Foreign investment in China started with a trickle in the early 1980s and has increased to the extent that China is now siphoning off a significant percentage of the worlds available foreign investment funding. With Chinas accession to the WTO and the continuing vitality of its economy, this trend seems likely to continue for the foreseeable future. Nevertheless, China remains an unfamiliar and challenging place to do business for many small and medium sized enterprises (SMEs). A popular way for an SME to get its feet wet in the China market without risking a lot of capital is through the establishment of a Representative Office (RO). The author touched on this topic briefly in the article Investing in China: Establishing a Business Presence. This article aims to delve into this topic in more detail.
Before going into the how of establishing an RO in China, perhaps it would be best to ask why?. Most companies that establish ROs in China do so because they are much easier to establish than direct investment vehicles such as joint ventures and wholly foreign owned enterprises, and generally require only about a tenth of the capital outlay. ROs are also permitted to operate...
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