Joint Venture

Joint Ventures in China serve several purposes for both the foreign and Chinese companies that engage in them and prior to the introduction of the WFOE after China’s inclusion in the WTO in 2001, were the primary means by which foreign enterprises could engage in business in the Chinese market. While the Chinese government is opening an increasingly large number of industries to foreign investment, there remain many still closed to foreign companies, without a Joint Venture partner. In this instance, the Chinese government encourages local companies to work with foreign partners to gain technology and management expertise, while the foreign companies gain early access to the Chinese market and the ability to secure market share.
At the same time, as China increasingly liberalises the economy and allows more foreign investment into what were traditionally parts of the economy only open to domestic firms, the ability for foreign companies to access these parts of the Chinese market, with or without a Chinese partner are becoming easier.
Are Joint Ventures Necessary Today?
There remain many industries that are closed to foreign companies in China, often on the grounds of heritage or national security. Increasingly, however, companies will find that industries that were once closed are now open to them and do not require a joint venture partner to access them. For these companies, registering a WFOE is often sufficient to run operations in China. Even if a company wishes to partner with a Chinese company or individual, there are many solutions that may well be more efficient in terms of time, capital, and bureaucracy than a JV.