Contrary to the popular conception, a FESCO (Foreign Enterprise
Service Corporation) is not a single, monolithic entity. Rather, it
is a catch-all term for many different Chinese companies that
provide similar services. The main reason for the popularity of
FESCOs is that to hire any employee (whether foreign or local),
Chinese law requires the employer to be a legal entity already
registered in Mainland China (not including Hong Kong, Macau, and
Taiwan).
The Foreign Investor's Catch-22
Naturally, the registration requirement poses something of a
Catch-22 for foreign investors seeking to establish legal entities
in China. How do you recruit workers to perform the activities
necessary to register a company in China if you can't hire
employees to do so until after the company has already been
registered? Even the independent contractor relationship is illegal
in Mainland China. There is a way out of this seemingly
contradictory situation, however.
