With international investors increasingly setting up shop in China, Zetland Fiduciary Group outlines the finer points of Wholly Foreign Owned Enterprises.

Hong Kong (PRWEB) August 22, 2008 — Wholly Foreign Owned Enterprises (WFOEs) have become the investment vehicle of choice for international investors in China, and financial consultancy Zetland has outlined the fine details of how to get started.

Registered capital is the initial invested amount required by the Chinese government for foreign investors to establish a WFOE in China. In its latest newsletter, Hong Kong-based Zetland Fiduciary Group highlights how much registered capital is required for specific Chinese sectors.

Wholly Foreign Owned Enterprises enjoy exclusive management control of their business activities and have autonomy in their operation and management, with less interference from the Chinese government. However, the enterprise is considered a Chinese legal entity and must abide by all Chinese laws.

WFOE’s are limited liability companies established under Chinese law. WFOEs negate the need for a Chinese partner and do not require large amounts of registered capital to fund.

Because there is no Chinese partner to guide the project through the approval process and other regulatory issues, the logistics of establishing a WFOE can be difficult and costly.

WFOEs must employ Chinese labor in accordance with local and central government labor laws, and are encouraged to establish trade unions, but not required to do so.

WFOEs are mostly used for production facilities, but under certain conditions they have also been utilized in the service sector, although with restrictions over location.

The amount of registered capital is dependent upon factors such as the scope of business and location. Local authorities will review a feasibility study report and approve the investment on a case-by-case basis. Reduced registered capital can be negotiated in some cases, the Zetland report notes.

Registered capital will be kept in the company account to use to run the business until it can support itself from its own cash flow. The initial registered capital must be enough to keep the business running before it generates its own income, otherwise increased costs such as additional licensing fees will be incurred.

The minimum registered capital for enterprises in the consulting industry is US$70,000. For trading it is also US$70,000, while for manufacturing it is US$140,000, reports Zetland.

Manufacturing WFOEs, with an eye on total export of their China-manufactured product, may also enjoy significant tax and other incentives if based in Free Trade or Export Processing Zones.

The report is one of many produced each month on Zetland’s comprehensive website.

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[Via PRWeb: Government Foreign Policy]


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