Blog / What is a WFOE in China? How to set up WFOE in China?

What is a WFOE in China? How to set up WFOE in China?

TL;DR: A WFOE (Wholly Foreign-Owned Enterprise) is a limited liability company in China owned entirely by foreign investors. WFOEs offer advantages like profit repatriation and operational flexibility, however the process of setting one up involves navigating regulatory and logistical requirements. WFOEs can host websites in China, but this may not fully resolve China-specific performance issues that a lot of websites face. Chinafy helps optimize website performance in China, even for companies hosting offshore.

Disclaimer: This guide is informational and does not constitute legal advice. Chinafy is not a legal or corporate advisory entity, and, given that every business is different, we suggest consulting with your internal legal counsel if you would like advice on any legal or compliance-related concerns, or alternatively we can connect you with one of our partners.

What is a WFOE?

A WFOE, or Wholly Foreign-Owned Enterprise, is a limited liability company in China that is 100% owned by foreign investors.

This structure allows foreign businesses to have full control over their operations in China, without needing a Chinese partner. For companies expanding into China, a WFOE is often the preferred business structure due to its operational autonomy and flexibility, which allows foreign firms to independently manage day-to-day operations, finances, and strategic decisions.

Unlike joint ventures, where decision-making is shared with a Chinese partner, a WFOE provides full authority to the parent company, making it an attractive option for global companies looking to expand into China.

Why set up a WFOE in China?

China is the second-largest economy globally, and establishing a WFOE is one of the most effective ways for foreign companies to access this lucrative market.

A WFOE offers several significant advantages, including:

Complete ownership and control: Foreign investors can retain 100% ownership, which allows for greater control over operations, decision-making, and strategy.

Profit repatriation: WFOEs can remit profits back to the parent company abroad after paying relevant taxes.

Operational flexibility: Unlike joint ventures or representative offices, WFOEs can engage in a wide range of business activities, including manufacturing, consulting, retail, and more.

However, despite the benefits, setting up a WFOE in China comes with challenges, including navigating the country's regulatory environment and selecting the correct WFOE structure that aligns with your business goals.

Types of WFOEs in China

Before setting up a WFOE, it's important to understand the various types of WFOEs available. The type you choose dictates the business activities you can legally perform.

Here are the 3 types of WFOE that can be established (plus a hybrid model):

1. Consulting WFOE

A Consulting WFOE is designed for service-based businesses, such as legal, financial, or management consulting firms. It typically involves fewer regulatory hurdles and is easier to set up than other types, making it ideal for businesses providing services rather than manufacturing or trade.

2. Trading WFOE (FICE)

A Trading WFOE, also called a Foreign-Invested Commercial Enterprise (FICE), allows businesses to import, export, and engage in wholesale or retail trade. This is an option for companies looking to distribute products within China or across borders.

3. Manufacturing WFOE

A Manufacturing WFOE enables companies to set up production facilities in China. These WFOEs handle the entire supply chain, from raw material sourcing to manufacturing and exporting finished goods. Manufacturing WFOEs must comply with more regulations, including environmental and safety standards.

4. Hybrid WFOE

For businesses engaged in multiple activities—such as a combination of manufacturing, trade, and services—a Hybrid WFOE is the best fit. However, the business must secure approval for each activity and comply with specific regulations.

Steps to Set Up a WFOE in China

Setting up a WFOE in China is a multi-step process that involves navigating Chinese regulations and ensuring compliance with various government authorities.

Chinafy is partnered with agencies like FDI China who help foreign companies enter and develop their business operations in China, so if you’re looking for a smoother way to set up your WFOE, get in touch.

Here is a detailed breakdown of the steps involved during the WFOE setup process:

1. Choose a business scope, name and location

The first step is to define your business scope, which specifies the types of activities your WFOE will engage in. This scope must align with China’s Catalogue of Industries for Guiding Foreign Investment, which categorizes industries as encouraged, restricted, or prohibited.

You also have to consider differences in culture and language when it comes to choosing a business name. This decision could greatly affect market perception and reach.

Once your business scope and name are defined, you will need to select a location, as a WFOE needs proof of a physical office or facility in China. Popular cities for WFOEs include Shanghai, Beijing, and Shenzhen, but choosing the right location depends on your business needs, such as proximity to customers, access to talent, and logistical considerations.

2. Prepare the required documents

To apply for a WFOE, you’ll need to gather several documents, including:

Articles of Association: A document that outlines the business structure, management, and operations of the WFOE.

Lease agreement: Proof that the business has a physical office or facility in China.

Feasibility study: A report that demonstrates the financial and operational feasibility of the WFOE.

Certificate of incorporation: From the parent company, translated into Chinese.

You’ll need to ensure that all documents are properly translated into Chinese and notarized by the relevant authorities.

3. Submit the application to MOFCOM

Once the documents are ready, they need to be submitted to the Ministry of Commerce (MOFCOM) or local commerce authorities. MOFCOM will review the application and approve the business scope, business name, and legal structure.

4. Obtain a business license

After MOFCOM approval, the next step is to obtain a business license from the State Administration for Market Regulation (SAMR). The business license legally allows the WFOE to operate in China.

5. Open a corporate bank account

After receiving your business license, you will need to open a corporate bank account in China for daily operations. You’ll also need a capital contribution account, where the registered capital from the parent company will be deposited.

6. Register for taxes

Register with the State Taxation Administration (STA) for applicable taxes, including Value-Added Tax (VAT) and Corporate Income Tax (CIT). Consult with a tax advisor to ensure compliance with China’s complex tax laws.

7. Obtain additional permits (if required)

Depending on your business activities, you may need to apply for additional permits or licenses. For example, businesses involved in food production, healthcare, or environmental activities may need sector-specific permits.

8. Hire employees and set up payroll

To hire employees, you must comply with Chinese labor laws, which mandate social insurance and housing funds. Establishing a compliant payroll system ensures accurate tax withholdings and benefits.

Can a WFOE host a website in China?

Yes, WFOEs can legally host websites in China, which may help deliver content more efficiently to end users in the country when combined with relevant website optimizations.

However, hosting a website in China comes with certain regulatory requirements that businesses must follow:

Obtain an ICP (Internet Content Provider) license: An ICP license is required for any business entity looking to host a website on servers located in China. This license must be obtained from the Chinese Ministry of Industry and Information Technology (MIIT).

Public Security Bureau (PSB) filing: In addition to the ICP license, businesses hosting websites in China must file their site with the PSB to ensure compliance with local regulations and internet security laws.

Use a China hosting provider: your website must be hosted with a China-approved hosting provider, such as Alibaba Cloud or Tencent Cloud.

Hosting your website locally can improve performance within China, reducing latency and page load times. However, even with China-friendly infrastructure and compliance in place, your website could still face performance issues due to code-based factors.

How to access the China market without onshore website hosting

Most global websites face performance issues in China due to incompatibilities with infrastructure (such as the server or content delivery network you’re using) and code (such as third-party resources that are slow or blocked in China).

If you want your company’s website to deliver a seamless user experience both globally and for China, there’s a way to achieve onshore-like web performance while hosting offshore.

Chinafy can optimize almost any website for China without requiring an onshore hosting, which may be an attractive option if your WFOE also serves other areas of the world and you don’t want to manage two separate websites.

Here’s how it works:

Site generation: Chinafy generates a version of your site which will be used for China visitors – your existing site remains untouched.

Website scan: Chinafy scans your website to identify blocked or slow-loading third-party services (e.g., Google APIs, social media plug-ins and hundreds of lesser known resources).

Resource optimization: It then uses rule-based recommendations to treat the majority of slow or blocked resources, either replacing them with China-friendly equivalents or removing them if there isn’t an equal replacement.

Infrastructure optimization: Chinafy automatically adds near-China content delivery networks (CDNs), as well as load balancers for traffic fluctuations and domain compression to further accelerate loading times.

Content synchronization: Chinafy version of your site gets synchronized with your original site.

Geo-IP-base routing: geo-routing is implemented on the DNS or CDN level of your site so that users in China get sent to the Chinafy version of your site while everyone else will be sent to your original site.

Chinafy bolts onto your existing website infrastructure, allowing you to keep your global website while offering fast and full access to users in China.



Setting up a Wholly Foreign-Owned Enterprise (WFOE) in China allows foreign businesses to enter and operate in China with full control over their operations, management, and profits. However, navigating China’s regulatory environment and ensuring compliance requires careful planning and attention to detail.

Chinafy offers a bolt-on solution to make your website run fast and fully for users from China without changing your existing global site, whether it be hosted onshore or offshore.

Ready to set up your WFOE in China? Contact us to learn more about how we can assist you with the process.

Don't get left behind.
Optimize your website for the world's fastest-growing consumer market. Start today, cancel anytime.
Make your website work in China
Fill out the form and one of our Chinafy team members will reach out to you within 1 business day to book an initial call or with a plan for next steps.
check30%-40% faster compared to using a CDN alone.
checkVerifiable results in just 2 weeks, instead of 1-2 years.
checkLittle to no action required from your IT teams.
"Chinafy has made it possible for us to be sure that our web visitors in China have the same good experience as all our other visitors in the rest of the world."
Michela Nalin Francek, Marketing Manager for Nolato
"Over 1 million engineers use SnapEDA each year all over the world. We were attracted to Chinafy's service because of how easy they made it to support the Chinese market."
Natasha Baker, CEO & Founder of SnapEDA
We are very happy with working with Chinafy. They went above and beyond to ensure we help MIT Professional Education deliver world-class online education in China.
Ignacio Cerro, CFO, Global Alumni for MIT Professional Education
"Consistency is crucial for us.
Chinafy fits the bill of what we were looking for."
Jonathan Rhodes, Marketing Technology Manager of Registrar Corp
"The process was super easy and I'm really glad we selected your team. The experience has been beyond my expectations."
Nicolas Duchesne-Lafoest, Product Marketing Manager 
"Chinafy went above and beyond to help me produce my event. I'm not sure I would have been successful without them. The client was elated that we managed to fulfill the request to live-stream into China so quickly."
Kevin Denham, Technical Director at ADM Productions
To start, please share a bit more about you.
Which website do you want to Chinafy?
Tell us your name?
What best describes your company role?
What's your Work Email Address?
What would you like to discuss?
Have a discount code?
By clicking 'Get Started', I also agree to Chinafy's Terms of Service & Privacy Policy.
close
Thanks for getting in touch!
One of our China experts will be in touch with you via email within the next 24 hours with

1 - Expected post-Chinafy results
2 - Your Custom Plan
3 - Next steps.

P.S. Make sure to check your promotions inbox in case our message lands there.

Please feel free to check out our case studies or blog in the meantime.
[[embed: get started form inline type]]

Related Stories

Load More
×

Notey will use the information you provide on this form to be in touch with you and to provide updates and marketing. Please let us know all the ways you would like to hear from us:

You can change your mind at any time by clicking the unsubscribe link in the footer of any email you receive from us, or by contacting us at community@notey.com. We will treat your information with respect. For more information about our privacy practices please visit our website. By clicking below, you agree that we may process your information in accordance with these terms.

We use Mailchimp as our marketing platform. By clicking below to subscribe, you acknowledge that your information will be transferred to Mailchimp for processing. Learn more about Mailchimp's privacy practices here.