A representative office (often shorted to rep office or RO) is the simplest and fastest option for overseas businesses to set up an operation in China. In simplest terms, it allows a foreign company to engage in market research or business operations in China, but not to make a profit. In a country where it is typically expensive and time-consuming to establish a new company, this easier setup route is appealing to many companies. For some, this will suit their operations fine (at least initially) and could save significant time and money. For others, it may be clear that a full WFOE setup is required from the outset.
The best option for certain types of company
At FDI China we have experience helping many overseas companies to open a representative office in China. We find this structure is popular in several areas: Early-stage market exploration, particularly smaller companies with restricted budget and resources. Activities such as market research, publicity, and marketing are permitted. Companies looking to make investments in the Chinese market but need to explore/research further beforehand. Companies which only need a simple local presence to carry out activities such as liaising with suppliers, or for quality assurance.