Among foreign investors, the most popular form of business establishment in China is the Representative Office. Its main attraction is that it is simpler and cheaper to establish than either a Joint Venture of a Wholly Foreign Owned Enterprise since no Registered Capital is required, startup costs are roughly 10% of the cost of establishing either of these. Representative Offices are also open to almost all industry sectors, including some sectors that are off-limits to Joint Ventures and Wholly Foreign Owned Enterprises. Furthermore, the Chief Representative need not reside in China. However, Representative Offices are very limited in the activities that they may carry out.
Why do foreign companies establish Representative Offices in China?
1. To conduct preliminary research before deciding whether or not to make a direct investment in China.
2. To provide data and promotional materials to potential partners and/or clients.
3. To coordinate the activities of its parent company in China.
4. To make travel arrangements for representatives of its parent company or Chinese clients or potential clients.
5. A foreign company might already...
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