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Trade Commissioner Service > Country and sector information > China > SME gateway > Establishing a Joint Venture in China

Establishing a Joint Venture in China

A Joint Venture (JV) is formed by one or more foreign investor(s), along with one or more Chinese entities. Usually, a foreign investor should own at least 25 percent of the shares, while a Chinese individual cannot normally be a shareholder in a JV except in certain circumstances.

Foreign companies usually set up a JV for the following reasons:

There are two types of JVs in China, differing in terms of how profits and losses are distributed:

Advantages of a JV

Establishment procedures

Requirements

Applications need to be submitted in Chinese, and, in addition, may be written in a foreign language. Both documents are equally valid. Foreign enterprises are not allowed to directly submit the application documents to the authorities. They need to retain a PRC entity who is authorized by relevant authorities to act as an agent, who will submit the documents to the examination and approval authority on behalf of the foreign enterprise.

Pre-licensing

Licensing

Once the JV receives an approval certificate, investors need to register for a business license with the AIC. The AIC will ask for most of the same documents as MOC, as well as its own standard filing forms. Once a business license is issued, certain post-registration formalities need to be completed:

The complete process to establish a JV usually takes four to six months.

Registration certificate

To register a JV, the foreign investor, as well as the Chinese partner, needs to have the following documents:

Chinese partner

Foreign partner

Key positions

In a JV, the board of directors has the highest authority. The board should have no fewer than three directors appointed by the JV partners, with the ratio between Chinese and foreign appointed directors determined through mutual consideration.

JVs also need to have at least one supervisor to oversee the execution of the company duties by the director(s) and senior management. In addition, a general manager is also required for daily operations, whose position can be concurrently filled by the executive director or a member of the board of directors.

Office/lease requirements

Investors should lease office space before they begin the application process. It is recommended that a clause should be added to the lease voiding the contract without penalty should the JV application is rejected. Office relocation requires a tax clearance declaration report.

Disclaimer:

Dezan Shira & Associates

The Canadian Trade Commissioner Service in China recommends that readers seek professional advice regarding their particular circumstances. This publication should not be relied on as a substitute for such professional advice. The Government of Canada does not guarantee the accuracy of any of the information contained on this page. Readers should independently verify the accuracy and reliability of the information. 

Content on this page is provided by Dezan Shira & Associates a pan-Asia, multi-disciplinary professional services firm, providing legal, tax, and operational advisory to international corporate investors.

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