Using China WFOEs in the Service and Manufacturing Industries

Published: September 2013

The wholly foreign-owned enterprise (WFOE) is one of the most common investment vehicles for foreign investors entering into the Chinese market, and can be used to engage in the service or manufacturing sectors. In this issue of China Briefing Magazine, we provide a detailed overview of the WFOE establishment procedures as well as outline the typical costs associated with running these entities in China. We hope that this information will give foreign investors contemplating entry into the Chinese market a better understanding of the time and costs involved.

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In this issue:

  • Setting Up a WFOE in China
  • Costs of Running a WFOE in China
     

Since China’s accession into the World Trade Organization (WTO) more than a decade ago, the Chinese government has continued to fulfill its WTO commitments by gradually opening up its various sectors to foreign investment. Along these lines, the 2012 Guidance Catalogue for Foreign Investment aims to further liberalize market entry for foreign investors and improve the foreign investment structure by encouraging foreign investment in the high-end manufacturing industry, as well as the strategic and modern service industries.

In fact, despite the still tumultuous global economic environment, recent data published by the Ministry of Commerce shows that China is continuing to attract large amounts of foreign direct investment. In the first half of 2013, China’s main recipient of inward investment was the services sector, which saw an increase of 12.4 percent year on year. In the realm of global manufacturing, China continues to dominate despite the country’s rising land and labor costs, producing over 90 percent of all computers and 70 percent of all cell phones worldwide. This data also reflects China’s efforts to upgrade its value chain in manufacturing. Compared to cheaper manufacturing destinations, China still offers significant advantages, such as developed infrastructure, skilled workers, and efficient transportation logistics.

The wholly foreign-owned enterprise (“WFOE”) is one of the most common investment vehicles for foreign investors entering into the Chinese market, and can be used to engage in the service or manufacturing sectors. In this issue of China Briefing Magazine, we provide a detailed overview of the WFOE establishment procedures as well as outline the typical costs associated with running these entities in China. We hope that this information will give foreign investors contemplating entry into the Chinese market a better understanding of the time and costs involved.

 


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