Setting Up A Wholly Foreign-Owned Enterprise In China

A Wholly Foreign-Owned Enterprise (WFOE) is an increasingly popular investment vehicle used by foreign entities that would like to form a company in China. This is often a preferred option for having a presence in China as a WFOE does not have the same limitations as a representative office. A representative office is mostly used for marketing purposes but cannot make a profit for itself, issue invoices or enter into business contracts. WFOEs are commonly limited liability companies and do not require the participation of a Chinese shareholder.

WFOEs are frequently used by foreign companies to manufacture their products in China and then export them to foreign countries. This is often achieved through the use of Special Economic Zones such as in Shenzhen and other locations in Guangdong province. The use of these Special Economic Zones allows to import duty-free materials for the manufacturing of the products in question. These materials are used together with Chinese