Friday, 16 March 2018

Starting a Business in China: Part 1

Starting a Business in China: Part 1

The business landscape is very different in China than western-based companies are accustomed to.  Primasia is here to help you navigate the business landscape in China and Hong Kong.

China presents western-based businesses with an incredible potential for growth and profit, as well as a host of complex issues.  It is advised to seek the assistance and advice of a China-based consulting firm to navigate these complex issues.  We will be able to help you understand and navigate these complexities, that range from legal issues to business operations and beyond.

There are two distinct business models used in China: Sales Office via Labor Dispatch and the Wholly Foreign Owned Enterprise (WFOE).  There are unique advantages and disadvantages to each business model, and your company will need to evaluate each one thoroughly to gauge which will best meet your financial and corporate objectives, as well as which one provides the least amount of risk.

Below you’ll find a basic description of the two business models to give you a better understanding of doing business in China:

Sales Office via Labor Dispatch
This business model involves using the services of a Professional Employment Organization (PEO).  The PEO will provide the business structure in China should your company not have a physical presence in the country-- ie. they’ll act as your subsidiary.  A PEO will provide services such as administration, fiscal and legal.  Western-based companies will benefit from this business model as it saves them from having to navigate all the legal complexities as well as the complex logistics of needing to set up a company in a foreign country.

A PEO will provide all the necessary human resources aspects needed to operate in China.  Employees will work under contract with the PEO and not directly under the foreign company. This way a foreign company will not have to deal directly with employment issues, as the PEO will handle payroll, tax compliance, visas, labor laws, expenses management, health insurance and office rental. 

Wholly Foreign Owned Enterprise (WFOE)
According to Chinese legislation, a company owned by 25% or more by foreign investment is categorized as a Foreign Invested Enterprise (FIE).  Most of the FIE entities operating in China are a WFOE.  A WFOE operates as a limited liability company in China.

The Chinese government introduced the WFOE business model as a way of exporting technology development and manufacturing.  However, foreign companies used this model as a way of setting up consulting and management services in China.  It is vital to understand that any capital or investments used by a WFOE should be from an individual, stand-alone entity and not from a WFOE that already has registered operations or branches in China.

Primasia provides different market entry solutions to assist you in expanding your business into China. Our team of experts can advise on all the legal, administrative and tax implications for your company, as you explore expanding your business to Hong Kong and/or China.  China presents companies with huge potential for growth in the market, but business setup does take time, investment and patience as you are being guided through the complexities.  Primasia is the perfect partner to help you access a tremendous market share opportunity, check out our website to learn more or give us a call.


Need more information?
Please contact:
John Barclay -Email
Teresa Tam - Email 
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Primasia Corporate Services Limited

Tel: +852 2882 2088
Suite 1106-08, 11/F., Tai Yau Building, No. 181 Johnston Road, Wanchai, Hong Kong

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