Chinese law provides for the formation of joint venture business entities by the state, individuals, or other business entities, and these entities have separate legal personality. The investors make capital contributions upon the formation of the business entity, which is then deemed paid-in capital. Typically, a joint venture is by and between a Chinese party and foreign party and is jointly financed and managed by both, who share in profits and losses.

Foreign investors may be business entities, organizations, or individuals, but Chinese parties in joint venture entities must be a business entity—other types of parties are excluded. Upon its approval by the local government agency, the joint venture becomes a Chinese legal entity with separate legal personality and is afforded protection under Chinese law. A joint venture entities in China may only be formed as a Limited Liability Company (LLC), and cannot issue stock or use a corporate organizational structure; rather profit and loss are determined by the ratio of each partner’s interest.

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: 合资企业