Representative Office（RO）
When the foreign investor considering about establishing operations in China. RO is undoubtedly an easiest way to enter Chinese market with comparatively lower threshold. Because there is no required investment capital for establish RO. many foreign investors choose to set up representative offices (ROs) to engage in market research and to learn more about the country.
A representative office is optional before making an actual investment if China and is not an independent legal entity. It must confine its activities to promotion or acting as a liaison office in behalf of its parent company. RO can only perform researches, monitoring, and liaisons activities which will not cause directly income.
What RO can be used for :
1. Liaisons representing the parent company within the company's business scope including facilitating the trades between parent company and the local suppliers,
2.QC facilitation or monitoring purchasing activities,
3.Marketing and sales administration for sales conducted between China and your parent company, administration for group activities elsewhere in China.
4. Marketing and promotions for parent company.
5.Conducting marketing research and academic communications.
A RO is not allowed to generate revenue, solicit business, engage in warehousing and sign contracts with customers; it can only hired local staff though approved employment agencies. It should engage in activities that service the head office directly. Here comes a key question “do you need to invoice locally for services or products? “If you do need to issue invoice locally, then RO can not help. You need to consider a Wholly Foreign Owned Enterprise (WFOE) or a Joint Venture (JV).
In summary, RO can be helpful in facilitating trade between your parent company and the suppliers in China, but RO may not invoice for services or sales in China directly. They can however introduce business to the parent company and liaise in matters relating to orders, contracts, shipping, payment of taxes, samples, quality control, marketing, promotion, and so on.
