Setting up even a simple, non-manufacturing WFOE can be a powerful first step in China.

FORBES: Staking Out Your Market Position In China: Part II

Dividends may be paid to the foreign shareholder out of the cumulative net profits of the WFOE.

FORBES: Staking Out Your Market Position In China: Part II

This also places the WFOE in close proximity to their joint venture which solves a few logistical issues as well.

FORBES: A China-Indiana Connection For New Energy Vehicles

Remy have recently closed their WFOE factory in Shenzhen and moved it to Zhengzhou where labor is in greater supply and, therefore, cheaper.

FORBES: A China-Indiana Connection For New Energy Vehicles

The registered capital of a WFOE is the amount that is required to run the business until it can break even, and may be as low as 100, 000 renminbi.

FORBES: Staking Out Your Market Position In China: Part II

Depending upon the amount of registered capital invested, the foreign shareholder may make shareholder loans to the WFOE, with payments of interest and repayment of principal not subject to profitability.

FORBES: Staking Out Your Market Position In China: Part II

Remy, Inc. (formerly Delco-Remy, and formerly part of GM) is already building starters and alternators in China through both a wholly foreign owned enterprise (WFOE) and a joint venture with a unit of ASIMCO.

FORBES: A China-Indiana Connection For New Energy Vehicles

As compared to a Sino-Foreign Joint Venture, a WFOE enables a company to implement its worldwide strategies without having to consider the wishes of a Chinese partner, and with only direct employees involved, a WFOE makes it easier for a company to protect its intellectual property and technology.

FORBES: Staking Out Your Market Position In China: Part II