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Oct 18

Business Venture Regulations – China

China business ventures in joint holdings are permitted in manufacturing, import/export and global sourcing as well as sales operations in China. In addition, a joint China business venture is also allowed to market its products through own sales network in China apart from import and export while being free to conduct global sourcing.

-Regulations for China Business for Import/Export and Global Sourcing

An Equity joint venture: China business, for manufacturing, import & export or global sourcing is set up as a limited liability company under the Law of PRC on Joint ventures through foreign and Chinese investment participation. Profit and loss are shared by the parties proportionately to their contributions to registered capital in joint China business. An equity JV can conduct both import/export and global sourcing.

Co-operative Joint Venture: In many ways, a Co-op JV may be thought of as an Equity JV going by the China business law on Chinese-Foreign Contractual Co-operative Enterprises for Co-operative Joint Ventures. However, differences between a Co-op China business and an equity JV include and specify that Co-op JVs don’t need to be legal entities. Secondly, the profits/losses, arising out of conduct of business, global sourcing and import/export, may be shared in any agreed proportions by members in Co-op JVs unlike in an equity JV. All fixed assets are transferred to the Chinese partner upon withdrawal by the foreign participant. Co-op JVs enjoy entitlement to import and export besides global sourcing of materials.

China business JV registration must be through application to MOFTEC or its branch offices before setting up the JV for manufacturing, import/export and global sourcing. MOFTEC at its discretion decides whether to grant approval but does so within three months. The JV China business must be registered, upon the grant of approval, with the State Administration for Industry and Commerce (SAIC), within a month and obtain license to commence its China business. It is this license that legally establishes a JV as a China Business.

-Global Sourcing, Import/Export Permissions and China Business

The China business law, permits wholly foreign owned enterprises for import & export and global sourcing since 1986. Foreign enterprises can establish China business for manufacturing, import/export or global sourcing subject to conformity of Wholly Foreign-Owned Enterprises (WFOE) while global sourcing is permitted.
WFOE is regarded as a limited liability China business entity owned entirely by foreign investors. These China business entities are not branches of foreign companies. Although WFOEs are barred from certain businesses they enjoy freedom of import & export and global sourcing besides China business. Setting-up a China business venture for manufacturing, import/export or for global sourcing is easier than other Asian countries.

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