There are two types of foreign company in China: wholly foreign owned enterprise and representative office.
The Wholly Foreign Owned Enterprise (WFOE) is a limited liability company wholly owned by the foreign investor(s). In China, WFOEs were originally conceived for encouraged manufacturing activities that have either exported orientated or introduced advanced technology. However, with China’s entry into the WTO, these conditions were gradually abolished and the WFOE is increasingly being used for service providers such as a variety of consulting and management services, software development as well as trading.
The Representative Office(RO) is a non-legal entity operating and representing its parent company. A RO is not allowed to engage itself in business activities, issuing invoices on its own, remitting outward, signing sales or purchasing contracts, or receiving income from services performed but may act as a liaison and promotion office for its parent company. It may be possible for a RO to engage in direct business activities provided that there is a bilateral treaty between the home country of the foreign parent enterprise and the PRC which clearly specifies a RO of the enterprises of that country is entitled to do so.