China’s government mandates that foreign investors in certain industries form joint ventures with a domestic Chinese partner. This can be done remotely from abroad. The column uses a dataset accounting for all joint ventures in China from 1998 to 2007 to show that this policy is successful in its aim of encouraging technology transfer from foreign investors to domestic operations. Subscribe to New Horizons’ newsletter, our monthly take on the key issues shaping international business. Let's discuss your Joint Venture in China. This will protect them from exposure to any unnecessary legal risks. A JV (either an Equity Joint venture or Cooperative Joint venture) is typically best formed when proper diligence is made, and the foreign entity is attempting to enter a heavily restricted industry. In actual fact, China possesses two types of joint ventures: the equity joint venture (EJV) and the cooperative joint venture (CJV). Solutions that are more affordable than all our major competitors. International Expansion 263 Joint Venture There are two types of joint ventures in China—an equity joint venture (in which profit and risk sharing are proportionate to the equity of each partner in the equity joint venture) and a coop- A joint venture is the coming together of two companies/individuals to form a single entity that shares their respective markets, resources, technical knowledge, assets and all of the profits gained from the leveraging thereof. Of all foreign direct investment in China, 19%—or $23 billion—came from JVs in 2014, and 21% of new foreign-investment ventures are JVs. Note that a Joint-Venture usually implies a transfer of technology. China drops JV requirements for foreign companies BEV China import tariffs Joint Venture PHEV Xi Jinping Now it’s official, the government in Beijing has dropped the requirement for foreign car manufacturers to team up with a local joint venture partner – and sooner than expected. © 2020 New Horizons Global Partners | Privacy Policy | Terms | GDPR. In practice, our legal department will ensure take care of a series of legal procedure with the Chinese Municipal Commission of Commerce, the Chinese Administration for Industry and Commerce, as well as the Chinese Administration of Foreign Exchange & Tax Bureau regarding the company bank information and fapiao, to be updated in the government system in compliance with the respective officers of each jurisdiction. In China two different kinds of Joint Ventures exist: Equity Joint Ventures (EJVs) and Cooperative Joint Ventures (CJVs). a minimum of 25% of the investment from the foreign partner a two-tiered management structure made up of a board of directors and a management team (general manager and deputies) that is contractually appointed and legally responsible for the daily operations of the company Cooperative joint venture (CJV) Joint ventures established in China are subject to the Laws of the People’s Republic of China and the law for foreign investments.Such establishments are prohibited from functioning on Chinese territory if they violate the Chinese law, if they do not comply with the requirements for aiding the country’s economic development of if they are found to be detrimental to the environment. Do not get into any business relationship with an entity in China that you cannot terminate by a simple contract termination notice. Our China attorneys consistently see the following mistakes with China joint ventures: 1. On Tuesday, Chinese President Xi Jinping announced a planned rollback of the manufacturing foreign ownership limits first set forth in the 1990s, which require that manufacturing operations in China be at least 50% Chinese owned. While the lawyer is correct in identifying a strict relationship between capital and equity when it comes to EJVs, the CJV does not require capital or assets to be in the same proportion as equity. Serving business owners for years now, we are a trusted, experienced and leading company for joint venture registration in China, and other services like opening of the bank account, work visa application and accounting. When launching a China joint venture, the requirements include a very thorough understanding of local customs. China to Relax Joint Venture Requirements for Manufacturing. A: Equity joint ventures are the second most common manner in which foreign companies enter the China … But none of this early work conducts a comprehensive empiric… Resolutions of the shareholders’ meeting of the invested company; Notarized/authenticated documents of the new shareholder’s identity; Credit certification documents of the new shareholder (issued by banks); Audited financial reports of the company for the recent year; Documents related to connected parties, various application forms, etc;. The office of the U.S. Trade Representative accuses China of using "joint venture requirements, foreign investment restrictions, and administrative review and … If the proposal is not supported with a detailed set of financial projections, don’t do it. Under the new Foreign Investment Law, which is set to come effect on January 1, 2020, the distinctions between the EJV and CJV structures will be abolished. businesses establish, maintain, Existing research (e.g. Dedicated accounting team to make your company's monthly compliance activities and government liabilities. (b) Required to appoint one Chief Representative. This liability is then restricted to the JV and does not extend to the parent company. Let Us Help You, Business Advisory on Corporate Establishment, Click to share on Facebook (Opens in new window), Click to share on LinkedIn (Opens in new window), Click to share on Twitter (Opens in new window), Click to share on Reddit (Opens in new window), Click to email this to a friend (Opens in new window), Legal Updates Businesses in China Should Note from July 1, Hainan Free Trade Zone: Tracking its Progress, An Introduction to Doing Business in China 2019, Human Resources and Payroll in China 2019-2020. Limited to (a) Marketing activities for the Head Office, and (b) Liaison and coordination with business contacts for the foreign head office. Hire into multiple countries with a single provider.2. But in some industries, regulatory restrictions on foreign ownership make joint ventures the only viable option for producing goods locally. Strategies to guide your global expansion, Home » Our Global Reach » China Business Solutions » Company Registration in China » Joint Venture in China. Equity joint ventures are the second most common manner in which foreign companies enter the China market and the preferred manner for cooperation where the Chinese government and Chinese businesses are concerned. China also agreed not to use Chinese companies to obtain sensitive technology through acquisitions. As China’s leading administrative specialist, New Horizons supports foreign corporations to incorporate a Joint Venture in China. 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