Why opt for a joint venture in China?

The creation of a joint venture with a Chinese partner allows foreign investors to:

  • Use the workforce, facilities, networks, channels and other resources of the local partner;
  • Avoid administrative problems and other bureaucratic complexities;
  • Access certain sectors and industries in China;
  • Benefit from the experience and market knowledge of the Chinese partner to facilitate the business’ cultural integration.

It is not necessary for the partners to share the same strategic or commercial interests.

Keypoints

What you should know about joint ventures:

  • Enables foreign investors to use the partners’ labor force and already existing facilities, networks, channels, etc.

  • Partnering with locals also helps to to avoid administrative issue and other bureaucratic complexities.
  • Some sectors and industries in China are only accessible for foreign investors when creating a joint venture with Chinese partners.

  • The parties involved may not share the same strategic or commercial interests.

Conditions for the creation of a joint venture in China

  • A joint venture must take the form of a limited liability company (LLC)

  • No minimum capital is required.

  • The proportion of the investment contributed by the foreign joint venturer(s) shall generally not be less than 25% of the registered capital of a joint venture.

  • It is possible for the partners to make investments, either in cash, through technology or industrial rights.

  • A joint venture is managed by a board of administrators and managers.

Drawbacks of a joint venture

Choosing a joint venture to establish a business in China requires certain concessions and a few difficulties:
– Cultural integration, a factor for success, can be very slow and difficult;
– You do not have total control over the commercial entity, and will have to deal with occasional disagreements with the partner;
– This “marriage” requires adapting the organizational structure in order to manage effectively and avoid conflicts.

Launching a joint venture in China necessitates a very thorough understanding of local customs. By collaborating with INS Global Consulting, you receive the advice and expertise of an experienced and effective company. Since 2006 we have been enabling numerous companies to access the Chinese market through joint ventures that have ensured their success in the country.

China Market Entry Vehicles

Have a broader perspective on China’s market entry vehicles

WFOE

Commercial capacity

Very high

Administrative efforts

Very high

Hiring autonomy

Very high

Cost

High

Setup time

6 – 12 months

Sales Office

Commercial capacity

High

Administrative efforts

Low

Hiring autonomy

High

Cost

Low

Setup time

1 – 2 months

Rep. Office

Commercial capacity

None

Administrative efforts

Low

Hiring autonomy

Medium

Cost

Low

Setup time

2 months

Joint Venture

Commercial capacity

Very high

Administrative efforts

Very high

Hiring autonomy

Very high

Cost

High

Setup time

6 – 12 months

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