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Economie - Établir une société
RO - WFOE: Comparison
This document was written by Mr. Nicolas Musy,
Senior Consultant, CH-ina
SinOptic remercie M. Musy d'avoir fort
aimablement mis ces textes à sa disposition.
1. The RO is usually a first step for a presence in China.
It is a completely sufficient and suitable structure for any buying
activities. It also suit sales activities when no production, assembly
or after-sales services must be provided by the mother company.
It is not really satisfactory for distribution activities as it forces
the mother company to rely legally (for ownership of the products
and collection of the money) on a third party as distributor and import
agent. (Often, these 2 fonctions must be spread to 2 different companies.)
In general it is complicated, risky from the point of view of obtaining
payment and not very satisfactory from the point of view of the services
provided to the customers.
As there was previously no possibility to register WFOE distribution
companies, many foreign companies have used their RO as a virtual
distribution company, formally going through local importers and distribution
agents. Problems stories are numerous and I would not recommend this
approach.
2. A WFOE is almost always recomendable for any production,
processing or distribution activity.
The alternative could be a JV. However, general experiences made
for the past 20 years show that a JV partner active in the particular
field of activity of the JV brings no real advantages and often additional
problems.
Successful JVs must be analyzed on a case by case basis to discover
the reasons for their success.
Until recently, WFOE could not be registered with a distribution
business scope. Besides, rampant smuggling via Hong-Kong made it uncompetitive
for a WFOE to import legally and necessary to go via an import "agent"
in South-China.
With the new lower customs tariffs and the drive against corruption
becoming effective, a distribution WFOE makes now sense and I expect
it to become more and more the solution to foreign companies distribution
problems in China.
Copyright © Nicolas Musy, Senior Consultant, CH-ina
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