Foreign investors generally establish a business presence in China in one of five ways:
- Wholly Foreign Owned Enterprise (WFOE): a limited liability company 100% owned by the foreign investor. A WFOE requires registered capital and its liability is limited to its equity. It can generate income, pays tax in China and its profits can be repatriate back to the investor’s home country.
- Foreign Invested Partnership Enterprise (FIPE): an unlimited liability business entity with no minimum requirements on registered capital. Same as WFOE, FIPE can generate revenue, hire local and foreign staffs and entering into contracts with local and overseas businesses in China
- Representative Office: a liaison office of its parent company. It requires no registered capital. Its activities are limited to: product or service promotion, market research of parent company’s business, quality control or contact liaison in China. A RO is generally prohibited from generating any revenue and entering into contracts with local businesses in China
- Joint Venture: a limited liability company formed between a Chinese company investor and a Foreign investor. The parties both contribute equity and share the revenues, expenses, and control of the enterprise. A JV has usually been used by foreign investors to enter the restricted industries. Such as Education、 Entertainment、Mining、Hospital etc.
- Hong Kong Company: often used as a Special Purpose vehicle (SPV) to invest in Mainland China. However, it is not a legal entity in mainland China