A China-Foreign Joint Venture was a business entity where both a local Chinese partner and a foreign partner carry on business in China and share profits and losses. Chinese law mandates that requires joint investment, management, and profit-sharing according to the ratio of each partner’s capital contributions. Each party’s capital contribution is converted into their interest in the venture, with foreign parties required to contribute at least 25%.

Filings for a China-Foreign Joint Venture must be completed by the Chinese partner, followed by the signing of a fair and equal agreement by all parties involved. The registrar’s office must then decide whether to approve the venture and issue a certificate within three months of receiving the filing. Within one month of approval, the joint venture must appear at the province’s business regulation agency, file for the formation of a business entity, and obtain a business license.

Risks of Joint Ventures
Intellectual property licensing and protection in Chinese joint ventures is very challenging. Disputes can only be avoided if the parties have clear agreements on the ownership, licensing, and protection of their intellectual property rights. Additionally, China-Foreign Joint Ventures are known for having major communication difficulties and cultural conflicts around management decisions. Therefore, close cooperation by both parties, especially prior to instituting the joint venture, is advised, since disagreements on business strategies and management approaches between partners can put business stability and continuity at risk.

The China-Foreign joint venture qualification was retired by the Foreign Investment Act of 2019.

Further Reading

See our comprehensive resources on China’s Foreign Investment Law. and an overview of FDI regulation in our Foreign Investment Law FAQ.

Translation Guide

See: 合资经营企业