When to Consider Registering a Representative Office (RO) in China
The growth of the Chinese economy over the last 40 years has been amazing, roaring at an average of 10% per year. Now, the country is the largest manufacturing hub, and its economy is expected to grow and become the largest on the globe in the coming years. That is not all. The Chinese market offers a large market of more than 1.4 billion people and is strategically located to help you access the rest of the Asia-Pacific region. The most preferred way of getting into the Chinese market for most investors is a wholly foreign-owned enterprise (WFOE). Still, there is one alternative that you should also consider: representative office (RO).
This post is a deeper look at Representative Office (RO) formation in China to answer two main questions, “what is a representative office (RO)?” and “what are the pros and cons of representative offices (RO)?” Keep reading to learn more about ROs and make the big decision about using ROs.
What is a Representative Office (RO)?
A representative office (RO) is one of the common types of business formations in China. It is considered an extension of another company back at home or in another country. This formation means that the company’s existence is hinged on the parent firm and is not recognized as an independent entity. To ensure that the RO runs well, China company laws require that the parent company must have been in operation for two years and more. Again, the parent company must be a limited liability company.
Pros and Cons of Using a Representative Office (RO)
Like other forms of companies you can form in China, whether WFOE s or JVs, a representative office (RO) can help your parent company get some presence in China. But it also comes with key disadvantages. Let’s contrast them:
- Pretty easy to form compared to WFOEs and JVs.
- You do not need to look for partners when forming a representative office (RO).
- It is an excellent way to join the market, especially when targeting to study or market new products.
- If you are still undecided about the Chinese market, an RO can be an awesome option for reconnaissance studies. For example, you can use it to scout for new partners before forming a joint venture (JV).
- The cost of running a representative office is lower compared to WFOEs.
- It encourages investors to prudently manage their parent companies.
- Representative offices are forbidden from undertaking profit-based deals.
- The company’s management cannot make independent decisions because it is 100% attached to the parent firm.
Register a Representative Office in China with the Help of Professionals
A representative office (RO) is an excellent vehicle when looking forward to quickly entering China for activities to increase the parent company’s presence. Although the process of registration is simpler compared to a WFOE, many still find it pretty complicated. This is why you should consider working with an agency of experts in company registration in China.
With experts like Hawksford, you get all the support you want. Indeed, they do not just leave your company after registration; they hold your hand even thereafter. You can count on them for help with other executive functions, such as accounting and payroll management. Again, they also come in handy to help you prepare for the annual inspection of companies in China.
Forming a representative office (RO) in China is an excellent option to fling open the doors of this enviable Chinese market. However, you need to compare the pros of working with an RO and those of using WFOE to make the big decision. No matter the option you take, Hawksford has the professionals that you need to get your company into China and grow it rapidly.