Home / China Lawyer / The Growing Importance of WFOE Amidst US-China Trade War

The Growing Importance of WFOE Amidst US-China Trade War

With the growing US-China trade war and continuous slowdown in Chinese economy, US companies having business interest in China cannot afford to maintain a quasi-legal status in China. The value of forming a China specific WFOE has been stressed by the China lawyers time and again. And with the growing tension between the two countries, forming WFOE will take a greater significance.

The US has imposed three rounds of tariffs on Chinese products this year, totaling $250bn worth of goods. President Trump has warned even more could be on the way. Beijing announced it would retaliate against new US tariffs, with the commerce ministry saying that it would “immediately introduce countermeasures of the same scale and strength”.

China purchased roughly $130 billion in American goods last year — less than a third of what the United States ordered from Chinese enterprises. Now Beijing is poised to impose higher border taxes on a total of $110 billion in U.S. products. China’s $3 billion dollar counter punch to the US tariffs is just the first move from the world’s second largest economy, according to a Bloomberg report. One of the major retaliatory actions might be the cancellation of a $38 billion order to American aircraft maker Boeing, which China placed back in the year 2015. Agriculture and technology are other major sectors where the Asian superpower may plan to hit back US trade imposition.

China’s Foreign Ministry said it will respond to Trump’s latest round of tariffs with duties on more than 5,200 types of American imports and unleash a crackdown on the US companies operating in China without proper legal documents.

Beijing imposed a 25 percent additional tariff on imported American cars in response to U.S. tariffs on $34 billion in Chinese goods, including the automotive, solar panel. Electronics goods, furniture sector. US companies need to understand that the independent contractors are almost never legal in China and if US firm has Chinese employees, it must have a WFOE as a possible weapon for defending themselves from the wrath of the Chinese government.

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