Joint Venture (JV)

A joint venture is a business arrangement in which the participants create a new business entity or official contractual relationship and share investment and operation expenses, management responsibilities, and profits and losses. The Chinese authorities encourage foreign investors to use this form in order to obtain exposure to advanced technology and improvement in management of state enterprises as well. In return, the foreign investors can enjoy low cost and a potentially large Chinese market share, and share risks respectively.

Wholly Foreign-Owned Enterprise (WFOE)

A wholly foreign-owned enterprise is a business formed in China entirely with foreign capital, totally under foreign control, and without any formal Chinese ownership participation. WFOEs are set up as limited liability entities and represent separate legal persons. WFOEs can generally control their own governance through articles of association. Many foreign investors find this type of form attractive because of the full control, which comes with 100 percent ownership.

Representative Office (Rep. Office)

A Rep. Office is an entity involved in business activities, which do not result in direct profits being made by the office. Rep. Offices are not allowed to operate as partnerships or sole proprietorships in China, for they are not recognised as legal persons. However, they are allowed and encouraged to conduct such indirect operational activities as liaison for business purposes, introduction of products, market research, and technology exchange among others.