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established by a company entering China. There are many reasons for
establishing a representative office. If a company has identified a
local joint venture partner in the Shanghai area and is beginning the negotiation
process, the company may elect to put a team on the ground in Shanghai to arrange
for visas, hire staff, and perform other administrative tasks necessary for
the eventual establishment of the joint venture. Companies might also
develop closer relationships for future business. Another common
purpose of the representative office is to establish contact with sales
and distribution networks set-up in the area.Representative offices under Chinese laws and regulations serve as liaison offices. This restricts a company from engaging in certain activities. Most importantly, representative offices are restricted from participating in business such as signing sales contracts and collecting on invoices. Companies establishing representative offices are required to have a Chinese state-run company or consulting company sponsor them throughout the process of applying to and registering with SMERT.
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