Furthermore, given the importance attached to intellectual property in today’s business world, it is vital that foreign investors take adequate steps to protect their IP from appropriation. We will be discussing the practical aspects of Chinese law and how it impacts business there. The joint part, though, is where the real problem arises. With China’s economy in a downturn and so much uncertainty regarding the future of US/China (and even EU/China) relations, our China business lawyers have of late been seeing a massive uptick in companies looking to do China joint ventures “to share in the risk.” When done right, China joint ventures do share risk. For parties looking to enter the Chinese market, it is essential that they keep in mind the relative immaturity of the Chinese economy; not only are private businesses a fairly recent development, the country’s legal system is still underdeveloped compared to mature markets in the west. What if one of us wants to buy the other one out? Why do you think that is a bad idea? Abstract. He primarily represents companies doing business in emerging market countries, having spent years building and maintaining a global, professional network. Marketing genius Seth Godin beautifully explains why this is the case in his post, “Why joint ventures fail so often“: There are two reasons joint ventures fail. As majority owner, the investor then assumes he has the right to elect the entire board, and thus effectively control the company. To help our clients determine whether they have found their dream JV partner, we have compiled a list of questions they should ask their potential Chinese joint venture partner to determine whether there is sufficient commonality to press forward with their joint venture deal. We set off on a venture in search of something, or to make something happen –- inherent in the idea of a venture is failure. Not only are joint ventures popular with companies embarking on investment into the Chinese market, they are also popular with the Chinese authorities. Me: [Jokingly] Did I say I thought it a bad idea? This can assist both parties to the agreement to stay onside and work within defined parameters. 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. In many cases, technology transfers are effectively required by China's Foreign direct investment (FDI) regime, which closes off important sectors of the economy to foreign firms. In 2017, the company ranked third in terms of output making 3.3 million vehicles. Overseas managers often use an adaptation of their home culture. The problem with China joint ventures is not China-specific; it is joint venture specific. Equity joint ventures are the second most common manner in which foreign companies enter the China market and the preferred manner for cooperation where … JPMorgan took 71% of … How To Increase Your Product Sales TO China, It’s Perfectly Legal for Your Chinese Manufacturer to Copy Your Products, Global Law and Business Podcast – Dominique Tolbert (Hospitality Business and Liberia), Understanding Doing Business in China: Why It’s Not Going to Change Soon But Why It Might Change You, Check Your International Registrations: Like Now. It is necessary to have control over the day-to-day management of the joint venture company. Aligning management structures inside the framework of the JV will help to create a unified culture for the operation. It’s easy and hopeful and exciting to start something, but challenging and often painful to finish it. ● The power to appoint and remove the general manager of the joint venture company. So any venture begins with some question marks. How can you avoid a bad joint venture marriage? What will you contribute to our joint venture, both now and in the future? Organisations embarking on a joint venture in China, irrespective of the industry, should develop their own clear and well defined contracts, amended and adapted to account for commercial practices in China, as well as its legal landscape. “Well, we only have a bit at stake here, so work on something else, something where we have to take all the blame.”. Meetings give us the ability to stall and to point fingers, to obfuscate and confuse. There is a long, documented history of this seemingly minor consideration dooming EJVs. The good news is that this sort of thing never happens to foreign companies that use their own qualified China lawyer, as opposed to their joint venture partner’s lawyer or a lawyer not familiar with China. What really needs to be done to ensure control? These include (but are not limited to) access to land, distribution channels, business licenses, labor, networks, and Communist-party support. Key takeaways: This will allow the US bank to expand its presence across the country’s booming financial industry. Goldman Sachs is set to buy out its China joint venture partner, which will make it the most advanced foreign bank to take full ownership of a mainland securities business. Who will make business decisions for our joint venture? Can our own businesses compete with our JV? However, China's strict commercial laws mean that joint ventures often have to be entered into despite the risks. Americans are feeling less optimistic about doing business in China. 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