China: Halt! Friend or WFOE?

Foreign freight forwarders have been allowed to operate in China by setting up wholly foreign-owned enterprises (WFOE) since 2005. Foreign freight forwarders who satisfy the following requirements are able to establish a presence in China, either in the form of joint ventures (JV) or WFOEs:

  • Have minimum paid-up capital of US$1 million;
  • At least five staff members must have more than three years of working experience in international freight forwarding industry or have obtained relevant qualifications;
  • Establish permanent office premises in China; and
  • Possess the right equipment and business facilities for communication, transportation, loading /unloading packing, etc.

The above JVs or WFOEs are able to expand with their own branches across China if the following requirements are met:

  • The JVs or WFOEs have been operating in China for at least one year;
  • All registered capital has been paid; and
  • Payment of an additional paid-up capital of US$120,000 for each branch.

China, however, still imposes restrictions on foreign investment in the logistics industry. Foreign investors are only allowed to set up JVs with Chinese partners; WFOEs are still not allowed. Foreign-invested logistics companies in China must meet the following requirements:

  • Have minimum paid-up capital of US$5 million;
  • Limit their shareholding percentage in international logistics businesses to 50 percent;
  • Establish permanent office premises in China; and
  • Possess the right equipment and business facilities for communication, transportation, loading /unloading packing, etc.

Source: ForwarderLaw.com

 

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