Wholly Foreign Owned Enterprise (WFOE) and Foreign-Invested Commercial Enterprises (FICE)

Often pronounced “wuh-fee”, a Wholly Foreign Owned Enterprise (WFOE) offers foreign businesses that wish to incorporate in China the greatest amount of control over their own company’s policies and directions within the registered scope of their business field. WFOEs are Limited Liability Corporations, owned and financially managed entirely by the foreign investor.

The Six Categories of Wholly Foreign Owned Enterprises in China

  1. Consulting
  2. Services
  3. High-Technology
  4. Manufacturing
  5. Food and Beverage
  6. Trade, Wholesale and Retail

WFOE

Pros

Cons

Control of Intellectual Property Requires large amount of registered capital to establish
No required licensing for Import/Export of your business’ products Can only conduct business within licensed category or specific business scope
Capability to convert profits from RMB to USD for repatriation Subject to all applicable Chinese business taxes (VAT, Corporate, Dividend, and Income)
Can purchase/build property in China
Hire staff directly
Long term licensing (15 to 30 year periods)
Incorporation capability regardless of how long business has been established outside China
If WFOE is established in manufacturing scope, the company obtains advantage of surpassing special licensing for the importing and exporting of its products

Foreign-Invested Commercial Enterprise (FICE)

A FICE is one way to establish a retail or wholesale business in China.  A FICE is, in general, a type of WFOE or JV.  Typically, a FICE follows stricter establishment guidelines in comparison to a WFOE due to the fact that they must be established at the provincial level, not the local level like many WFOEs are.  However, Beijing and Shanghai are allowed to grant their own FICEs.  As such, many of the FICEs in China are established in these areas.  Below is a list of pros and cons for setting up a FICE.

FICE

Pros

Cons

Can open an office in any location in China Could take several months to establish
Can be owned by a foreign entity 100 percent Requires a large amount of registered capital to establish
Can conduct import/export activities with distribution rights A manufacturing FICE must obtain permission from several bodies to conduct manufacturing activities
Can conduct wholesaling activity Certain industries are excluded from setting up a FICE
Can operate franchises Difficulty receiving approval for FICE from provincial government
TriVista
TriVista’s global consulting team provides guidance to foreign businesses operating in China. Learn More.

Get a FREE China Manufacturing Guide






for your free China Manufacturing Guide & a subscription to our e-newsletter.

From the China Blog:

Get a China Guide for Free

Get registered and receive access to all of our content!

for our free monthly newsletter &
a .pdf of our China Manufacturing Guide