• Flower
  • 2017-08-10 14:38:00

How to Form a WFOE in China, Part 12: Do You Really Even Need One?

From a business perspective, taking most products into China (both industrial and consumer products), marketing it, selling it, and then delivering it, is a massive task for most companies. China is a big and diverse country and it should be viewed as many markets, not just one. Using an experienced Chinese distributor or distributors is oftentimes the best way for foreign companies to sell their product in China.

Distribution contracts with Chinese companies have much in common with US distribution agreements, but they also almost always also have stark and important differences. The United States provides distributors with all sorts of legal protections. In the United States, it can be difficult or expensive to terminate a distributor and it is not at all unusual for distributors to pursue litigation when their distribution relationship terminates. Chinese law has no special protections for distributors. China has no requirement for payment of any special compensation to a distributor whose distributorship is terminated. Our China distribution agreements nearly always provide for applying Chinese law in a Chinese court and they typically do not bother with provisions that try to work around distributor protections china company formation.