Joint Ventures

A Joint Venture (JV) is an organisation jointly owned by one or several Chinese and foreign partners. A JV can be formed by way of equity contribution, where ownership, risk and profit are shared based on each party’s monetary contribution. Alternatively a JV can also be incorporated with liabilities and profit distribution being decided by contractual agreement.
 
Joint Ventures may be beneficial in a number of ways. A good local partner may contribute market knowledge and strong marketing and distribution channels, and they may help reduce the costs and risk of market entry. In certain restricted sectors, such as automotive and insurance, forming a JV with a Chinese company is still the only permitted route for establishing a permanent presence in China.

The challenge of establishing and running a successful Joint Venture is finding and nurturing the right partnership. Partners have to overcome issues such as mismatched expectations and differences in business culture and practices. The ability to maintain effective communication, and control where necessary, is also crucial. It is essential that you carry out corporate and financial due diligence before you sign up to any partnership. Companies should also plan an exit strategy. Like a marriage, it is better to have a pre-nuptial agreement than a messy divorce.