This China FICE Features page was last updated on May 16, 2012
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China FICE Features & Characteristics
What is a FICE and why is it different to a normal WFOE
A Foreign Invested Commercial Enterprise, more commonly know as FICE (in some cases even further shortened to Foreign Invested Enterprise or "FIE") is fast becoming a common investment vehicle for Mainland China based foreign business. Reason being; The FICE is a genetically enhanced, characteristics enriched form of a WFOE, but in contrary to the WOFE, under the business model of a FICE foreign invested commercial enterprises are allowed to trade within Mainland China.
Therefore Foreign Invested Commercial Enterprises are the only corporate models that non-PRC investors can use to sell their products in China. Because a WFOE is not permitted to carry out sales activities in China Mainland, many foreign investors now set their business model unread a FICE to conduct trading activities in China, as well as export and import their goods for distribution to and in China.
As we already know, a China FICE is the optimum way for a foreign company to distribute its products in China. However, there are three (3) main types of China FICE which are featured as follows:
... may conduct commodity wholesale; commission-based agency activities; import and export of commodities; warehousing services; marketing services; product installation and after-sales services; indirectly engage in retail activities via franchisees.
... may conduct commodity retailing activities; import merchandise; source and export Chinese products; conduct TV and telemarketing, mail order sales, Internet sales and vending machine sales. If applying to open a shop at the same time as applying to establish the retail China FICE, a proposed shop must conform to the urban development plan and the commercial development plan of the city where it is situated.
If applying to open a shop after the establishment of the retail China FICE, then in addition to meeting the above requirement, the enterprise must also have undergone annual inspection on time and passed, and have received all of its registered capital from its investors.
... can manufacture and/or produce it’s own products and sell them wholesale in China, or export them. Another distinct characteristics and outstanding feature is that It actually can combine elements of a Retail and Wholesale FICE. Though, certain restrictions do apply.
The Administration of Foreign Investment in Commercial Fields abolished the extant regional restrictions on foreign investors. This is perhaps the most outstanding feature which allowed to catapult the FICE popularity level straight up. They also expanded business scopes, and the requirement for registered capital was largely reduced. These measure began only in recent years and after China had joined the World Trade Organisation WTO in 2004.
With China aggressively working their own economy to become the world’s largest economy and a rising Chinese middle class, Macroeconomic trends surrounding the new breed of Chinese consumer can be summed up and characterised in one word "Potential". China alone contains a health chunk of the world’s population and in boosting their own consumption and graving for more foreign and brand products they are already avid consumers. Thus, China is fast becoming an enticing marketplace for any foreign Company and the means to get a foot in the door is by means of a Foreign Invested Commercial Enterprise.
Today, foreign investors can set up joint venture, co-operatives or wholly owned enterprises; or they can franchise others to open stores. Moreover, they can engage in one or more selling operations simultaneously, and more importantly, they are now entitled to import-export privileges previously reserved for China Mainland companies only.
The Foreign-Invested Commercial Enterprise features the ideal way for foreign entrepreneurs to enter China’s rapidly growing local: import, export and retail markets. Previously, only Global Corporations fulfilled the criteria required to set up a foreign-invested venture in Mainland China. A good example would be MacDonald’s, but they have no other western competition, basically because no other enterprise is large enough - or was large enough to distribute goods and services in the expanding Chinese market. However, this has now radically altered as the China FICE makes the Chinese marketplace available to a multitude of foreign investors and all nationalities.
Foreign companies can now choose to acquire trading and distribution rights, or to set up a new, standalone foreign-invested commercial enterprises (FICE), including the ability to expand the business scope of an existing an existing and qualifying enterprise.
A Foreign Invested Commercial Enterprise (FICE) is incorporated through the Foreign Economic Relations & Trade Commission in the city or province of incorporation. A FICE is a limited liability company that is similar in most respects to a WOFE. However, unlike a WOFE a FICE can open branch offices anywhere in China, and its activities are restricted to;
Foreign-Invested Commercial Enterprise is a foreign company, which does not necessarily concentrate on production in China but on import and export.
A FICE is a Wholly Owned by Foreign Enterprise (WOFE) with import and export rights. and just alike, a FICE could be completely financed by a foreign investment and a Chinese partner is not required.
Unlike a WFOE, a FICE may be a Joint Venture with a Chinese partner. Exceptions are products like books, sugar, salt, oil etc. For these products a Joint Venture with a Chinese Partner is required.
The Foreign-Invested Commercial Enterprise has quickly become the de facto model for both WFOE & JV who wish to sell on China Mainland.
In general a FICE has no rights for tax advantages and is being taxed like a Chinese invested company. This means tax planning at the pre-incorporation stage must be part of the investment structuring process