A joint venture (JV) is created through a partnership between foreign and Chinese investors, who together share the profits, losses and management of the venture.
For foreign investors, there are two major reasons for choosing to establish a JV; these include government requirements for specific industries, and the local partner being in a beneficial position to assist with market knowledge or established networks. It is strongly recommended that you consult with the foreign partner of an existing JV in order to better understand the advantages and disadvantages of the structure before progressing to establish a JV. Due diligence is essential in choosing the correct partner. See Chapter 4 for further information on due diligence in China.
There are two types of joint ventures in China- equity joint ventures and cooperative or contractual joint ventures, which differ predominantly in the ways in which profits and losses are distributed. Like WFOEs, JVs must pay 15 per cent of the registered capital of the venture within three months of the business licence being issued, with the balance due within the first two years. The same minimum investment requirements and consideration by the Government apply to JVs as WFOEs.
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