The Chinese consumer market is one of the fastest-growing in the world. One of the reasons for this is the wide-scale availability of venture capital and other financing options for investors in the country.
Currently, China is the second-largest consumer market in the world
. Moreover, the general population doesn’t carry a lot of debt and has significant purchasing power. This is why Western brands are looking to cement their popularity among the people of China.
But for a foreign business to be successful in China, it’s crucial to be prepared to overcome cultural and logistical differences, and choose the right type of company. Here’s how you can device on one:
A limited liability company owned by a foreigner(s) in China is known as a Wholly Foreign-Owned Enterprise (WFOE or WOFE)
. These companies are controlled solely by the foreign owner.
One of the biggest advantages that WFOEs enjoy is the freedom to exercise most of the same international strategies as their parent company, without having to worry about Chinese partners.
For example, if your WFOE is a manufacturing company; there’ll be no need for a special import or export license for your manufactured products. Other than that, the Chinese government allows full-fledged protection of intellectual property to these WFOEs.
Joint Venture (JV)
Unlike a WFOE, a joint venture isn’t wholly owned by foreigners. In fact, it is created as a result of a partnership between both foreign and local Chinese investors. The two parties share both profits and losses as mutually decided.
Before setting up a joint venture business in China, it’s very important to get in touch with business consultants who can guide you about the nature of local business owners in China, their expectations from the partnership and any risk factors.
On the other hand, the benefit of setting up a joint venture is that you benefit from your Chinese partner’s well established relationship with the government, distributors, and knowledge of market dynamics.
This is one of the easiest ways for a foreign entity to establish its business in China. The biggest advantage is that there are no significant capital requirements for setting up a representative office.
In simple words, a representative office allows you to carry out market research for business purposes in China.
This differs from WFOE in a way that it doesn’t allow you to make profits. This is therefore a feasible option for low budget startups and companies who are in the early phase of market exploration.
To learn more about how to set up a company in China, get in touch with Business China
! We will not just help you with the China Business Registration process, but will also provide expert advice where necessary. Call us now at +86-020-2917 9715.