Joint Ventures

By Gregory Sy

Joint Ventures, in this specific context, refer to a registered legal entity cooperation between at least one foreign investor and Chinese investor. Previously, this structure was more common, though it has been steadily decreasing due to the disadvantages set out below.

Joint Ventures can be classified into two different types:
- Equity Joint Ventures
- Cooperative Joint Ventures

The main distinction between the two is that the latter provides for more flexibility in distribution of revenues. Whereas Equity Joint Ventures require that the joint venture partners share in distribution of profits based on their proportionate Read the rest of “China Business Vehicles: Part III” or post a comment

Starting from 1 December 2004, a new investment vehicle has been available to foreign investor – Chinese government allow and encourage foreign investor to set up “Foreign Investment Commercial Enterprise”(FICE) in China to conduct wholesale, retail, and other permitted businesses. Such a type of business entity possess of the total right of trade and business. It can conduct import/export activities by itself, independent of the local import and export company or setting up a manufacturing company.

Read the rest of “Registration of a FICE in Shanghai” or post a comment >>

Wholly Foreign Owned Enterprises

By Gregory Sy

Wholly Foreign Owned Enterprises (WFOEs) or limited liability companies whose investors are purely foreign are quickly becoming the most popular method of foreign investment in China. While foreign companies once thought (and were often compelled by laws) that a local partner was necessary to operate business in China, this is increasingly no longer the case in a wide range of industries.

Characteristics of WFOEs:
- Between one to fifty shareholders
- Restricts the right to transfer shares
- Prohibits public offering of shares
- Equity is divided based on contribution to registered capital and not allocation of shares
- Liability is limited to the amount of registered capital contributed Read the rest of “China Business Vehicles: Part II” or post a comment

By Gregory Sy

While domestic companies have a wide range of alternatives in establishing business operations in China, foreign companies are more restricted, with the most common business vehicles for foreign investors being:

- Representative Offices
- Wholly Foreign Owned Enterprises 
- Joint Ventures (Cooperative and Contractual)

1. Representative Offices

General
The fastest and easiest method for a foreign company to establish a presence or ‘footprint’ in China is through registration of a Representative Office of a foreign company. Read the rest of “China Business Vehicles: Part I” or post a comment

When a company sets up operations in China they appear to be faced with two distinct choices: ‘going local’, or imposing the dominant business culture of their organization.

It’s not an easy choice, and there are no clear cut answers as to which route will bring you the best results. In the absence of a definite conclusion it can become a battle of wills to see which culture will win.

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