Foreign investment in China started with a trickle in the early 1980s and has increased to the extent that China is now siphoning off a significant percentage of the world’s available foreign investment funding. With China’s accession to the WTO and the continuing vitality of its economy, this trend seems likely to continue for the foreseeable future. Nevertheless Romeo Abdo, China remains an unfamiliar and challenging place to do business for many small and medium sized enterprises (SMEs). A popular way for an SME to get its feet wet in the China market without risking a lot of capital is through the establishment of a Representative Office (RO).
Before going into the “how” of establishing an RO in China, perhaps it would be best to ask “why?”. Most companies that establish ROs in China do so because they are much easier to establish than direct investment vehicles such as joint ventures and wholly foreign owned enterprises, and generally require only about a tenth of the capital outlay. ROs are also permitted to operate in the shrinking list of industry sectors that are forbidden to direct investment vehicles.
Conduct direct business activities: An RO’s activities must be confined to product promotion, market research, liaison, and the like, and it may neither charge fees for its services nor engage in profitable activities such as direct sales or manufacturing (although they are subject to taxation under certain circumstances)
Directly hire employees: It must utilize an authorized human resources agency that will refer suitable candidates to the RO in exchange for a certain percentage of employee salaries. Some ROs make an end run around this system by directly recruiting and negotiating with employment candidates and sending their names to the authorized human resources agency so that it can then ‘refer’ these candidates back to the RO. While this practice doesn’t seem to have caused many problems with the Chinese authorities so far, the formalities of referral and salary deduction must be complied with.
Brazil has grown in popularity amongst investors at an incredible pace over the past 5 years, inevitably leading to huge price increases on what was previously ‘dime a dozen’ real estate. As the appeal of the region continues, increasing numbers of investors are searching for different ways of making huge capital growth at rock bottom prices.
Land investing in Brazil offers speculators an opportunity to enter the market and build on existing portfolios, at the lowest entry level prices with a greater selection of exit strategies. Land Investing Brazil has compiled a list of the most frequently asked questions from clients keen to enter the Brazilian market and make the most from their investment.
Why is it so cheap? The northeast of Brazil offers everything a person could want for a dream lifestyle, yet the local population have until recently been unable to develop the local resources. The lack of capital, high interest rates, low wages and lack of foreign investment have resulted in prime unspoilt land in a stunning destination. Government incentives to promote tourism for the development of this region has opened the doors to foreign investors, bringing in capital and benefitting from huge growth at the lowest prices.
What constitutes good land for investment? Prime land for investment in the northeast of Brazil is that which comprises of features in demand. Stunning visual surrounds offering the ‘wow factor’ is something that buyers will always want. Close proximity to established towns with good road connections will drive prices up faster. The areas that are being developed offer excellent connections with good infrastructure and within easy reach of international airports. It is advisable to avoid agricultural land, even though the prices are cheaper, as limited exit strategies will apply. The connection of utility services to the land, or the possibility to have them connected in the near future will enable even greater returns in a shorter period of time.
What are the exit strategies? Land offers a greater variety of exit strategies to a typical apartment or villa purchase, with little or no maintenance costs. Many land investors in Brazil opt for Land Banking, holding onto prime plots for a period of time while the demand grows, the infrastructure develops and the value increases dramatically. If a land is purchased prior to obtaining permission for construction, the price is often much lower and will offer substantial gains once the permission is obtained. Land purchased with permission to construct can present the buyer with the option to build, selling the finished product at prices that are often double the seller’s outlay. Developers are snapping up large plots for hotels and multiple units, knowing the demand from European and North American buyers is growing at an incredible pace.
What are the restrictions on foreign ownership? Throughout Brazil, for the purchase of land, apartments, villas and other real estate, there are no restrictions on foreign ownership. The Brazilian government are actively promoting development to foreign nationals, fully understanding the growth of the economy is greatly assisted by foreign investment.
What types of properties can be built? Some land purchases will have set parameters relating to the planning consent. Pre-purchasing research should include a full understanding of what the buyer intends to do with their Brazilian land plot, to ensure the type of land being purchased fits the buyer’s requirements. Restrictions on plots should be explained during the search process to ensure correct advice for finding the ideal plot of land. The types of properties to be built can include a villas blocks of apartments, hotels; the choices are only restricted by the buyers intended cash outlay.