Earlier, WFOEs in China were mainly conceived for accelerating manufacturing activities, but now WFOE is increasingly being used for service providers such as a variety of consulting and management services, software development and trading as well. WFOE business entities in China are increasingly shifting more to consulting and management services, software development, and trading. With that, any enterprise in China is 100% owned by a foreign company or companies.
Business Scope in a WFOE Application–
The real intention of a WFOE for China is to encourage more foreign firms in specialist industries and technologies to enrich the workforce and the economy by starting a business in China. Business scope is one of the most valuable issues of a WFOE application. As the WFOE companies can only conduct business within its approved business scope, it needs to be defined clearly in the application. Applying for a WFOE in China involves much more than just filling out a form to get approval. Any sort of changes in the business scope requires further application and approval from the Chinese authorities.
Minimum WFOE Capital Investment Required–
Since China still maintains foreign currency control policy, it’s still advisable to choose registered capital within RMB 100,000 ~ RMB 500,000 as the minimum registered capital for Consulting WFOE, Service WFOE, Hi-Tech WFOE registration in Shanghai, Beijing, Shenzhen, Tianjin, Guangzhou, Hangzhou, Ningbo, Suzhou, Chengdu, Chongqing, Wuhan, Xi’an and many other cities of China. The Chinese authorities at the Ministry of Commerce will typically require a minimum commitment of between RMB 200k to RMB 500k.
It is highly important that companies fully understand and comply with Chinese rules and regulations while setting up and maintaining operations over here. Corporate establishment in PRC for overseas businesses is possible for only three main business structures such as- Wholly Foreign Owned Enterprise (WFOE), Joint Ventures (JV) and Representative Office(RO). Among these, WFOE is perhaps the best business model foreign enterprises can opt for.