Do you actually need a Chinese company?

Most foreign businesses dealing with China need no Chinese company. An entity becomes necessary when you must issue Chinese tax invoices domestically, employ staff in China, hold stock there in your own name, or need a licence that attaches to a Chinese legal person. When you do, the vehicle is usually a wholly foreign-owned enterprise; a representative office cannot trade.

Setting up a Chinese company is the move people reach for first, and often the wrong one. An entity is a tool with running costs, a filing calendar and a deregistration procedure at the end of it. The selling routes, and the tax on a payment from China, are set out in whether you need a Chinese company to sell in China. This piece covers the rest of the decision: which vehicle, who may own it, and what it commits you to.

Is your business with China, or in China?

The question answers itself once two situations that sound alike are separated. Doing business with China means selling to a Chinese distributor, reaching Chinese consumers through cross-border e-commerce, or serving customers from abroad: the contracting and the money sit outside China. Doing business in China means invoicing customers there in RMB, employing people there, or holding stock and premises there: the revenue is earned onshore.

A Chinese company exists to do the second. It is not needed simply to be paid by a Chinese business. A Chinese buyer purchasing from outside China deducts the expense on the foreign supplier’s own invoice, together with the tax payment vouchers,^⁠[1] and withholds the tax due on the payment. How that works, and what it asks of the buyer’s finance team, is in the answer on selling into China.

When do you need no company at all?

What you are doing	Chinese entity?
Selling to a Chinese distributor, paid offshore	No. The distributor buys from you, imports in its own name and resells on its own invoices
Selling to Chinese consumers through cross-border e-commerce	No. You appoint a domestic agent, which registers with customs and carries the duty to declare truthfully⁠[2]
Selling to Chinese businesses from abroad	Not necessarily. The buyer can deduct on your invoice, and withholds the tax on the payment⁠[1]
Issuing Chinese tax invoices and being paid in RMB onshore	Yes
Employing people in China	Yes, or a third party that employs them for you
Holding stock in China and selling it into the domestic market	Yes
An activity that needs a licence held by a Chinese legal person	Yes, and the company comes first: the licence is applied for after registration⁠[3]

Which vehicle, if you do need one?

“Consulting company” and “WFOE” are used as if they were competing options. They are not on the same axis: WFOE describes who owns the company, and “consulting company” describes what its business scope says it does. These are the forms that exist.

Vehicle	Can it trade?	What it is
Representative office(代表机构)	No	A liaison presence of the foreign parent. It has no legal person status, may not engage in profit-making activities, and engages its Chinese staff through a designated service unit⁠[5,6]
Wholly foreign-owned enterprise(外商独资企业)	Yes	A company registered in China and invested in wholly by foreign investors: a foreign-invested enterprise under the Foreign Investment Law
“Consulting company”	Yes	Not a legal form. A company, usually a WFOE, whose business scope is services. The scope is set by the articles of association and changed by amending them, and any item that requires approval has to be approved
Domestic company(内资企业)	Yes	Owned by Chinese investors. A company with any foreign investor in it is, by definition, a foreign-invested enterprise

So for most overseas investors the choice is no entity, or a WFOE; and if a WFOE, a services scope or a heavier trading or manufacturing one. The heavier the scope, the more licences, capital and compliance it carries. Choose the narrowest scope that covers what you will actually invoice for; widening it later is an amendment to the articles. The full comparison, including what a representative office is still good for, is in WFOE, representative office or no entity.

Who counts as a foreign investor?

A foreign natural person, enterprise or other organisation. A foreign-invested enterprise is any enterprise registered in China that foreign investors have invested in, wholly or in part (Foreign Investment Law, Article 2).^⁠[7] Two consequences are commonly misread.

• A foreigner’s company in China is a foreign-invested enterprise. There is no route by which a foreigner holds a domestic company in the foreigner’s own name. Registering one in a Chinese national’s name instead is nominee shareholding: the register shows someone else as the owner, and your position rests on a private agreement with that person.
• Nationality decides it, not residence. A Chinese citizen is a domestic investor wherever they live. A Chinese citizen settled abroad who invests in China does so by reference to the Foreign Investment Law and its implementing regulations, unless a law, an administrative regulation or the State Council provides otherwise (Implementing Regulations, Article 48).^⁠[9]

Outside the sectors on the foreign investment negative list, foreign investment receives national treatment from the point of entry (Foreign Investment Law, Article 4).^⁠[7] Inside them, a sector may be closed to foreign investors or may require a Chinese partner; outside them, a WFOE needs no Chinese partner at all. Which sectors are affected is covered in whether a foreigner can own 100% of a Chinese company.

What does an entity commit you to?

A standing set of obligations, whether or not the company trades in a given month. Price these in before registering.

• Registered capital. A limited liability company formed since 1 July 2024 must have its subscribed capital paid in within five years of establishment (Company Law, Article 47).^⁠[8] How to choose the figure, and the transition for older companies, is on the registered capital page.
• A filing calendar. Monthly or quarterly tax returns, nil ones included, a corporate income tax annual return within five months of the year end, and an annual report by 30 June, all set out in what annual filings a Chinese company must make.
• Social insurance from the first hire. An employer registers each employee for social insurance within 30 days of the employment starting (Social Insurance Law, Article 58).^⁠[10]
• At least one visit. Registration can often be done remotely, but the bank and the tax bureau act only once the company exists; plan for at least one visit by the legal representative, as registering without visiting explains.
• An exit with its own procedure. Closing a company means liquidation, tax clearance and deregistration, in that order, and abandoning one instead has consequences that reach the people behind it. Both are set out in how to close a company in China.

How do you decide?

• Selling to China from abroad? No entity. Contract through your overseas company and buy local help as a service.
• Testing whether there is a market? Start without an entity, through a distributor or cross-border e-commerce, and register once recurring onshore revenue makes one necessary. Starting without a company forecloses nothing.
• Invoicing customers in China, hiring, or holding stock? You need an entity. Choose a WFOE with the narrowest scope that fits, and budget for the calendar above.
• Talking to a distributor before your brand is registered in China? File first. The no-entity route is the moment the trademark exposure begins, as the answer on selling into China explains.
• Running the company from abroad? Where a company is managed and controlled is a tax-residency question of its own; see tax-residency traps for remote founders.

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