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WFOE structure

Daxue Talks transcript #2: 5 minutes talk with a business lawyer about WFOE in China in 2019

Find here the Daxue Talks episode 2. Learn in 2-5 minutes the latest updates about WFOE in China from a China-based business lawyer.

Full transcript below:

I am Nicolas Coster, I’m a French business lawyer. I’ve been in China for 16 years and specialized in foreign direct investment. So, basically, I set up companies in China.

  1. What are the requirements of registered capital when establishing a wholly foreign-owned enterprise (WFOE) in China in 2019?

You don’t have any requirements in 99% of the cases, the law changed a few years ago. This means if you want, you can put a registered capital like 10 000 RMB, except for some very specific field, for example, financial companies, where the requirement tends to be on RMB.

2. What are the benefits of the WFOE structure?

The main benefit of the WFOE structure is to be able to fully control your company but you need to know that from January 1st, 2020, the WFOE will disappear. So, for the existing WFOE or the WFOE you have set up this year, you can carry on to have a WFOE status for 5 years, after the WFOE will be like any other Chinese companies. You will not have any specific benefits compare to Chinese companies.

3. What are the benefits or differences that are going to disappear from WFOE compared to Chinese companies?

That is a good question. You don’t have a benefit… WFOE has fewer advantages than Chinese companies, so, in theory, we are waiting for the implementation, but let’s say that we think it is better to have a Chinese company and to have a WFOE because Chinese companies are more flexible.

disappearance of WFOE

4. As early as 2020, WFOE will be almost the same as Chinese companies in what sense?

The WFOE will disappear that means the law defines the WFOE status will be canceled. The WFOE will not exist anymore, except doing 5 years for the existing WFOE, where they can decide to remain as a WFOE or they can decide to change the status to the normal Chinese company.

5. What will be the impact of the disappearance of WFOE?

Normally, it will be no discrimination for foreign investment. It is what they plan, but we are waiting for the implementation rules because today we have a general law but we don’t know what could be the implementation.

6. Will the disappearance of WFOE mean that foreign companies will rely on RMB rather than the injection of foreign currency?

This is not true. You can inject RMB. That is what we call White RMB. For a few years, half of my clients invest in RMB.

Daxue Talks is a show powered by Daxue Consulting, a china-based strategic market research company founded in 2010! With Daxue Talks, you will stay up to date with all the latest business updates in China.