China is the second biggest economy in the world and it is widely expected that it is a matter of time until it overtakes the USA as the biggest economy in the world. While the number of Chinese investments in Europe is ever growing, a growing number of Western companies seek a presence in China which will help the marketing activities of their companies and facilitate access to the Chinese market and investment opportunities. Setting up a representative office in China is a very good way for a company to promote its services in China and attract Chinese clientele.
A representative office is not the same as a branch or a subsidiary. A representative office is not a separate legal entity and it is not allowed to issue invoices or generate income for itself. Representative offices are prohibited from signing business contracts, collecting payments, placing orders, buying property and conducting any profit making activities. Such activities can only be conducted by the overseas headquarters. Although the scope of services that can be offered by a rep office is limited, the role of a rep office for marketing purposes can be invaluable. Further, the process to set up a rep office is faster and simpler than the process to set up other investment structures.
The services that can be offered by a representative office include:
a) conducting market research;
b) building business relationships;
c) marketing services and products;
d) presenting products and services.
To set up a representative office in China the following documents are required:
1. Copy of Articles of Association or equivalent document of the company that will set up the representative office.
2. Certificate of Registration or equivalent document.
3. Letter of authorisation from the company's director authorising a person in China to sign the documents.
4. Letter of Authorised Signatory.
5. Passport copies of the intended China Chief Representative and other Representatives.
6. Appointment letter of China Chief Representative and other Representatives.
7. Description of the line of business of the company and the services to be provided by the representative office in China.
8. CV, photos and copies of passports of the China Chief Representative and other Representatives.
9. Bank Reference.
10. Original leasing contract for the office of the representative office, certificate of ownership and landlord identification.
11. Any other documents requested by the authorities and depending on the specific area of China where the representative office will be established.
Any of the above documents which originate from the country of origin of the company that wishes to set up the representative office have to be certified by the Chinese Embassy or Consulate of the country in question.
The process of setting up a representative office in China involves the following steps:
- Filing an online application to obtain registration certificate with the local Administration of Industry and Commerce.
- Obtaining a Public Security Bureau Certificate. This is needed in order to apply for visas for foreign representatives.
-" Obtaining certificates of Organisation Codes and IC cards.
- Registering with Local Taxation Bureau.
- Registering with the State Adminstration of Foreign Exchange. This is required to be allowed to open a bank account with foreign currency.
- Obtaining Customs Registration certificate if the representative office intends to import personal belongings or other goods through customs.
- Registering with the Statistical Bureau.
- Opening a bank account with foreign currency and Chinese RMB.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.