Starting business in China

The Chinese economy is considered by many to be the ultimate investment opportunity. Not only does it offer a market of up to 1300 million possible consumers, it also brings about massive annual growth rates. This is further strengthened by the fact that the Chinese government is doing everything in its power to continue to improve the investment climate for foreign companies by, among other things, continually spending large amounts of money on the improvement of the infrastructure. Here is a brief overview of the four main forms that a business establishment in China can take.

Representative Office in China

The first possibility of how a foreign company can establish itself in China is through the establishment of a Representative Office (RO) in China. A Representative Office in China is not a separate legal entity but is considered to be part of its parent company. It is the most basic form of foreign investment and can be very useful, and in some cases even necessary, for most administrative decisions concerning the establishment of a business.

Establishing a Representative Office in China

Before a foreign company is allowed to establish a RO in China the relevant authorities will have to approve the request and the registration of the office has to be completed.

Registration of a Representative Office in China

Once the documents have been submitted to the relevant approval authority, the approval authority will review the documents and decide whether it will approve the registration and establishment of a RO in China.

Sino-Foreign Cooperative Joint Venture in China

A Sino-Foreign Cooperative Joint Venture (CJV) is a joint venture between a Chinese and a foreign company within the territory of China. This joint venture in China is based on a cooperative joint venture contract in which matters like the terms of cooperation, the division of earnings, the ownership of property upon the termination of the contract term of the CJV, the sharing of risks and losses, etc are laid down.

Sino-Foreign Equity Joint Venture in China

In China a Sino-Foreign Equity Joint Venture is still the most widely used type of foreign investment, even though Wholly-Foreign Owned Enterprises are developing strongly. It is a limited liability company and it has the status of Chinese legal person. In China this is a crucial difference to the RO, because unlike the latter, a Sino-Foreign Equity Joint Venture (EJV) is capable of buying land, hiring Chinese employees independently, constructing buildings, etc.

Wholly Foreign-Owned Enterprise in China

A Wholly Foreign-Owned Enterprise (WFOE), also known as Wholly Owned Foreign Enterprise, is a limited liability company established within the territory of China through foreign investment only. WFOEs are becoming increasingly more popular, mainly because of the fact that there is no involvement of any Chinese investor thus giving the foreign company complete control over the newly established business.

Do's and Don'ts of Business in China

Do's

In China, business relationships are personal relationships; establish a trusting relationship that demonstrates your respect.

Business cards are important. When exchanging business cards, it is polite to present your card with the thumb and forefinger of both hands.

Become friends with local influential officials.

Take time to discuss issues, ask for feedback and explain your decision. The Chinese respect this approach over the preferred fast meetings in the United States.

Handshaking is the accepted greeting, with a light handshake encouraged, lasting as long as 10 seconds.

Don'ts

Avoid unintentional criticism of others.

Don't poke fun at someone, even for laughs.

Don't be the first to reach for a restaurant bill.

Don't be late for an appointment. It is considered a serious insult.

Don't make snap decisions; the Chinese like to be included in the decision-making process.

GOWEALTHY.COM © 2010
For further information, write to enquiry@gowealthy.com
For comments: editor@gowealthy.com