Three primary investment forms are commonly used by foreign companies to establish a permanent presence in China — the Sino-foreign Joint Venture, the Wholly Foreign Owned Enterprise, and the Representative Office.
Sino-Foreign Joint Ventures
This investment form requires the foreign company to team up with a Chinese partner. As Chinese companies are typically short on money (particularly hard currency), the foreign partner usually provides the bulk of the funding while the Chinese partner supplies land use rights, deals with the Chinese bureaucracy, and helps recruit employees for the venture.
Sino-foreign Joint Ventures can be divided into two types — (1) Equity Joint Ventures, and (2) Cooperative Joint Ventures (also known as Contractual Joint Ventures). In an Equity Joint Venture, the parties are obligated to divide their respective contributions to the joint venture (whether in cash or in kind) into discrete ratios, which ratios must be strictly adhered to when apportioning profits both during the ventures operation and after liquidation. In a Cooperative Joint Venture the parties need not calculate a contribution ratio for each partner and...
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