Doing Business In China: An Overview

Doing Business In China: A Report From The China Alliance Regarding Strategy And Investment In China

The following is an excerpt from The China Alliance report on Doing Business In China, which is intended as a Summary of the key issues relating to business strategy and investment in China.  The Alliance is comprised of four legal firms: Michael Best & Friedrich, LLP, Armstrong Teasdale, LLP, Blake, Cassels & Graydon, LLP, and Butzel Long.

To hear a brief summary of the article, from the editor of Doing Business In..., The Global Business Professor, please click on the image below.

Foreign Direct Investment and Business Vehicles

In practice, representative offices are the cheapest and easiest way for a foreign business to enter the Chinese market. Generally speaking, approvals are granted relatively quickly and as a matter of routine. Most foreign businesses choose to open a representative office in China as a preliminary investment. 

Representative offices provide foreign companies with the opportunity to explore the Chinese market without making the more sizeable investment and commitments that are required when establishing Chinese business entities. Under Chinese law, a representative office may be established to act as a liaison between the Chinese market and the foreign company.

A representative office's liaison activities are restricted to research, marketing and other activities that facilitate business between the Chinese market and the foreign company. Representative offices are not permitted to engage in any direct business activities. In other words, the representative office is not permitted to accept payment for goods, issue invoices or contract for sales on behalf of the head office. All sales contracts must be signed by the foreign company and payment must be remitted directly to the foreign company overseas.

Generally, once the application is submitted, a local branch of the Ministry of Foreign Trade and Economic Co-operation (MOFTEC) will review the documents and examine the credibility of the applicant, and an approval will normally be granted within approximately one month.

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