What is sold abroad as a China PEO is, inside China, labor dispatch: a licensed local company employs the worker and dispatches them to you. The best-known name for these providers is FESCO, which is not one company but a catch-all label used by many competing Chinese HR firms, some state-linked and some private. Dispatch exists because Chinese law requires an employer to be a legally registered entity in China, which forces foreign companies without one, and representative offices in particular, through a provider. The rules cap what dispatch can be used for, so this page sets out the mechanics and the limits; provider contracts control, and nothing here is legal or tax advice.
PEO in China means labor dispatch
Under a dispatch arrangement the provider holds the employment contract, runs payroll in renminbi, remits the mandatory social insurance and housing fund contributions, and handles employment formalities, while the worker performs their duties for you. This is closer to an employer of record than to a US-style co-employing PEO, because you have no Chinese entity to co-employ with. FESCO is the generic term you will meet most: dozens of local firms in different cities carry the name or the model, with varying ownership and no unified pricing, so the brand tells you almost nothing and the specific provider's licence, contract terms and quoted fee stack tell you everything.
Who must use a dispatch provider
A representative office, the lightest form of foreign presence in China, cannot directly employ Chinese nationals at all and must staff itself through a dispatch agency; commentary on PRC employment law is consistent that rep offices are required to rely on FESCO-type providers for their local hires. A foreign company with no Chinese presence of any kind faces the same wall from the other side: with no registered entity it cannot be an employer, so a provider is the only compliant route to a local hire. A wholly foreign-owned enterprise, by contrast, can and generally should hire directly; policy has moved to encourage direct employment and shrink dispatch usage in registered companies.
The limits on dispatched roles
Dispatch is not a general-purpose employment channel for operating companies. The Labor Contract Law framework confines dispatched workers to temporary, auxiliary or substitute positions, and legal commentary is blunt that a FESCO cannot lawfully be used to hire core staff for a registered company. Representative offices sit outside the proportion caps precisely because they have no other option. Dispatch contracts are fixed-term with little room for negotiation, and providers handle disputes over pay, social insurance and termination as the legal employer. A provider willing to paper your whole permanent team through dispatch into an operating entity is proposing a structure the rules were written to prevent.
What to check before signing
First, the provider's dispatch licence and the actual employing entity's name, since FESCO branding spans many unrelated firms. Second, the fee quoted against what it covers: salary, employer social insurance and housing fund contributions in the employee's city, and the service fee, itemised, because contribution bases and rates vary by city and an unitemised quote can hide margin inside statutory lines. Third, contract terms on termination and dispute handling, which run through the provider as legal employer. Fourth, fit: if you are building a permanent team, price the alternative of registering an entity and hiring directly, because dispatch is designed as a bridge and the rules narrow its long-term use.
Questions people ask about china peo
Is a China PEO the same as an EOR?
In substance yes: the provider is the sole legal employer and you have no entity in the arrangement. The local legal form is labor dispatch, and the constraints that come with dispatch, including the temporary, auxiliary or substitute limitation for operating companies, apply.
What is a FESCO?
A catch-all label for many competing Chinese HR service companies that employ and dispatch staff, run payroll and remit social insurance. It is not a single organisation; ownership, pricing and quality differ by city and firm, so diligence the specific provider.
Can a representative office hire staff directly?
No. A representative office lacks independent legal status to employ Chinese nationals and must engage its local staff through a licensed dispatch provider, which is why rep offices are the one structure exempt from the usual limits on how many dispatched workers a business may use.
When should we switch from dispatch to our own entity?
When the team is permanent and core to the business. Dispatch rules confine registered companies to temporary, auxiliary or substitute roles, and per-head provider fees accumulate, so a growing permanent team usually justifies a wholly foreign-owned enterprise that hires directly.