A Joint venture is a company set up and invested by Sino and foreign investors. It effectively uses the advantages of local enterprises.

Equity Joint Venture

A foreign company wishing to establish a business in the PRC can do so by means of a Foreign Equity Joint Venture Enterprise in partnership with a Chinese partner.

This is a form of Chinese limited liability company between a Chinese and a foreign party and is therefore a separate legal entity. Each participant contributes to the venture in financial terms by way of an investment of capital and therefore has a stake in the business. This is similar to the holding of shares in a limited company.

However the foreign participant is not able to recover the investment until the termination of the joint venture. The joint venture also brings together the respective skills and technologies of each party.

 Co-operative Joint Venture

A more flexible way of operation with a Chinese partner is a Co-operative Joint Venture which is governed by the Law on Chinese Foreign Co-operative Enterprises promulgated in 1988 and amended in 2000. This legal framework allows individual agreements such as profit sharing, which need not be restricted to the equity contributions. It differs mainly with the equity joint venture in that the foreign investor may repatriate his original investment prior to the expiration of the joint venture.

This kind of partnership structure has limited applicability between foreign individuals or entities and Chinese entities.