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A Deeper Look at Representative Office Formation in China

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The Chinese administration has demonstrated that it is willing to go to any length to grow its business-based economy. Whether you target opening a business in the manufacturing or hospitality, China will no doubt have a spot for you to grow. But if you are not yet decided to incorporate a business in China, you should consider opening a branch office. In this post, we will take a closer look at the branch office to determine what it is and associated benefits.

What is a Representative Office?

A representative office in China is a local branch of a parent company that is registered elsewhere in the globe. According to Chinese laws, a representative office is seen as an extension of the parent company, which remains fully responsible for its liabilities. Although a representative office is limited to non-profit based deals, it is easy to set up and gives a business faster entry and presence in China.

Special Benefits of Running a Representative Office in China

You can Setup a Representative Office without any Share Capital

Unlike other companies such as joint venture and wholly foreign-owned enterprises, opening a representative office does not require you to raise share capital. This means it is a cheap, fast, and reliable way of getting into the Chinese market.

The Perfect Opportunity to Study the Market before Making the Final Decision

When venturing into the international market, it is prudent to ensure you understand it well. By opening a representative office, you are able to take a closer look at the market, understand its dynamics, and make the best decision about joining it.

For most investors, representative offices are also used to identify potential local investors to partner with. Through the office, you can easily check the performance of the local companies and establish the most potential ones for the formation of a joint venture.

Administrative and Auditing are Pretty Simple

When you decide to set up a representative office, the process is pretty simple. Within a couple of weeks, the office can be up and running. The number of staff required to run the office and associated costs are also low compared to running a wholly foreign-owned company.

Besides, the auditing system for representative offices is also pretty easy because it involves only tracking the money from the parent company and where it is going.

You Maintain 100% Ownership of the Representative Office

Because the representative office is considered a branch of the parent company, you have the opportunity to control it 100%. This means that you have total control over all the operations including, the hiring of staff and its operations.

A representative office is a powerful company formation that allows you to easily venture into the Chinese market and assess it before making the final decision to open a limited liability company. Because it is considered part of the parent company, it implies that you can easily form it and start operations within a short time. Therefore, do not just venture into the Chinese market without clearly understanding its dynamics. Instead, open a representative office to learn and get prepared for entry and rapid growth.

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