1. Different categories of WOFE according to their main activity
1.1. Business consultancy services and other services
Suitable for services provided to enterprises or individuals, subject to regulations on the type of service. These enterprises may issue CNY invoices ("fapiao") to their clients. However, they are not licensed to engage in the purchase or sale of products. Certain types of services are (highly) regulated and require special permits or additional licenses. These include, for example, recruitment services, umbrella company services, catering, information-related IT professions, cloud hosting activities, etc.
1.2. Distribution, retail trade, e-commerce, import-export trade
Companies engaged in purely commercial activities are also known as FICEs (Foreign Invested Commercial Enterprises). They may have import-export rights and buy Chinese or imported products and resell them to customers in China. The meteoric growth of online sales in China and mobile payment systems such as Alipay and Wechat has prompted many Western companies to set up subsidiaries in China. This allows them to effectively capitalize on these new opportunities while maintaining control over local inventory and distribution. If a foreign-owned company is the bridgehead for multiple boutiques or sales outlets, it may also consider setting up multiple domestic retail branches attached to it.
1.3. Production, manufacturing or assembly
Historically, these WOFEs were the first to be approved in China, ranging from simple assembly workshops to other manufacturing and textile production activities. Today, many companies with significant import trade activities are facing increased local competition. Some are starting to assemble in China, either to control domestic distribution, improve quality or control supply costs. This situation has become particularly evident since the outbreak of COVID-19 in 2020. See our page dedicated to manufacturing activities.
2. Regulatory WOFE news and updates for 2025
The latest negative list for foreign investment in Chin came into force on January 01, 2023. In particular, it stipulates that if the nature of the project is not included in the negative list of restricted sectors, the previously mandatory requirement to obtain a registration receipt has been removed.
This means that the establishment or modification of the structure of a WFOE follows a logic closer to the more flexible one applicable to domestic enterprises. Nevertheless, a suitable scope of business should be carefully drafted to allow for the full range of expected activities to be carried out. In practice, the local administrations (tax bureau, Chinese customs, company registry, food or medical device inspection authorities, etc.) remain highly autonomous. There is no overall coordination of their respective requirements.
In practice, this means that the establishment or the amendment of the AOA of a WOFE (not engaged in the prohibited activities of the negative list) will follow administrative procedures similar to those applicable to Chinese invested enterprises. However, an appropriate business scope should be carefully drafted to effectively permit your expected activities. So far, we observe that the administrations remain very autonomous. They do not coordinate with each other (Tax Bureau, Customs (GACC), Administration of Commerce, Immigration Bureau, Health Bureau, China FDA, etc).
For installation projects supported by individual entrepreneurs: A regulation issued by the State Administration for Market Regulation (SAMR) has also come into effect. It allows the establishment of a joint venture between an individual of Chinese nationality and a foreign legal entity or individual. This provision was previously prohibited as it required the Chinese party to be a legal entity. For the time being, this measure only applies to projects registered in Shanghai or the neighbouring provinces of Jiangsu, Zhejiang and Anhui. In keeping with the spirit of the pilot measures often implemented here, the logic could be extended to the rest of the country. While this model facilitates the prospects for Sino-foreign partnerships, it is advisable not to lose sight of some essential considerations. These include investor liability and the management of profit repatriation. Options and terms should be evaluated and compared before embarking on a Sino-foreign joint venture (JV).
The administrative preparation for a foreign investor has been simplified. As of November 2023, China has acceded to the Apostille Convention (Hague Convention Abolishing the Requirement of Legalisation for Foreign Public Documents). This will allow public documents issued in member countries to be certified for use in China through the apostille process. Previously, international business registration certificates required certification followed by Legalisation by a Chinese consulate or embassy.
Finally, as of July 1, 2024, an important amendment to the Chinese Company Law came into force. In particular, it clarifies the rules regarding the responsibilities of directors and shareholders in day-to-day management.
3. Investment classification for foreign investors
Prior to 2016, foreign investors were required to obtain formal approval to invest in China (either as their own subsidiary or as a joint venture) before registering their company. This approval depended on the exact nature and description of the intended business. A Foreign Investment Catalogue was used to classify foreign investment as encouraged, permitted, restricted or prohibited, as follows
- Encouraged: research and development R&D, environmental protection, greenfield, energy conservation.
- Permitted: e.g. as WOFE status or allowed only as joint venture.
- Restricted: additional licenses required, prohibitive minimum capital requirements, for example.
- Prohibited: strategic sectors or monopolies: many still remain, even in service activities.
In October 2016, the National Reform Commission (中华人民共和国国家发展和改革委员会) and the Commission du Commerce or MOFCOM (中华人民共和国商务部) issued the "Interim Measures for the Administration of the Registration of the Establishment and Change of Foreign Owned Enterprises". These measures stipulated that for any project not included in a new "negative list of foreign investment", official approval would be replaced by registration. Thus, the Certificate of Approval was replaced by the Certificate of Registration.
This list is regularly updated by the two commissions. Their official policy is to reduce restrictions, not to add new ones. However, the continued existence of specific regulations governing foreign investment underscores the continuing reality of differential treatment compared to domestic Chinese investment.
You may consult here the latest version of the negative list valid for 2025.
In short, the evolution of these measures suggests that China is generally keen to promise a greater degree of real openness to foreign investors. For example, the authorities have announced a simplification of the procedures for registering a 100% foreign-owned company or subsidiary.
In practice, while the number of sectors open to foreign investors has gradually increased, and the number of required licenses and certificates may be lower, the content and density of the application documents to be submitted has increased. After an initial phase of filling out online forms for approval, the next step is to submit original paper files, duly signed and notarized. Some documents must be legalized and notarized beforehand, which requires several weeks of preparation in the investor's country.
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4. Legal incorporation and shareholder status
A WOFE is a Limited Liability Company (LLC Company Limited). Its shareholder and parent company is usually a corporation, i.e. a registered company based overseas. Chinese regulations now allow a shareholder to invest as a natural person (individual).
This legal form is a recommended alternative to the JV partnership in business sectors where 100% foreign controlled investment is allowed.
Choosing this legal status for your legal entity in China offers the key advantages of autonomy of management, decision-making, better control over trademarks, patents and overall development strategy.
5. Investment budget and minimum capital
The minimum capital required by the Chinese authorities for a WOFE varies according to a number of criteria, including, but not limited to
- The business sector concerned, according to its classification in the negative list
- The location (city and province) where the company is registered
- The zone requirements (Free Trade Zone, Special Economic Zone, Hainan Free Port)
- Your WCR, investment and cash flow requirements to be realistically forecast
- Key Performance Indicators for Chinese Industrial Parks. For production or manufacturing activities, they have highly variable ratios, especially in terms of expected capital and tax performance.
The timetable for the payment of the capital - in a single contribution or in several instalments - must be set out in the Articles of Association (AOA) of the company. It must also be set out in an initial feasibility report. In Shanghai, the authorities consider a foreign entrepreneur or investor to be serious if he proposes a minimum capital to cover start-up costs until break-even. This should be based on a carefully prepared budget presented in a feasibility report. In the service sector, financing requirements are often lower than in retail and distribution (no inventory financing). As a reminder, for manufacturing or assembly activities, the minimum capital should also be planned according to the specific - and variable - requirements of industrial parks.
The capital should be paid into a special capital bank account and then transferred to the current accounts. Note that any overseas payment from a parent company directly into a WFOE's current account will not be recorded as a capital contribution (in addition to being subject to income tax in China). Thus, undercapitalizing a subsidiary at the outset can prove disastrous, both in terms of cash flow requirements and potential restrictions (VAT status, credit rating with Chinese customs (GACC), impact on the company's public records and reputation).
In principle, a capital increase for a subsidiary in China is allowed. The recapitalization process remains procedural and time consuming as it requires prior approval. A new capital injection involves additional formalities that will take at least several weeks. Not the best choice to meet urgent cash needs.
6. How to finance and capitalize a company in China?
The investor (parent company or individual shareholder) provides the initial investment necessary for the initial financing of the business. However, the choice of bank for a subsidiary in China must be made carefully. While China's major banks are generally fully licensed by the central bank, foreign banks operating in China are sometimes limited in their privileges. China has strict foreign exchange controls under the supervision of SAFE (State Administration of Foreign Exchange). The official currency, the RMB (ISO code: CNY), is still not freely convertible.
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The capital contribution can be made as soon as the company's bank accounts have been opened. The company will have several bank accounts, including in particular :
A capital account. Temporary, dedicated to capital contributions.
A designated account to which compulsory deductions, including taxes, will be debited.
The banker authorizes the opening of bank accounts once the company's business license and official chops have been issued by the authorities.
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Above, a company's bank account opening certificate
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Since Chinese regulations allow individual investors to be direct shareholders without a parent or holding company, it is worth comparing the choice of bank and the currency of contribution. It is also worth checking the tax treatment of dividends and the conditions under which shareholders can sell their shares.
7. Liability of directors and legal representative in China
The appointment of directors and officers is set out in the company's Articles of Association (AOA). This applies primarily to the legal representative, whose name appears on the business license. It also includes other officers such as an executive director or a general manager. Subject to the approval of the authorities after verification, it may be possible for a single person to combine several functions. Certain positions may be given to non-resident individuals. Evaluate and compare. For a foreign-owned company, it is also possible to opt for a board of directors. This is mainly for internal governance reasons.
To this day, in 2025, China's foreign investment regulations do not contain any provisions for what we overseas call self-employed entrepreneurs, micro-businesses, self-employed workers, or professionals. These statuses simply do not exist for foreigners in China.
8. Foreign company business licenses in China
8.1. Legal registration of the company with a business license
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This is an example of the business license of a foreign-owned enterprise (WOFE) registered in China. It is equivalent to a certificate of incorporation. It is issued by the Ministry of Commerce (SAMR) of the municipality or administrative region where the company is registered.
It shows, from top to bottom:
- Business license (商业执照)
- License number
- Company social credit number
- Full company name in Chinese
- Legal registered address of the company
- Type of company (foreign-owned)
- Registered capital of the company
- Date of legal incorporation
- Business license expiration date
- Authorized business scope (permitted activities)
- QR code to access public records
- Seal of the licensing authority
- Date of issuance of the license
There is no mention of the Roman alphabet on this license. Simplified Chinese is still the only official language recognized in China.
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8.2. Additional licenses: certificates and permits for regulated activities
In China, a number of activities are also supervised and controlled by administrations that are neither subordinate to nor coordinated with the MSA. As such, they issue additional licenses, certificates or permits required for operations. This reality affects various sectors in the services, retail, import-export or manufacturing industries. Here are 4 examples, illustrated and explained below.
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Services sector
and telecommunication services
This is an example of a VATS (Value-Added Telecom Services) license, which authorizes the practice of value-added telecom services. It is one of the requirements of China's Cybersecurity Law.
The services include data hosting in a Chinese cloud, other hosted IT services and call center telecom activities.
The content of this license is not standard. The reverse side of the license details the authorized activities and their geographic scope(s).
IT activities include IDCs (Internet Data Centers), IRCs (Internet Resource Collaboration), IP-VPN network operators, MPLS (Multiple Protocol Label Switching) and ISPs (Internet Service Providers).
This license was purchased for a company (WOFE) in Shanghai. It was issued by the Chinese Ministry of Industry and Information Technology (MIIT), which was established in 2008. The license is valid for 5 years, renewable.
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Retail business
This is the special permit for the sale and distribution of alcoholic beverages issued to a Shanghai-based foreign enterprise (WFOE).
It takes the form of an additional license issued by the administration bureau, which is also responsible for controlling the distribution of these products.
In addition, employees involved in the logistics and storage of the beverages must be trained by a special supervision bureau.
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Industrial production activity
The license shown here authorizes a foreign-owned factory to manufacture food contact packaging.
The regulatory authority is a department of the China Food Hygiene Administration (CFDA), which is responsible for matters relating to food production activities.
Its issuance certifies the compliance of the equipment installed and operating at the site
It is also issued after prior training and qualification of production personnel who hold individual licenses.
The second special license, shown opposite, authorizes the production of food products for the same facility.
These two special licenses illustrate China's meticulous administration, which qualifies, authorizes and controls related activities in a highly compartmentalized manner.
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REMEMBER: Beyond these few examples of additional or special licenses, many other activities are affected. Especially those that are sensitive from the point of view of:
- Sanitation and public health regulations (food, pharmaceuticals, medical devices, etc.)
- Compliance with China standards and other environmental regulations
- Hazardous product operations (e.g., production safety aspects)
- Sensitivity to strategic sectors (networks, communications, defense)
- Compliance with international regulations or agreements (e.g., NVOCC or IATA licenses)
- Cultural and publishing issues in China.
Obtaining these licenses is not automatic. It's a case-by-case approval process, not a simple declaration. With careful preparation and anticipation, these licenses can be obtained by a foreign-owned enterprise (WFOE or joint venture) in accordance with national laws and regulations and local foreign investment procedures.
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9. Hiring Chinese and foreign employees
An LLC (ex-WOFE) company has legal personality. It has a seal (official chop) which, when affixed to an employment contract with its Chinese and foreign employees, enables it to enter into a direct employment contract in its own name.
Foreign employees can obtain work permits and resident visas to work legally in China. Many subsidiary managers subcontract payroll, accounting, social security and tax filing to a qualified local accounting firm.
10. Recommendations before sStarting your Business in China
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First consult the list of restricted or prohibited foreign investment. However, this list does not indicate the specific conditions that may be required for permitted investments. These conditions may vary from city to city (and county to county). As a first possible point of optimization: conducting a pre-establishment analysis will help to compare the requirements based on an overall project and to pre-negotiate some key points with the authorities. For example, a recommended minimum capital, official and actual taxation, and the availability of specific premises. Finally, local customs services, conditions for obtaining VAT refunds on exported products, opportunities to enjoy zero customs duties and taxes for processing trade.
- Except in special cases, the review and approval of an investment project is entrusted to several administrations at the provincial or municipal level. They validate them according to their local development priorities. In other words, in a non-uniform or standardized manner.
- Preparing a good registration package for a WFOE requires the preparation of a feasible business plan, which will be carefully reviewed. Inspections and administrative checks will verify that the actual business activities are consistent with the previously approved business scope. The increased frequency of inspections reflects the effective implementation of the social credit system applicable to all enterprises in China.
- A pre-setup analysis may also include a review of the requirements for approval and compliance with Chinese standards that products, ingredients and components must meet. In general, environmental considerations have become an important criterion for the acceptance of investment projects in China.
- If your products are already being sold in China, you shoul assess the impact of setting up your own business on the relationship with your existing network of importers or distributors.
- Finally, for certain projects, it may be advisable to first conduct a more global analysis in the form of a pricing, potential, positioning or competitive study. In this case, the goal is to validate the relevance of your product or service offering before committing to any investment.
11. Company dormancy status or how to put a company on hold
As of March 1, 2022, a new clause in China's company regulations will allow a company or subsidiary to apply for business suspension status. This recent measure comes in response to the difficulties many domestic companies face during health crises (COVID-19). Inspired by the spirit of Western regulations in this area, this option allows companies to reduce their monthly expenses or fixed costs in times of temporary difficulties. This option remains open to companies that are operating normally and are not already blacklisted. Here you will find an article outlining the requirements for putting a company into dormant status in China.
The proper preparation and optimization of your China establishment project is one of our core businesses. Upon request, we can provide you with numerous examples of registration and licensing services for our clients. These include references in B2B or B2C service activities, import-export trade, wholesale and retail distribution, online sales (e-commerce), and assembly + manufacturing.
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