Joint Venture
A Joint Venture (JV) in China is a form of limited liability company joined by a partnership between a foreign investor and one or more local Chinese partners. Well-known companies such as McDonald's, KFC, and Starbucks have applied a JV structure in China.
Local Insight, Foreign Capital.
The main advantage of a JV structure is that the foreign partner can gain more accurate insights, leverage local talent, and receive resources and support from the local partner while doing business in China.
With the introduction of the new Foreign Investment Law, effective January 1st 2020, the shareholding ratio, regulations, and organizational formulation have changed. Equity Joint Venture (EJV) and Cooperative Joint Venture (CJV) structures were replaced by the new governing law. Existing joint ventures formed before the new Foreign Investment Law are entitled to a 5-year transition period to adopt and upgrade their structure to comply with the latest regulations.
Setting Up a Joint Venture
Before moving forward with the incorporation process, it is vital to conduct due diligence on the intended JV partner. Apart from finding the right partner, there are several pre-considerations to take into account.
Right & Qualified Partners
Identify and vet partners who are the right fit for your business goals.
Capital & Investment Scope
Define the capital contribution and investment scope of each party.
Drafting the LOI
Draft a Letter of Intent (LOI), project proposal, and the name of the JV.
Restricted Industries Check
Check that the business or involved industry is permitted, encouraged, or restricted for JVs. Get a free consultation from Wilto.
Business Scope & Structure
Define the business scope and select the right JV structure.
Article of Association
Define the Article of Association: board structure, liquidation, trade unions.
Local Company vs. Foreign Company Considerations
When structuring a JV, each side of the partnership brings a different set of considerations to the negotiating table.
Local Company
- Business tax
- VAT
- Customs duty
- Investment
- Profit distribution
Foreign Company
- Registered capital ratio
- Business culture
- Business model
- Internal structure
- Liability
Incorporation Process of a JV
There are many opportunities for a JV to form a business. Proper JV structuring and application should seek professional advice to ensure a smooth process and avoid unnecessary legal risks.
Qualification Check
Qualification check under China's Negative List.
Application & Document Submission
Expert-guided preparation and submission of the JV application documents.
Business License Approval
Approval and release of the JV Business License.
⚡ 15 working days in total
*Processing times are average estimates — actual duration depends on the complexity of each case.
Interested in a Joint Venture?
If you are interested in setting up a JV in China, Wilto is available to assist and share relevant information with you. Kindly contact us to get more detailed information.
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