Representative office
Introduction of Representative Office (RO)
There are 4 modes of business presences in China: Representative Office, WFOE, Joint Venture, Hong Kong company. About 20% of PTC's clients chose RO 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. Parent company must be established for more than 2 years
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:
- Conduct research and survey for its parent enterprise in the local market;
- Liaise with local and foreign contacts in China on behalf of the parent enterprise;
- Conduct research and provide data and promotional materials to potential clients or trading partners;
- Act as a coordinator for the parent enterprise's activities in China;
- Make travel arrangements for parent enterprise representatives and potential Chinese clients;
Under no circumstances may a Representative Office do the following in China:
- Directly engaged in any business for profit;
- Sign contracts or deals on behalf of the parent enterprise;
- Represent any firm other than its parent enterprise;
- Collect money or issue invoice within China for services or products;
- Buy property or import production equipment.
