OVERVIEW
A China representative office (RO) is an office of a foreign enterprise set up in China for liaison with Chinese businesses and customers on behalf of its parent company. A RO is not considered to be a separate legal entity. It must be emphasized that a representative office may not carry out direct revenue earning business activities. For example, it cannot enter into purchase/sales contracts and cannot receive payment for services, issue invoices nor repatriate moneys overseas. However, a RO can open bank accounts and employ staff to maintain liaison with customers and suppliers. Its head office can also enter into contracts with its supplier/customers in China in its own name, but not in the name of its RO. Therefore, before a foreign investor establishes its presence in China using foreign investment enterprises (FIEs) such as equity joint venture, cooperative joint venture or a wholly foreign- owned enterprise, it could first set up a representative office to test the Chinese market.

ADVANTAGES OF REPRESENTATIVE OFFICE
The simplicity and short time required for establishing a RO is the main reason for its popularity in the China market. Unlike foreign investment enterprises ("FIEs"), representative offices are not required to meet stringent requirements for items such as capital contribution. The strong points to establish a RO are as follows:
- Least capital injection required (currently around RMB100,000).
- Can handle market research, sourcing, project investigation for mother company, who in turn to execute trading function.
- Can hire local staff to work from labour market..
- The parent company should be established least 1 year before.

DISADVANTAGES OF RO
RO is not considered to be a separate legal entity. So it only works as liaison purpose,
The restrictions are as follows:
- Limitation in activity. No trading or invoicing is allowed.
- Local staff should be hired via government admitted agents.
- Although not profits, cost expenses still attract tax liability

HOW LONG TO FORMATE
To establish a RO is therefore largely a matter of complying with the prescribed application procedures. Once all the necessary documents for application are ready for submission, government approval can be as long as 25-45 working days.

TERM AND TERMINATION
In China, the maximum duration approved for a representative office is three years (five years for insurance companies and six years for banks.) The duration date is calculated from the date on which the approval document is issued by the authority. If the representative office wishes to continue its operations after the expiry of the registration certificate, it must renew its registration by submitting an annual report of its business operations and its application for renewal 30 days prior to the expiry of the existing registration certificate.