Business Structures for Foreign Investment in China (2025)

Common Forms of Incorporation:

• Wholly Foreign-Owned Enterprise (WFOE): This is the most common structure for foreign investment in China. A WFOE is a limited liability company wholly owned by foreign investors. It offers greater control and flexibility compared to joint ventures. While there is no strict minimum capital requirement in most cases, the registered capital must be sufficient for the company's intended business operations.
• Equity Joint Venture (EJV): An EJV is a limited liability company jointly owned by foreign and Chinese investors. While the previously mentioned 25% foreign ownership requirement might not be strictly enforced in all cases, it's still a common benchmark. The registered capital requirements you mentioned are outdated. The amount should be sufficient for the business operations.
• Cooperative Joint Venture (CJV): A CJV is a venture where foreign and Chinese parties cooperate on a specific project or business activity. The contributions of the parties and the sharing of profits and losses can be more flexible compared to an EJV. CJVs are less common than WFOEs or EJVs.
• Foreign-Invested Commercial Enterprise (FICE): This is a general term encompassing various forms of foreign investment, including WFOEs, EJVs, and CJVs.
• Holding Company: A foreign investor can establish a holding company in China to manage multiple investments. Specific requirements and regulations apply to holding companies, including minimum asset and investment thresholds. The credit rating requirement you mentioned may be outdated.
• Joint Stock Company (Company Limited by Shares): This structure is less common for initial foreign investment due to higher registered capital requirements. The minimum registered capital requirement you mentioned may be outdated. It is more often used for larger-scale projects or when seeking a stock exchange listing.
  
  
  

  Other Structures:

  • Branch Office: Setting up a branch office of a foreign company is possible in certain sectors, primarily in financial services.
    Strict regulations and approvals are required.
  • Representative Office (RO): A representative office is not a separate legal entity.
    It acts as a liaison office for the foreign company to conduct market research, promote products, and liaise with clients.
    An RO cannot engage in direct sales or revenue-generating activities.
    
    
    

    Key Considerations for Choosing a Structure:

    • Business Scope: The intended business activities will influence the choice of structure.
    • Control and Flexibility: WFOEs offer greater control, while joint ventures involve shared control and decision-making.
    • Capital Requirements: While there are generally no strict minimum capital requirements for WFOEs, sufficient capital is needed for business operations.
    • Regulatory Approvals: Certain industries or types of investment may require specific regulatory approvals.
    • Tax Implications: The choice of structure can have tax implications.
    • Legal and Professional Advice: It is crucial to consult with legal and business professionals experienced in foreign investment in China to determine the most appropriate structure for your specific needs.
      
      
      

      Key Updates and Considerations:

      • Foreign Investment Law: The Foreign Investment Law provides a framework for foreign investment, aiming to streamline the approval process and protect foreign investors' rights.
      • Catalogue of Industries for Foreign Investment: This catalogue classifies industries as encouraged, restricted, or prohibited for foreign investment.
        It's an essential reference for foreign investors.
      • Negative List: The "negative list" specifies the sectors where foreign investment is restricted or prohibited.
        All other sectors are generally open.
      • Regulations are Subject to Change: Chinese regulations are subject to change, so staying up-to-date is crucial.