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Foreign Investment Enterprises in China
Foreign Investment Enterprises ("FIE") refer to enterprises
established under Chinese law using foreign investment, which
constitutes an important form of utilizing international private
direct investment. Chinese law fails to expressly define the concept
of FIE. The-term "FIE" is loosely referred to in Chinese laws and
regulations. Literally an FIE refers to an enterprise with foreign
investment. However, as a legal concept, the concept of FIE is more
complicated than the above literal understanding.
According to current Chinese laws, FIEs are divided
into four categories:
Sino-foreign equity joint ventures ("EJV"), Sino-foreign
co-operative joint ventures ("CJV"),
Wholly Owned Foreign wned Enterprises ("WOFE"), also known as
Wholly Foreign Owned Enterprises (WFOE) and Foreign Investment
Companies Limited by Shares ("FICLBS").
(1) Equity Joint Venture (EJV)
An EJV is formed jointly by at least one Chinese investor and at
least one foreign investor in accordance with the Sino-foreign
Equity Joint Venture Law and other relevant laws and regulations.
Foreign companies, enterprises, other economic organizations and
individuals may act as foreign investors. Chinese companies,
enterprises and other economic organizations may act as Chinese
investors. The Chinese investors and the foreign investors should
enter into a Joint Venture Contract and contribute capital
subscribed by them as set forth in the Joint Venture Contract. The
investors share profits and losses pursuant to the ratio of capital
subscribed by them. The capital subscribed by the foreign investors
should not be less than 25% of the registered capital.
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(2) Cooperative Joint Venture (CJV)
A CJV is formed jointly by at least one Chinese investor and at
least one foreign investor in accordance with Chinese laws and
regulations. Foreign companies enterprises, other economic
organizations and individuals may act as foreign investors. Chinese
companies, enterprises and other economic organizations may act as
Chinese investors. The investors contribute capital or provide
cooperation conditions to the CJV as set forth in a cooperative
joint venture contract between the Chinese and foreign investors.
Their respective rights and obligations are set forth in the
cooperative joint venture contract.
(3) Wholly Owned Foreign Enterprise
The registered capital of a
Wholly Owned Foreign Enterprises ("WOFE"), also know as Wholly
Foreign Owned Enterprise (WFOE), should be subscribed and
contributed solely by foreign investors. A WOFE does not include
branches established in China by foreign enterprises and other
foreign economic organizations. The Chinese Laws on Wholly Owned
Foreign Enterprises does not have a clear definition of the term
"branches". The term "branches" should include both the branch
companies engaged in operational activities and representative
offices, which are generally not engaged in direct business
activities. Therefore, branches and representative offices set up by
foreign enterprises are not WOFE.
(4) FICLBS
A FICLBS refers to an enterprise legal person established pursuant
to the Tentative Provisions of MOFTEC on Several Issues Regarding
the Establishment of
Foreign Investment Companies Limited by Shares. The total
capital of a FICLBS should be divided into shares of equal amount.
The shareholders of a FICLBS should bear liabilities to the FICLBS
to the extent of the capital they subscribed. A FICLBS shall bear
liability for the debts of the FICLBS within the limit of their
assets. Both Chinese and foreign shareholders jointly hold the
shares of the FICLBS. The shares purchased and held by foreign
shareholders should account for over 25% of the capital of the
FICLBS.
Foreign Invested Enterprise Registration Procedures – Approval
(Phase I )
Foreign Invested Enterprise Registration Procedures – Registration
(Phase II)
Foreign Invested Enterprise Registration Procedures – Post
Establishment Registration (Phase III)
Introduction to Wholly Owned Foreign Enterprises
Maintenance of WOFE
Summary of WOFE Registration Procedures and Estimated Costs
WOFE Registration in Beijing
WOFE Registration in Shanghai
WOFE Registration in Shenzhen
WOFE Registration in Guangzhou
Representative Offices
A China Resident Representative Office (RO) also known as Permanent
Representative Office, is an office of a foreign enterprise set up
in China for liaison with Chinese businesses and customers on behalf
of its parent company. A RO is not considered to be a separate legal
entity. It must be emphasized that a representative office may not
carry out direct revenue earning business activities. For example,
it cannot enter into purchase/sales contracts and cannot receive
payment for services, issue invoices nor repatriate monies overseas.
However, an RO can open bank accounts and employ staff to maintain
liaison with customers and suppliers. Its head office can also enter
into contracts with its supplier/customers in China in its own name,
but not in the name of its RO. Therefore, before a foreign investor
establishes its presence in China using foreign investment
enterprises (FIEs) such as equity joint venture, cooperative joint
venture or a wholly foreign- owned enterprise, it could first set up
a representative office to test the Chinese market.
China Resident Representative Office
Legal Status of Representative Office
Business Scope of Resident Representative
Office
Chief Representative
Resident Representative Office Registration Procedures
Taxation of Representative Offices
Maintenance of Resident Representative Offices
Resident Representative Office Registration in Beijing
Resident Representative Office Registration in Shanghai
Resident Representative Office Registration in Shenzhen
Resident Representative Office Registration in Guangzhou |
