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About This Site  amlinkint.com is a site dedicated to provide comprehensive information about China, a rapid growing country yet full of mysteries. There are two main categories of the information: business and travel. Business information include doing business in China, import from or export to China, product sourcing in China, Chinese cultures revealed, and China economy and its global impacts. Contained in the travel section are:  what you need to know when traveling to China, complete tour guide of major cities such as Beijing, Shanghai and Xi'an,  and how to find cheap travel services in China.

 

Business Setup

Wholly Invested >>

Joint Venture >>

Local Representation >>

 

Major Industrial Park >>

Equity joint venture >>>    Contractual joint venture >>>

 
 

 Setting Up Contractual Joint Venture Business in China

 
 

As the name goes, this type of joint venture is rather similar to a equity joint venture but in a contractual form. Before the joint venture, all liabilities, rights and responsibilities are agreed upon a contract thus the parties involve will negotiate the form of administration and profit division. Contractual is different from equity joint venture because profit sharing is not based on ratio of investment but according to form of investment as per contract.

The major difference between an equity joint venture and a contractual joint venture as means in China market entry is that the latter neither necessarily calculates the shares in the form of currency nor distributes profit in proportion to their share, but share profit according to the form of investment and the ration of profit sharing as per the contract. Joint venture is the most common method in China market entry, there are many advantages of joint venture:

   It provides great flexibility to arrange business relationship in a way that benefits both parties. This applies to the management of the joint venture and its financing

   Comparing joint venture with wholly foreign-owned enterprise, joint venture investing reduces capital expenditure as well as manpower. With joint venture, its easier to obtain the capital, the technology as well as local society and government support

    Joint ventures allow the firms to enjoy a higher degree of marketing control which would shorten the time taken to obtain local market information

   A foreign investor does not need to set up a new corporation in China under joint venture structures. The foreign investor and Chinese partner participate in the joint venture by doing business using the Chinese business license under a co-operative and contractual arrangement. This would allow each partner to focus on their own specialty

However, there are also some disadvantages of joint venture as means in China market entry:

  Comparing with license and contract manufacturing in China, joint venture requires the foreign enterprise to pump in more funds which results in higher risks.

  Due to culture differences and profit sharing issues, valuable time would have been wasted after settling an agreement. Therefore, correct communication techniques are important.

  Undesirable income tax and liability implications if joint venture is construed as a partnership.

  Parties involved do not have the autonomy of a sole proprietorship in the decision making process.

Sample joint venture contract >>>

Equity joint venture >>>    Contractual joint venture >>>

 
 
 
 

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