Establishment and Operation of a Limited Trading and Distribution Company in China
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Welcome to ChinaInvest.biz Magazine - June 2010 Issue

ChinaInvest.biz Media Limited is a member of Klako Group and will be providing monthly insight into investment, tax and operational issues for foreign companies entering and operating in China.

With the issuance of the new regulations by the Administrative Bureau for Industry and Commerce for Representative Offices, in this issue we aim to outline an alternative and perhaps in the longterm
more advantageous solution to operating in China under a legal umbrella. It is important to provide companies looking for the most effective solution to enter the market with the necessary establishment
and operational details. In addition Representative Offices already established in China, who are looking to find other options, should be aware that establishing a Limited Company is a viable decision to operate more successfully in China.

We hope this information can be an informative tool for all companies looking to establish or are already operating Limited Trading and Distribution Companies in China..


Establishment and Operation of a Limited Trading and Distribution Company in China

By Klaus Koehler, Managing Director, Klako Group

Since January 2010 the Chinese government has modified its regulations concerning Representative Offices (RO). In brief the corporate compliance changes are as follows:

  • The Parent company of the Rep Office must be at least 2 years old
  • The Rep Office must be renewed on an annual basis by submitting notarized documents from the Parent company
  • The Rep Office is only permitted to have 4 foreign representatives
  • The deemed profit tax rate has been changed from 10% to a minimum of 15%
Companies who are looking to source and /or start sales activities in China might find directly setting up a Limited Company as an advantage.

To read full article, please click here to view magazine (PDF file)

If you require assistance with the above subject, please contact us at This e-mail address is being protected from spambots. You need JavaScript enabled to view it

All information in this report is verified to the best of our ability and is assumed to be correct at time of release; however, Klako Group does not accept responsibility for any losses arising from reliance on the information provided within.


Interview with Mr. David Benz, the Chief Representative of Vaughan Benz HK Limited

V aughan Benz is one of the world’s leading manufacturers of custom made four and five star hospitality (hotel) furniture Established in 1986, they are one of the few furniture companies that continuously
has maintained a factory in the US (in Los Angeles) Labor costs in the US and California in particular are very expensive, and since the early 1990s, they have outsourced some manufacturing to countries
with lower wages including Mexico, El Salvador and the Philippines They started manufacturing in China in 2001 and found the pricing, work ethic and infrastructure superior to the other countries, so they decided to establish a strong manufacturing presence in China Their pricing is now competitive with Fortune-500 sized furniture manufacturers for guestroom furniture – something they were unable to do when they attempted to do so from their USA factory

The Representative Office was established in July 2007 to supervise the production of the furniture at four “partner factories”, nearly all in the Shanghai area and surrounding provinces They currently employ nice people: a fully bilingual Operations Manager with a strong furniture background, four Quality Control Managers (including one supervisor) that work in their “partner factories” on their behalf to ensure that the quality of the product meets the high standards, one Pricing Manager, who negotiates prices with the factories and communicates back with the Pricing Manager in Los Angeles, and three CAD drafts people, who execute the furniture designs in Auto Cad software and send the drawings back to the Los Angeles headquarters office for revision and approval.

To read full interview, please click here to view magazine (PDF file)