WeWork, once valued at $47 billion, filed for bankruptcy in the U.S. on Monday, leaving many questioning the potential repercussions for WeWork China. This concern hints at possible complications for the multitude of businesses in China that have registered their business addresses with WeWork—a legal requirement for formal business operations in the country.
Despite the global news about WeWork, WeWork China, which separated from its parent company in 2020, stated on Tuesday that the recent developments do not affect their operations. The company assured stakeholders of their independent operations and management capabilities.
Yet, the commercial property outlook in China is not looking great either, so should the situation turn unfavorable for WeWork China, it could pose operational challenges for the many businesses reliant on its services. The complex process of updating office registration, necessitated by WeWork’s potential collapse, threatens to disrupt business operations and incur substantial costs due to the lengthy and intricate procedures involved.
WeWork’s China Presence
In China, WeWork’s presence was marked by aggressive expansion in the years following its arrival in 2016. It capitalized on China’s booming office-sharing market, forming WeWork China. It also made a notable $400 million acquisition of nakedHub, further adding to its locations in major cities.
WeWork China, with 60 locations in major cities, secured significant funding, including a $500 million investment in 2018, largely backed by SoftBank.
However, in recent years, WeWork has grappled with a series of setbacks. High operational costs and a rapid expansion strategy that outpaced demand have led to significant financial losses. The subsequent pandemic dealt another blow, as demand for shared office spaces plummeted due to the rise of remote working.
The Impact on Office Registrations
For businesses in China registered with WeWork, the news of its potential bankruptcy carries substantial implications. We have explained these consequences at length in a previous blog.
Changing and updating office registration in China is notoriously cumbersome, often taking up to three months and requiring the legal representative to visit government offices in person. This is further complicated by the need to deregister with one district bureau before registering with another if changing districts within a city.
Moreover, the advisory costs for navigating this transition can be steep. Due to the complexity of the process, we recommend seeking professional assistance from Chinese accountants or lawyers. The fees for these services can vary significantly, with a range from $1,000 to $5,000.
Additionally, banks have their own sets of procedures, which are often complex and varied. This complexity presents further challenges for companies that need to update their banking details in addition to office registration changes.
Seeking Solutions Amidst WeWork’s Crisis
WeWork’s downfall is a stark reminder of the inherent vulnerabilities within China’s shared office sector. While these arrangements offer flexibility and reduced overhead for startups and small businesses, they also come with risks. Office registration complexities, especially with a provider like WeWork’s instability, can disrupt operations and incur costs.
The China Desk by Kinyu offers a strategic alternative to setting up your own entity in China, providing workspace solutions and compliant hiring services. Our support helps companies avoid the administrative and legal entanglements of shared office spaces. This ensures smooth operations and provides peace of mind.
Experience the benefits of a tailored business solution in China; please book some time with one of our team members, or download a case study.
