In Mainland China, there are 4 modes of business presences for foreign investors: WFOE(65%), Representative Office(20%), FIPE(10%), Joint Venture(5%). About 20% of Onbic's clients choose Rep. Office as their China business entity since it's cost efficient and it requires no capital investment.
Representative Office (RO) is established by foreign companies to engage in business liaisons, quality control, product promotion, market research, exchange of technology and other permitted activities in China.
ROs are not allowed to directly engage in operational activities, RO can't issue official invoices, nor receiving payments from it's clients. State Administration of Industry and Commerce (SAIC) usually specifies in scope of business, as it shown in the Registration Certificate of ROs, that ROs can not engage in direct operational activities. Therefore, it's not a form of foreign direct investment (FDI) in China. However, some ROs are engaged in operations in a lawful or tacitly permitted way and constitute one of the direct foreign Investment forms in China, for instance: ROs of foreign law firms, ROs of foreign airlines etc.
A Representative Office in China may only engage in non-profit making activities, it can carry out the following functions:
Under no circumstances may a Representative Office do the following in China:
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.
The name of the Representative office should be in the form of "Name of the Enterprise + Name of the City + 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.
Social Security in China. new
A new rule on foreign employees’ social security in effect starting 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.
According to State Administration of Industry and Commerce's file: Gong Shang Wai Qi  No.4, PARENT COMPANY must be established for more than 2 years