The following structures are among the most used by foreign organisations establishing either a commercial or non-profit presence in the Mainland of China:
Wholly foreign-owned enterprise
Widely accepted as the most popular entity for doing business in the Mainland of China, a WFOE is a limited liability company (LLC) allowing 100% foreign ownership, whether by individuals or corporate entities.
As a Chinese Mainland investor is not essential, you can independently operate a business here. It’s for this reason that the WFOE continues to be a suitable structure for foreign investors entering the Mainland of China, as long as the business activity is not included in the 2024 Negative List for Foreign Investment.
Encouragingly, the latest version has relaxed rules on foreign investment in the manufacturing sector. However, if your sector remains restricted, you may need to consider using a joint venture structure instead.
There are three common types of WFOEs:
- Trading WFOEs: For trading, wholesale, retail or franchises in the Mainland of China
- Consulting WFOEs: For consultancy and other related services
- Manufacturing WFOEs: For the manufacture and sale of goods and products
What’s more, being an LLC, a WFOE operates as a separate legal entity. This means that your liability is limited to your registered capital, protecting your personal assets.
WFOE advantages
- Allowed to engage in all activities it is registered for in the Mainland of China
- Total control over decision-making processes
- Ideal for protecting your trademark when expanding operations to the Mainland of China
- Full authority over the hiring of staff
- Suitable for establishing a long-term presence in the Mainland of China
WFOE disadvantages
- Entrance restrictions for certain sectors
- Initial costs required for registered capital, office rent and other fees
Popular WFOE locations in the Mainland of China
When choosing a location to base your business in China, it’s important to understand that different municipalities and regions suit different types of industries. For example, Shanghai is known for finance, automobile, chemical and logistics investment, whereas Shenzhen is developing itself as tech powerhouse for smartphones, IT equipment, home appliances, robotics and drones.
Locations that are highly sought after for WFOE registration include:
- Shanghai
- Shenzhen
- Beijing
- Guangzhou
- Chengdu
- Xiamen
- Xi’an
- Yiwu
China WFOE requirements
If you already have a location in mind, the next step is to understand the requirements for setting up a WFOE in the Mainland of China. You will need to prepare and translate documentation for submission to the authorities and appoint key statutory positions.
Minimum registered capital requirement
Since the Company Law reforms in 2014, the registered capital requirement has been removed. As of 2025, no minimum investment is required to set up a WFOE, unless the business involves a regulated industry such as securities, insurance and banking.
As a gauge, however, you may set aside an amount that can cover the first year of your operations in the Mainland of China. It’s also important to note that following the new Company Law amendments announced in July 2024, all subscribed registered capital must be fully injected within five years of incorporation. This makes it essential to plan ahead and decide on a realistic capital commitment before establishing your entity.
Documents required
To get authorised and start operations, you’ll need to prepare the following documents for approval:
- Office lease contract: Proof of a registered address for your WFOE.
- Name approval: To ensure that your name does not conflict with others already in operation. Approval is required from the local Administration for Market Regulation (AMR).
- Board resolution or appointment letters: For your directors, supervisors, general manager and legal representatives. This should be accompanied with copies of their identification documents.
- Articles of Association (AoA): This is another crucial document for the company registration process in the Mainland of China, providing information on your business description, including the scope that you intend to operate in.
- Feasibility study (optional): To demonstrate that the company is feasible, you need to provide a comprehensive business plan and a budget.
All documents in foreign languages (including English) should be accompanied by Chinese translations. Once these are fulfilled, your WFOE company registration can be approved.
WFOE setup procedure and timeframe
The incorporation of a WFOE can be completed within two months. We typically manage this process in two phases to simplify the preparation on your end:
| Phase |
Process of setting up a WFOE in the Mainland of China |
Required time |
| Phase 1 |
1.1 Gathering information |
One to two weeks |
| 1.2 Document legalisation in home country |
At least one month |
| 1.3 Signing office lease for WFOE |
At least one month |
| 1.4 Document translation |
One week |
| 1.5 Requesting domicile documents from landlord |
One to two weeks |
| 1.6 Preparing of standard document forms for signatures |
Within one week |
| 1.7 Signing of registration standard documents/forms |
One week |
| Phase 2 |
2.1 Applying for a business licence |
One week |
| 2.2 Opening WFOE corporate bank accounts |
Two to four weeks, depending on your selected bank |
| 2.3 Import and export registration (for trading WFOE only) |
Up to two weeks |
Note: This only applies where the necessary documents have been provided. Additional preparation time will be required should any documents be missing or deemed non-compliant. This will be determined on a case-by-case basis, separate from the standard procedure outlined above.
Structured as an LLC set up with a local partner, a JV is another way for foreign businesses to enter the Mainland of China. While many sectors are now fully open to 100% foreign ownership, the Mainland of China still operates under the Negative List approach, which identifies areas where foreign investment is restricted or prohibited.
For sectors that fall under these restrictions, the law may require you to engage a local partner. In some cases, foreign ownership may be capped below 50%. Much depends on the sector you’re operating in. Rigorous research and due diligence must then be conducted in advance to find a qualified and reliable partner.
For many investors, however, this could seem risky. Where regulations allow, we would recommend going with the WFOE structure instead for greater independence and control over day-to-day operations.
As a JV is considered a more complex corporate vehicle, the incorporation process can take up to two months.
JV advantages
- Access business sectors which are restricted in equity ownership terms
- Gain insights from your partner’s experience in doing business in the Mainland of China
- Leverage your partner’s existing channels for sales and distribution
- Receive local treatment when participating in official and public tenders
JV disadvantages
- Costly and lengthy process to scout for a suitable Chinese Mainland partner
- Complexity when it involves multiple partners
- Difficulties in merging different company cultures and management styles
- Intellectual property protection and management issue
- Conflicting interests represented at the board level
- Division of profits
If you are simply wanting to learn more about the business opportunities in the Mainland of China, you could establish a RO. This is the simplest type of business formation that you can open in the Mainland of China, with the process taking about two months.
A RO does not constitute an independent legal entity in the Mainland of China, meaning that its registration merely grants you a presence in the local market. ROs are thus limited in their activities as compared to the company registration of a WFOE or JV. Specifically, ROs:
- cannot partake in direct profit-generating activities;
- cannot issue invoices; and
- cannot hire Chinese staff directly.
The office is only allowed to engage in non-profit making operations, such as offering customer support and conducting market research. Additionally, to establish a RO in the Mainland of China, your overseas parent company must have been incorporated and operating for at least two years. This option is thus unavailable for newly formed entities.
For these reasons, you may consider establishing the WFOE structure from the start. We've seen companies that began with a RO eventually converting to a WFOE as operations grow. If you're looking to expand in the Chinese Mainland market, a WFOE is likely to be more suitable.
RO advantages
- Quick and low-cost setup
- Suitable for market research, promotion and liaison
- Lighter compliance obligations than other business structures
RO disadvantages
- Restricted activities
- No legal independence
- Hiring limitations
- Tax liabilities apply even without local income
The Mainland of China also recognises several types of non-profit organisations, each intended for different purposes and subject to distinct regulatory requirements. These include foundations, social service institutions, social organisations and public institutions, although not all are available to private or foreign investors:
Foundation
A foundation is a non-profit legal entity formed using donated assets to support public welfare and charitable activities. These entities are commonly used to fund and administer long-term initiatives in areas such as education, poverty alleviation and environmental protection.
Subject to the applicable regulatory requirements, foreign participation in establishing foundations may be permitted in limited circumstances. For non-public fundraising foundations, founders are generally required to contribute initial endowment assets of at least RMB 2 million and satisfy the relevant governance and registration requirements. Foundations must be registered with and supervised by the Ministry of Civil Affairs or its local counterparts.
A foundation may conduct a range of charitable and public welfare activities within its approved scope. Its assets must be used solely to further its charitable purposes and may not be distributed for private benefit. Foundations are also subject to ongoing regulatory obligations, including information disclosure, annual reporting and audit requirements.
For multinational companies, foundations may be used to support corporate social responsibility (CSR) programmes and long-term community initiatives. Where appropriate, they can provide a structured framework for managing charitable activities while demonstrating a long-term commitment to social development in the Mainland of China.
Social service institution
A social service institution is a non-profit organisation formed using non-state-owned assets to provide services in areas such as healthcare, education, culture and research. If you are considering establishing a social service institution in the Mainland of China, it must be registered and supervised by the Ministry of Civil Affairs or its local counterparts.
Where permitted under the applicable laws and regulatory requirements, foreign entities will generally need to cooperate with a Chinese Mainland entity when establishing this type of organisation. Applicants must satisfy several establishment requirements, including receiving approval from the relevant competent authority (where required), appointing qualified personnel, securing fixed premises and demonstrating funding that meets the applicable regulatory requirements.
Following registration, the institution may provide social services within its approved scope of activities and must operate on a non-profit basis.
Social service institutions are also subject to ongoing regulatory oversight, including annual reporting and evaluation requirements. For organisations seeking to deliver public services directly rather than through grants or charitable funding programmes, this legal structure may be suitable for social service projects such as Sino-foreign non-profit schools or hospitals.
Social organisation
A social organisation is a non-profit membership-based entity formed to promote and support the common interests of its members.
Founders will generally need to be Chinese citizens and/or Chinese legal entities. Foreign individuals and organisations generally cannot establish a domestic social organisation independently.
Applicants are typically required to demonstrate an adequate membership base, fixed premises and funding that satisfies the applicable regulatory requirements. This generally includes at least 50 individual members or 30 institutional members. Social organisations are registered with and supervised by the Ministry of Civil Affairs or its local counterparts.
Once established, a social organisation can provide services to its members and organise industry exchanges. It must operate in accordance with its approved objectives and articles of association and comply with the applicable laws and regulations governing its activities. Social organisations are also subject to ongoing regulatory oversight, including annual reporting and other compliance requirements.
As social organisations are established to pursue non-profit objectives, they are generally not an appropriate legal structure if your goal is to establish a commercial presence in the Mainland of China.
Public institution
A public institution is a non-profit entity that uses state-owned assets to provide services in areas such as education, science and technology, culture and healthcare. As public institutions form part of China's public sector, they are generally not available as a legal structure for private or foreign investors.
Businesses seeking to establish a commercial or non-profit presence in the Mainland of China will typically need to consider other legal structures, depending on their objectives and the applicable regulatory requirements.
Compare China entity types
To help you decide on a suitable business structure, view our 'at a glance' comparison table outlining key information for different entity types.
