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Business Scope

Business Scope of Representative Offices

The business scope of a Representative Office (RO) should be clearly stated in the application document prepared by the applying foreign enterprise. After approval by the relevant authority and registration with the AIC, the business scope will be stated in the Registration Certificate for the RO. A RO can only engage in business activities which are within the business scope as set forth in the Registration Certificate.

Normally, ROs can only engage in non-operational activities in China, such as liaison, product promotion, market research and technology exchange. However, if a bilateral treaty between China and the home country of the foreign enterprise provides that ROs established by enterprises of both countries should have the authority to engage in direct operational activities, such provisions should prevail.

ROs will have the authority to engage in economic activities and sign economic contracts which are necessary to maintain the existence and function of the ROs. For example, a RO entered into a purchase contract with a computer company, whereby the RO will purchase a computer for office use. This computer purchase contract should be valid because the purpose of this contract is to satisfy the basic needs of its operation.

The right to engage in activities to maintain its operations is an intrinsic right of a RO. Such activities are not business activities. Therefore, such activities should not be restricted by the business scope of the RO. However, based on the above example, if the RO is to resell the computer to a third party for profit, the RO should be deemed to be engaged in business activities. Such activities clearly exceed the business scope of the RO, accordingly, the AIC may order the RO to stop its operational activities and impose a fine of less than RMB20,000.