Setting Up WFOE in China: Your 2022 Guide

China is the ultimate investment destination offering entrepreneurs a large market for their companies. After setting up a WFOE in China, the large market of more than 1.4 billion people and the larger Asia-Pacific will be there for you to exploit. The Chinese administration has also adopted reforms that have propelled the country into a global economic behemoth which the World Bank predicts will topple that of the US by 2030. 

A wholly foreign-owned enterprise (WFOE) is the most preferred business vehicle to help you take advantage of this huge market. Keep reading as we dig deeper to demonstrate how to start a WFOE in China. 

Why a WFOE in China?

Before looking at the main steps involved in company setup in China, let’s start by looking at the associated benefits. 

• As the name suggests, a WFOE is a business vehicle that allows 100% foreign shareholding. So, you will be fully in charge of decisions about the company operations, from who to hire to product development.
• Unlike other company structures, such as representative offices (ROs) that come with so many limitations, a WFOE is different. You are allowed to carry out direct activities, such as manufacturing, servicing and trading in line with respective business license.
• Your WFO is allowed to directly employ locals and foreigners without limitations.
• A registered WFOE in China can issue official invoices in RMB and collect revenues in RMB.

Steps Involved in Setting Up WFOE in China

Here are the main steps required for company incorporation in China: 

1. Select a Name for Your WFOE

Before you can get started, it is prudent to select a business name to avoid conflict of interest. The name should not have a resemblance to other registered enterprises in China. If you have a parent company back home, the name can be similar or completely different. You need to submit eight name suggestions to the State Administration for Industry and Commerce (SAIC) for approval.

1. Prepare the Required Documents

Armed with the approved name of the business, the next step is preparing the required documents. So, get the registration form from SAIC and fill them out correctly. Then, you need to get a Feasibility Study Report (FSR), the company’s articles of association, the resume of the selected legal representative in China, and copies of investors’ passports. A recent annual audit will also be required if the company is linked to a parent firm back home. 

In addition to the above documents, you will also need the following: 

• The estimated amount of investment.
• Company’s operating structure.
• Estimated size of production and list of products (for manufacturing firms).
• A comprehensive business plan.
• Estimated requirements for different utilities.

1. Apply for Business License

Upon paying the required fees, all the documents highlighted above, plus a duly filled form for registration, are submitted to the Ministry of Commerce (MOFCOM). You also have to present them to the Local State for Industry and Commerce (SAIC). If additional clarification is needed, make sure to provide them promptly. 

1. Register for Taxes and Chops

Once the license is issued, the next step is registering your company for taxes. Further, register for company chops with the Public Security Bureau (PSB). Other bodies that you might need to register with include:

• Financial bureau.
• Technology Supervision Bureau.
• Statistical Bureau.

1. Open Your Company’s Bank Account

The process of setting up WFOE in China cannot be considered complete until you have opened a bank account. This is very important because it allows your company to get paid and pay its bills too. So, check for a bank that is willing to work with your brand, especially in providing liquidity to seal financial gaps. 

The process we have listed above is never easy for many foreign investors because of the long list of documents involved. They also indicate that it is lengthy, expensive, and involves dealing with multiple parties, but we have a simplified option: using the Hawksford agency for setting up a WFOE in China. The agency works with experts who can help you complete the process of company registration fast and professionally. 

Hawksford can also help you draw a good market entry strategy, manage payroll, file tax returns, and accounting. You can never go wrong with experts!