative Offices (ROs)
  • Wholly Foreign-Owned Enterprises (WFOEs)
  • Joint Ventures (JVs).


Representative Office (RO) serves as a liaison office for the parent company and can represent the interests of a foreign investor, its popularity has decreased due to its numerous restrictions. ROs are permitted to conduct market research and establish partnerships and business channels; however, the parent company must manage all business transactions, including the issuance of invoices. An RO cannot generate revenue because it is taxed on its expenses.

  • To be eligible to establish an RO in China, the parent company must have existed for at least two years;
  • ROs must use an employment agency authorized by the government instead of directly hiring local employees;
  • There can only be four foreign employees in an RO;
  • Because ROs are not considered legal entities in China, there is no requirement for investments;
  • Depending on where you are, the registration process can take up to four months to complete.

Businesses looking to establish a brief presence in China without the need to generate revenue or very limited sourcing ventures may benefit from an RO. 


The Wholly Foreign Owned Enterprise (WFOE), a company that was established in China in accordance with Chinese laws and is wholly owned by one or more foreign investors, is the most popular business entity in China. A WFOE is a type of Limited LIability Compan9 (LLC) that has the ability to:

  • Employ local employees directly and, frequently, has no limit on the number of foreign employees.
  • Conduct business activities and generate revenue based on a limited business scope.
  • During the licensing phase of the company formation process, a WFOE’s registered capital must be disclosed. This can be used immediately for the company’s operations and should cover the costs of the initial investment.
  • Depending on where you are located, a company may take anywhere from four to six months to become fully operational from the time the registration process begins.


Joint venture companies structure in China.

Equity Joint Venture (EJV): In EJVs, both domestic and foreign businesses contribute capital. The amount of profit and risk that both the foreign and local business take on is determined by the proportion of the capital investment. EJVs are often used by foreign businesses entering business sectors where WFOEs are prohibited, but this is becoming less common as more business sectors are opened to WFOEs.


Cooperative Joint Venture (CJV): CJVs are partnerships with a local business as well. However, at the beginning of the partnership, each party agrees on a proportion of risk and profit that is independent of capital investment. During the 1990s, when the Chinese economy was not as developed, CJVs were used more frequently. Local Chinese businesses provided equipment and other necessities, while international corporations frequently contributed funds. Establishment procedures, laws, and regulations can be very different from one industry to the next. The usual risks of forming partnerships exist in China as well, which is often made worse by differences in business practices and culture between foreign and domestic partners.