When is it more advantageous to set up a Representative Office in China instead of a WFOE?
A Representative Office (RO) is a simple, lightweight, and non-commercial structure. It becomes a better option than a WFOE in specific situations, because the two entities have different rights, costs, and obligations.
✅ 1. When you do NOT need to issue invoices or generate revenue in China
An RO cannot invoice, cannot sign commercial contracts, and cannot generate profit in China.
It is useful only if the goal is to:
- conduct market research,
- build relationships with partners,
- manage communication or marketing,
- supervise a supplier or a local JV,
- coordinate operations with the overseas headquarters.
✅ 2. When you want a legal presence in China with very low operating costs
An RO is the cheapest way to establish a presence in China:
- no registered capital required,
- simplified accounting,
- simplified taxation (but it still exists),
- minimal administrative and reporting obligations.
Ideal for testing the market without major financial risk.
✅ 3. When you need to establish a presence quickly
Setting up an RO is generally faster than setting up a WFOE because:
- no capital contribution is needed,
- fewer audits,
- fewer notarized/legalized documents,
- reduced administrative steps.
Useful when you urgently need a local address, support staff, or a physical presence.
✅ 4. When your business does NOT require a Chinese commercial license
Certain industries require complex licensing (finance, education, e-commerce, etc.).
An RO lets you be present without going through the complex licensing process, as long as no commercial activity is conducted.
✅ 5. When your local team is small
An RO can hire staff, but only:
- through a licensed HR agency (e.g., FESCO),
- and typically a small team (4–10 employees depending on activities).
If your team is small and focused on support functions, an RO is sufficient.
❌ When an RO is not appropriate:
You should NOT choose an RO if you want to:
- sell in China,
- issue Chinese invoices (fapiao),
- import/export,
- sign contracts as a Chinese entity,
- hire directly without a staffing agency,
- receive payments in RMB.
In these cases, a WFOE is necessary.
Conclusion
A Representative Office is ideal if you want a presence in China without engaging in business activities, for pure support functions such as research, marketing, sourcing, or coordination.
If your goal is commercial activity, even in the medium term, a WFOE is generally the better choice.
For any information, please contact our team to info@opkofinance.com.
