The first possibility of how a foreign company can establish itself in China is through the establishment of a Representative Office (RO) in China. A Representative Office in China is not a separate legal entity but is considered to be part of its parent company. It is the most basic form of foreign investment and can be very useful, and in some cases even necessary, for most administrative decisions concerning the establishment of a business.
Before a foreign company is allowed to establish a RO in China the relevant authorities will have to approve the request and the registration of the office has to be completed.
Once the documents have been submitted to the relevant approval authority, the approval authority will review the documents and decide whether it will approve the registration and establishment of a RO in China.
A Sino-Foreign Cooperative Joint Venture (CJV) is a joint venture between a Chinese and a foreign company within the territory of China. This joint venture in China is based on a cooperative joint venture contract in which matters like the terms of cooperation, the division of earnings, the ownership of property upon the termination of the contract term of the CJV, the sharing of risks and losses, etc are laid down.
In China a Sino-Foreign Equity Joint Venture is still the most widely used type of foreign investment, even though Wholly-Foreign Owned Enterprises are developing strongly. It is a limited liability company and it has the status of Chinese legal person. In China this is a crucial difference to the RO, because unlike the latter, a Sino-Foreign Equity Joint Venture (EJV) is capable of buying land, hiring Chinese employees independently, constructing buildings, etc.
A Wholly Foreign-Owned Enterprise (WFOE), also known as Wholly Owned Foreign Enterprise, is a limited liability company established within the territory of China through foreign investment only. WFOEs are becoming increasingly more popular, mainly because of the fact that there is no involvement of any Chinese investor thus giving the foreign company complete control over the newly established business.
