[ By Richard Hoffmann, Senior Associate, Dezan Shira & Associates Beijing Office ]
Joint Ventures (JVs) were the first business entity opened to foreigners and for a long time have been an unpopular vehicle for international investors looking to China for lower production costs or for market access. Yet recently, we notice more than ever before, there are an increasing number of foreign investors wanting to set up a JV in China. JVs are coming back!
The Joint Venture often sounds like a warm and friendly way of doing business, a marriage made in heaven. You are likely to be offered many such wonderful sounding deals. Many Chinese factories are looking for long-term security in foreign sales via an overseas partner, or to get access to western technology. And because this structure has been around for a long time, many foreigners who have not yet done business here have heard about it. It sounds much more attractive conceptually than the main alternative, a Wholly Foreign Owned Enterprise.
But wait, China’s business history is littered with thousands of cases of unhappy partnerships and broken dreams – the analogy with human marriage is a common one, with the popular Chinese idiom “same bed, different dreams” often quoted. One major Western oil company once told us, only partly in jest, their JV was a win-win situation – meaning the Chinese won twice. Business is not about being warm and friendly; it is about making profit and running a successful company. You may well end up becoming close friends with a commercial partner, but it is not the primary objective.
