A foreign invested enterprise (FIE) is a type of company that enables an organization to invest money in a venture or project in a different country. Although it is utilized in other jurisdictions, particularly in Asia, this specific company form is most frequently used when conducting business in China. We outline the essential requirements for companies thinking about setting up a foreign invested enterprise (FIE) in China, as well as when a different corporate structure could be preferable.
China is currently the top destination for foreign direct investment worldwide. This indicates that a large number of companies are considering investing in China and must take into account the legal procedures that must be followed for such an investment.
As a general rule, we may describe a foreign invested enterprise as any legal entity in a nation whose main function is to allow foreign corporations to invest there. FIEs in China have a wide range of distinct legal forms.
The types of FIEs in existence before China's Foreign Investment Law coming into force on 1 January 2020 include:
- Wholly foreign-owned enterprises (WFOEs).
- Sino-foreign equity joint ventures (EJVs).
- Sino-foreign co-operative joint ventures (CJVs).
- Foreign-invested companies limited by shares (FICLSs).
- Foreign-invested investment companies (FIICs).
- Foreign-invested partnerships (FIPs).
- Foreign-invested venture capital enterprises (FIVCEs).
If your company requires a significant legal presence in China, it may be advantageous to establish a foreign enterprise there. Complying with the Foreign Investment Law, and setting up an FIE, is essential where:
- You want to start a business or a project in China as an investor who is not headquartered in China, either by yourself or in partnership with other investors;
- You want to invest in a company with a basis in China but are not a Chinese citizen;
- To make other types of foreign investments that may occasionally be allowed under Chinese law.
International businesses may occasionally believe in error that doing business in China necessitates a foreign-invested enterprise. In truth, there are a variety of additional company options that might be suitable.
These include:
- A Representative Office (RO): An RO is able to carry out a restricted set of activities in China, and are primarily intended for an international business that is ‘scoping’ out the local market and conducting market research. They cannot execute contracts, import or export goods, or do business with other companies in their own name.
- A Global PEO: A workforce based in China can get employment solutions from a global PEO. This includes finding and hiring employees in China to work for your client’s company. By utilizing a worldwide PEO, you can avoid having to establish your own FIE, branch, or other local subsidiaries.
Contact us now for strategic support on which form of company you want to set up in China.
