Setting up a representative office in China primarily requires 4 stages and this entire process can take up till 4-5 months time.
Stage 1 – Pre-approval Stage
Once you have decided to base your representative office in which city, the next thing is to approach the local Ministry of Commerce (MOFCOM) for contacts of a local designated foreign enterprise service company (FESCO) who will be in charge of your representative office application process. You should be paying approximately US$800 to $1000 to a designated FESCO for their service of notifying you on the relevant upcoming deadlines and administrative procedures. In addition, a signed lease agreement is one of the pre-requisite for the approval; therefore it is vital to secure a lease for a “grade A” office space before submitting the application.
Stage 2 – Application Stage
Generally your application approval should be done by MOFCOM, but if your industry is specific to banking, insurance, law, accounting and media, you may have to approach the relevant authority which has jurisdiction over your industry sector. Once approved, you should have the Certificate of Approval certifying your legal presence for the next 3 years which can be further extended.
Stage 3 – Registration Stage
This stage is to register for your representative office’s business license which must be renewed annually. It is important to note that you must complete the registration within 30 days of your approval from stage 2. The application together with the supporting documents is required to be submitted to the local State Administration of Industry & Commerce (SAIC and the process normally takes about 1-2 months time.
Stage 4 – Post Registration Procedure
Firstly, In China, it is expected for your representative office to register the office location with the local police (Public Security Bureau) and to register with local and national tax bureaus. Secondly, you should make financial and corporate seals as it is a
practice in China to use them on official documents. Thirdly, opening a foreign exchange bank account will aid to facilitate overseas fund transfer. Fourthly, to import the relevant equipments or materials, remember to complete the relevant customs registration. Lastly, get a FESCO to assist you in recruiting of Chinese staff.
The Chinese prefer to work
with someone familiar as it minimizes any disagreements or problems that
might occur. Furthermore, being familiar with someone would allow the
parties involved to have more trust with one another. Therefore, as foreign
investors are new to the China market, they might not have the network or
“guan xi” to gain the trust of the Chinese companies. This will most likely
create complications when the foreign companies are trying to establish
their enterprise in China.
Once all this is done, your representative office is set to establish its presence in China. However before getting to this stage, a good market research study is required to ensure that your products or services are viable in the Chinese market.