Sales Representative in China

Overview by

Commercial Intermediaries

Trading Companies
  • Type of Organization
A foreign company wishing to export products in China must obtain distribution and trading rights. The foreign company can have recourse to a Chinese trading company. These trading companies generally have authorisations to trade a vast range of products. The big trading companies have some offices everywhere in the world and on the Chinese territory. However, transport and diversity of the regions do not allow them to operate on the whole of the Chinese territory. The FICEs (Foreign invested commercial entreprises) can also obtain import and export licenses since 2006.
  • Main Actors
China Qingdao Hong Jin Trading Company Ltd, Nexfar Ltd, Wenzhou Nanlong import & export trading company Ltd,
  • Type of Organization
In China, distribution comprises services of an agent, wholesaler and retailer services. A commercial intermediary is indispensable for selling products: a wholesaler, an import-export company, etc.
  • Main Actors
D2D China, Chinese wholesalers

Using a Commercial Agent

The Advantages
Using services of a Commercial agent is necessary in China in businesses. In an invitation to tender process, a Chinese will prefer to speak with a Chinese. Alternative to be preferred to a local institution in some professions. It is necessary to have recourse to several agents for each region, the Chinese territory being wide.
Where to Be Vigilant
Role and responsibility, capacity to involve or not involve the company, capacity to negotiate prices, etc.
Elements of Motivation
The commission amount is an important element of motivation.
The Average Amount of Commission
10 to 20% according to the sectors.
Breach of Contract
During the end of the agency contract or if the agent ends the contract, the agent is entitled to a remuneration of an appropriate amount.
Finding a Commercial Agent
Finding a commercial agent
Find Sales and Distribution Service Providers in China on

Setting Up a Commercial Unit

The Advantages
To be able to locally manage its own presence, its own teams and marketing trends. In other words, one can establish commercial relations with China directly from Europe. But to obtain convincing results, investments must be made in developing relations by establishing a local presence. Whether for purchases or sales, the problems faced are primarily dependent on the execution of services.
Where to Be Vigilant
- Cultural differences, difficulties of managing Chinese teams
- administrative difficulties
- Relative absence of legal groundwork (attention copyright)
- Dissensions with foreign partners

Read the work of Benoit AMS on the difficulties faced by foreign companies in making deals in China.
Different Possible Forms of Settlement
  • A Representative Office
For the majority of the foreign companies, the first form of establishment in China is the representative office, and for a long time was the only form of presence with 100% of foreign assets possible in China. It remains today the fastest form of the simplest presence, as for its formation, and cheapest (for formation as well as operational charges). The representative office does not facilitate trading on the Chinese territory, but enables: renting offices (in certain types of building only) , e-recruiting personnel (via FESCO) , organising follow-up actions of market operations, market research, information and promotion of products of the parent company, customer and supplier contact, supervision and coordination of the local operations of the parent company).

The representative office of a foreign company is a "hybrid" structure as it does not enjoy any legal status according to the Chinese law. In other words, a representative office structure does not allow you, for example, registering a brand (registering must be done by the parent company), or to institute legal actions against a third party. Moreover, the existence of the average company representative office, cannot prevent setting up an average Chinese company in the same city. Finally, the Representative office head in China is legally responsible on his own behalf for activities of the structure. The representative office is however a structure adapted relatively well to the management of local partners, suppliers or distributers.
  • A Branch Office
No possibilities of creating a branch office.
  • A Company
Companies with 100% foreign capital (WOFE)this structure presents, on paper, many advantages including considerable independence as compared to the local partner; this may lead to many "problems".
Today, foreign companies can create WFOE (Wholly foreign owned enterprise) in trade (import/export activities with due respect for local sale), production/assembly (local and foreign sale for local and/or export resale or the services (services to companies or to private individuals).

The concerned activity type will have to be defined very specifically in your project. As example, a distributive firm cannot manage logistics, including storage or delivery (logistics is a closed sector to foreigners) and  thus delivery must be sub-contracted to a specialised logistics company. In China, regulations are not the same for everyone; it is arbitrary, complex, changing and opaque. Also, general terms presented by the central administration are only a reference base requiring negotiations on a case-by-case basis with authorities responsible for industrial parks, provinces or districts of municipalities which enjoy broad discretionary powers in the negotiation of foreign investments.

Finally, the WFOE are generally set up for a period from 15 to 30 years.



Evolution of the Sector
Many foreign companies set up sales outlet which function as franchises. In China, foreign companies which set up franchises, in general call upon local partners (in each major city) or sell to a master franchisee which leases and supervises several franchise sectors on the territory. To set up a franchise in China proves to be difficult, being given the legislation and the complications involved. However since its appearance in the Nineties, the number of franchises in China is most significant in the world.
Some Big Franchises
Mc Donald's , fast food
Subway , fast food
Century 21 , real estate agencies
Franchises present in China
Franchise Trade Fair in China
For Further Information
CCFA, Chinese association of department stores and the franchise
Find more on about Selling to China.

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