A Representative Officeis mainly engaging in non-profit activities related to its parent
office. Usually a Representative Office is used as a basis for
doing market research within China and others not for profit
seeking activities like e.g. meeting and researching / acquiring
suppliers and potential customers. It is thus the easiest way to
officially step into the Chinese market but also a quite efficient
one, if you just want to improve supplier or customer relations
quickly. Of course there are some disadvantages coming with it. As
you can imagine there are certain activities, which you will not be
allowed to do and thus create a trade-off between quick and cheap
market entry versus limited commercial activity options. In the
following chart you can clearly see the opportunities you will have
after setting up an RO but also some limitations of a
Opportunities and Limitations of a Representative Office
Features of a Representative Office
1) Legal Status of a Representative Office
The Representative Office is a non-legal entity operating
representing it's parent company overseas. A representative office
is not allowed to engage itself in business activities, issue
invoices on its own, remitting outward, signing sales or purchase
contracts, or receiving income from services performed but may act
as a liaison and promotion office for its parent company.
2) Name of a Representative Office
The name of the Representative office should be in the form of
"Name of the Enterprise + Name of the City + Representative
3) Business Address of a Representative Office
At the beginning of setting up the Representative Office, it is
advised to decide the place and building where office is going to
be located first, as the address of the proposed office will have
to be mentioned in the application for approval.
Note: the business address must be located in commercial buildings
approved by the government.
4) Social Security of a Representative Office in China.
A new rule on foreign employees’ social security in effect started
from October 15, 2011. It is said that if a company hires a foreign
employee, the company shall register this employee with the local
social security authority within 30 days of the employee receiving
their work permit.
Advantages of setting up Representative Offices(RO) in China
Using a representative office as China entry form has the following
1) Affordable: no paid capital required, government and service
fees are usually lower than what is needed for WFOEs.
2) Quicker registration process (usually within one month or so)
3) Less paperwork required for application (compared to wholly
foreign owned enterprises)