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Blog The Pros and Cons of a Representative office in China

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The Pros and Cons of a Representative office in China

by Bobby Lee | 10 October 2016

 

A representative office or (RO) is a less expensive, and fast way for foreign businesses to set up in China. Foreign companies specifically use RO for non-direct profit business activities which usually involves product promotion, research of business’ market and engaging as liaison for your  business. For a business to set up an RO the company has to be at least two years old, and the RO certificate will last for as long as the foreign parent company exists.

Could a rep office be the right China company type for your business?

Discover the pros and cons of setting up a representative office in China for your business here...

What you need to know about setting up a Representative Office in China

With an RO being one of the most common options for foreign Businesses in China, it opens up a vast opportunity to step up your business and gain further involvement in the Chinese market. With the help of an RO, companies can test the market to make sure of  any investments or strategies before they decide to fully engage in the Chinese market.

The main Pros of a Rep Office

  • Quick to set up a new rep office (Hongda can set your RO up in just around 2 weeks)
  • Registered capital is not a requirement
  • Less tax than other types of business setups (no corporate or divided taxes)
  • Less expensive solution and easy to use
  • Easy to meet up with contacts and factories in China, saving time
  • Able to have your own physical presence and office in China
  • Can hire foreign and local staff
  • Manage product and supply chain from withing China
  • Quality of product check
  • Keep marketing strategies updated.



Representative Office Checklist

 

The main Cons of a Rep Office

  • The restrictions of all activities which involves profit (i.e. an RO cannot sell or make money)
  • Can only deliver services to its main offices
  • An RO may not take part in any contracts with customers involved in China
  • May not trade or do business with external entities
  • The RO cannot employ staff directly and must make use of an authorized agency: FESCO (Hongda will assist you in dealing with them)
  • Must be located in government-owned buildings, in specific cities (this may not be the case in the city you're interested in - Hongda will advise)
  • You must rent an office space for your RO before starting the setup process


Why an RO in China will benefit your businesswhy a representative office in china will benefit your business

You might ask if the rep office is really worth the time and effort to open due to the limitation to nonprofitable business activities. If your foreign company's goal for China is mainly focused on marketing and promoting your product or service here, or even for networking, then having a representative office in china could well be just what you need. 

Some foreign businesses even invest in multiple rep offices combined with WFOE’s or a Joint Venture to maximize the efficiency to access needed which support their specific needs.

If you might be interested in converting your current RO or setting up a WFOE read more here.

With all the resources that China has to offer many companies have decided to expand into China’s market, having a foot in china will help maintain your business interests and provide for more research and market testing. An RO is a simple solution for achieving this.

Are you interested in setting up a representative office? Why, or why not?

Please let us know if you have any questions about ROs by leaving a comment below, we'll be happy to answer them.


Representative Office Checklist

Topics: Chinese Representative Offices

Bobby Lee

Bobby Lee

Senior consultant at Hongda Business Services

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