Joint Ventures in China


Today more than ever the hot industry in Chinese joint ventures is the automotive industry. This is because the Chinese Government has decided it is necessary to encourage domestic automotive production from a wider range of companies.¹ At least in China there is an additional reason for a foreign business to work within the joint venture framework that does not rely on the traditional breaking into the foreign market formula.

One of traditional reasons a foreign company might decide to create a joint venture with a local company is that the foreign company has no contacts within the local company’s state. As the foreign company will be relying on the local company’s contacts to do business the relationship between the two joint venture partners is essential. With the Chinese government’s guidance that further automotive joint ventures are necessary for foreign automakers to do increased business in China, the relationship will be based on mutual interests. Mutual interest and market focus is an essential element in a successful joint venture; without this confluence of interest the joint venture is ripe for short and long term bickering and potential dissolution, which can be a very bad thing in China.

However, once the decision has been made to create a joint venture the counsel for the partners have little choice but to form that joint venture, or find alternative work. The following is meant to assist counsel in forming a joint venture in China; however this paper is only a short practice guide, designed to give counsel a general understanding of joint ventures in China. This guide should not be used alone, without any further resources; some good ones are to be found in the following footnotes. Read entire paper in the pdf.

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