A brief guide to Chinese company law | RÖDL

updated on 18 March 2025

Since the introduction of the Foreign Investment Law in 2020, the legal framework for investment in China has been simplified and standardised.  

Short Overview:

This article provides a comprehensive overview of the various ways in which foreign companies can enter the Chinese market.

Overview of the most important Types of Companies in China

Wholly Foreign Owned Enterprise (WFOE): This type of company is ideal for companies wishing to operate in China without local partners. It is similar to a German GmbH and offers full control and limited liability.

Joint Ventures (JV): This type of company enables partnerships with Chinese companies and offers the advantage of being able to utilise their existing structures.

Company limited by Shares (CLS): This type is suitable for larger companies that want to raise capital through the sale of shares. It provides access to capital markets, but is more complex to set up.

Partnership Enterprise (PE):  This flexible and less bureaucratic type is particularly attractive to start-ups and entrepreneurs. There are several variants with different liability rules.

Representative Office (RO): This option is suitable for companies wishing to explore the Chinese market. An RO is not allowed to do business, but is used for market research and to support liaison activities.

Choosing the right type of company depends on the individual needs and objectives of the business. Each option has its own advantages and challenges, which we explain in detail below. Our article is intended to serve as a guide and facilitate the entry of foreign companies into the Chinese market.