Before moving forward, it is important to determine if the foreign company is qualified to create a JV under China’s Negative List. By entering into a joint venture, overseas investors may benefit from marrying the expertise and knowledge of local conditions from the Chinese side, with the advanced technical knowledge and management expertise they bring to the table. In November 2018, the company announced new Chevrolet models for the Chinese market, including an extended-wheelbase Malibu XL, a new Chevy SUV concept a new Monza. Against a general trend towards liberalisation, the revised Investment Catalogue imposes new and tighter restrictions on investment in regards to vehicle manufacturing and education. As certain Chinese markets liberalise and allow foreign investors, the local expertise offered by Chinese joint venture partners could prove invaluable. Once the above documents are ready and accepted by the AIC, the Municipal Commission of Commerce (MOC) will issue a formal approval letter in favor of the Joint Venture incorporation assigning the entity an enterprise code. Take advantage of Canada’s free-trade agreements, foreign investment agreements, WTO agreements, and more. Both documents need to be in written forms and must be signed by all partners. Some of the top Chinese automotive companies are almost entirely dependent on selling overseas brands. Joint Ventures (JV) are one of the corporate structures available to foreign investors to invest in and have access to the Chinese market. JVs should apply for the name registration within 30 days upon receiving the approval of the project proposal. Obtain a certificate of approval for the establishment of the JV from the Municipal Commission of Commerce (MOC). All applications must be submitted in Chinese and, in addition, may be written in a foreign language. The incorporation process of a JV normally takes 5 to 6 months as it can be a complex corporate vehicle. Differently from WFOEs (Wholly Foreign-owned Entity) and Representative Offices, a joint venture involves at least one Chinese partner which can be either an individual or a corporate.. Answer a few short questions to assess your readiness to do business abroad. Once the approval certificate has been received, investors must apply and register for a business license with the AIC. Rules, regulations and access to the domestic market clearly favor this method. It is made up of two components: Registered capital refers to the equity investment in a JV. In short, a Joint Venture in China is a limited liability company that is created through a partnership between a foreign-invested enterprise (FIE) and Chinese investors, who share the costs, rewards, and the management of the joint venture. To find a qualified and reliable partner, rigorous research and due diligence on all aspects should be conducted in advance. But the plane maker only does a small amount of manufacturing in China and doesn't have any major joint ventures there. Request a quote now to take the next step towards your dream business. In addition to filling annual taxes, JVs must submit an annual audit report to the AIC. The MOC application should include the following documents: Project proposal briefly describing the JV, Feasibility study setting out the JV’s investment size and purpose, operational and management structure, number of employees, utility requirements such as power and water, brief description of supply and distribution network, brief estimate of revenues and expenses, Certificate of incorporation or equivalent of the corporate investor(s) (certified by the Chinese Embassy or equivalent overseas). Specifically, multinational firms seeking to conduct foreign direct investment (FDI) in China are often required to form legal business relationships with a domestic Chinese partner, typically in the form of international joint ventures (IJVs) that establish a new offshoot firm. If the right to the use of the site does not constitute a part of a Chinese partner's investment, the joint venture shall pay the … The ideal partner will simply be the one whose resources, skills, and assets are complementary to the needs of the masterplan for the Chinese market. The minimum legal requirement is: Despite these minimum amounts, the authorities will approve the amount of registered capital on a case-by-case basis depending on: The amount is then written into the company’s articles of association. For individual investors a passport copy is required (certified by the Chinese Embassy), Capital credit certification from each investor’s bank, Copy of passport for (i) JV’s director, (ii) JV’s legal representative, and (iii) JV’s supervisor, Leasing contract for office space in China, certification of real-estate ownership, landlord’s identification, Letter of authorization (authorizing the JV to accept service in China on behalf of the investor(s)), In some cases, latest annual audit report from the foreign investor provided by a certified public accountant, Any prior reviews or approvals from government branches (for example land-use rights if required), Record establishment of the business and official seal engraving with the Division of Entry & Exit Administration of the local Public Security Bureau, Obtain certificate with the organization’s code number from the Technical Supervision Bureau, Register with and obtain certificates from both the state and local, Tax reports should be submitted to the Tax Administration Department on a monthly, quarterly and annual basis, Register with and obtain a certificate from the, Obtain certificate of financial registration from the local Finance Bureau. As a foreign investor, there are two major reasons to create a JV: This is the amount of capital required to start-up the business until it becomes self-sufficient from its investors. An EJV is a limited liability company where profits and losses are distributed by the ratio of capital contributions. Chinese Joint Venture Rules and Respect for IP Cause Concerns . Access the business sectors which are restricted (not prohibited) in equity ownership terms by the Chinese authorities, Gain insights from the local partner’s experience in, Leverage the partner’s existing channels for sales and distribution, Obtain local treatment when participating in official and public tenders, The costly and lengthy process to scout for and engage a proper Chinese partner, The complexity of establishment and ongoing maintenance, Difficulties in merging different company cultures and management styles, Intellectual property protection and management issue, Conflicting interests represented at BoD (Board of Directors) level. The standard fate for joint ventures in China is that once the Chinese JV partners either believe they no longer need their foreign joint venture partner or simply no longer want to share in the JV spoils with their foreign JV partner, they will work to drive the foreign partner out of the venture. The process to establish a JV will generally take between 4 to 6 months. Joint Venture(JV), which can be established in a variety of ways. Where the financial and procedures of a joint venture are inconsistent with the provisions of the Tax Law, the tax liability shall be determined according to the provisions of the Tax Law. With 100 multilingual professionals based in Shanghai, Beijing, Suzhou, Guangzhou and Shenzhen, we are able to offer the very best local knowledge to our international clients. If the right to the use of the site does not constitute a part of a Chinese joint venturer's investment, the joint venture shall pay the Chinese Government a fee for its use. By Steve Brachmann April 2, 2015 0 Print Article. Equity Joint Venture (EJV) The Equity Joint Venture (“EJV”) is probably the most common of the foreign investment vehicles in China. Until now, foreign players could only own up to 49% in a Chinese fund management firm. Establishing a joint venture in China A joint venture (JV) is a form of foreign invested enterprise (FIE) that is created through a partnership between foreign and Chinese investors, who together share the profits, losses and management of the JV. Normally operation of a join… Readers should take note that the Government of Canada does not guarantee the accuracy of any of the information contained in this report. Documents in both languages shall have equal validity. Once a business license is issued, certain post-registration formalities must be completed including: JVs are also required to appoint at least one individual (of any nationality and residency) as the supervisor of the JV. The JV’s investors must pay 15% of the registered capital of the JV within the first three months after issuance of the business license (similar to a certificate of incorporation under Canadian law), with the balance due within the first two years. Serving as an entry guide for foreign investors in China, the Negative List refers to a comprehensive manual outlining certain areas where foreign investment and businesses are prohibited or restricted. Access guides, information and other resources to learn about doing business in international markets. The power to appoint and remove the General Manager of the China joint venture company. Moreover, JPMorgan has applied to win an auction to purchase the shares needed for a 70 percent majority equity stake in its Chinese futures joint venture. The first step for foreign investors is drawing up a list of one or more potential Chinese partners, listing the pros and cons of each case, and then go through independent due diligence to at least ensure the legal capacity and financial position of the partner. Hawksford is an established provider of company registration and outsourced corporate services in China. Get introduced to the right people, and connect with potential business partners and clients by participating in a trade mission or event. China to drop 50:50 rule and allow foreign majorities in joint ventures 18 April 2018 China is to allow foreign vehicle manufacturers to own more than 50% of their joint ventures with domestic companies, removing a two-decade restriction and giving a boost to business seeking to capture a share of the world’s biggest vehicle market. The Foreign Investment Law has been widely promoted as a framework that will emphasize equal national treatment of foreign investment, putting foreign investors on equal footing with domestic investors in the Chinese market and giving them equal protections. The JV model presents a variety of options for management and financial structures broadly divided into the following two groups: CJVs require the same two-tiered management as EJVs. 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