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For the latest information on Joint
Ventures, China Consulting,
Outsourcing
in China and China
training courses
please visit www.bdinternational.co.uk
China – Joint
Venture Checklist
China’s size, diversity and rapid change, not to mention
its culture and the broad influence of government on business, all contribute to
making it a difficult operating environment. Nowhere is this more clearly
demonstrated than in the process for establishing a joint venture or a wholly
foreign-owned enterprise (the two procedures are similar except in the case of
the latter there are no partner negotiations).
The procedure for establishing either enterprise in China
is time-consuming and complicated. The most effective means of reducing the
period of time required is to have clear objectives which are communicated to
the Chinese and to have undertaken the most thorough and rigorous preparation.
These will allow you to pre-empt some of the key issues which may arise during
the process.
The brief check list below outlines some of the considerations
which need to be taken into account. It is part of a comprehensive set
of checklists, which, together with workshops, case studies and model
documentation, are used by Business
Development International in our "Joint Venture Toolkit"
covering all aspects of establishing an enterprise in China, from initial
market research to operational issues once the enterprise starts business.
Preparatory
Information
- What
are my objectives in setting up this joint
venture?
- Are
these objectives shared by my prospective partner? May he have a hidden
agenda?
- Is
a joint venture the correct entry vehicle? Are there other ways of meeting
my objectives?
- Is
this project in the "encouraged" or "restricted"
categories for foreign investment?
- Who
are the key Chinese decision-makers for my project?
- What
are the proper procedures for establishing a joint venture in China? Am I
fully conversant with the approvals process?
- What
do I expect my Chinese partner to contribute to the project? What does he
expect me to contribute?
- Which
laws, rules and regulations cover the establishment of joint ventures in
China? Are all the regulations published or are some neibu (hidden)
regulations?
Capital
Contributions and Financing
- Should
I channel my investment through a Chinese holding company? Do I meet the
criteria?
- How
should my contribution to the total investment in the joint venture be
structured?
- How
do I check the value of my Chinese partner’s non-monetary contribution to
the project?
- What
can I include as technology transfer? How do I value it?
- What
are the target markets for the joint venture? If mainly domestic, how will I
balance foreign exchange inflows and outflows?
- Can
I obtain Renminbi financing? How do I go about obtaining this?
- Am
I aware of the pitfalls to be found in Chinese model contracts?
Sales,
Marketing and Distribution
- How
will I get my products to market in China?
- What
do I need to know about the market for my products in China? How do I find
out this information?
- How
much of my production should be exported?
- How
do I recruit and train a sales force?
- How
will the joint venture find reliable suppliers of raw materials etc.?
Human
Resources
- How
do I recruit staff? Can I choose who I employ? How do I remove
unsatisfactory employees?
- How
do I retain staff?
- How
will Chinese Labour Law affect my freedom of action in employment matters?
- How
much will I have to pay my staff and employees?
Other
Issues
- How
can I protect my Intellectual Property Rights? If you have not already done
so register your trademarks now!!
- How
do I resolve disputes with my partner or with the authorities?
- What
tax privileges are available to me?
The above checklist is intended to serve as a reminder of
some of the key issues which should be addressed when negotiating a joint
venture in China, it is not necessarily comprehensive. For a detailed discussion
of what is required, please contact Business Development International.
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