Setting Up a Joint Venture in China

Everyone, every business is headed to China. In the last two decades, China has emerged as a heaven for investors, as entrepreneurs rush to take advantage of the high-potential market for higher profits.

This is why every big business out there,

specially multinationals, such as Apple and Epson, has a presence in China. In the same way, if you want to grow your business into a global brand, setting it up in China will be a great idea.

One of the common methods of entering and taking advantage of the Chinese market is setting up a joint venture. A joint venture is a type of limited liability company that requires you to enter into a partnership with a Chinese partner. Here is a comprehensive guide to assist you.

Select the Right Partner

The first step, which we consider the most important, is selecting the right partner. Here, you need to comprehensively research the potential candidates to ensure only the best one is selected.

Consider drawing a list of potential partners and analyze each of them based on associated pros and cons. You might also consider setting up a Representative Office (RO) to help you select the preferred partner.

The right partner to form a joint venture with should have ample resources and skills to help your enterprise grow rapidly after establishment. The partner should also have well-established trading networks and access the sectors that you would otherwise find difficult to access.

Prepare the Right Documents

After selecting the right partner, you need to work together to prepare the required assortment of documents, including the following:

• Letter of intent: This is a document by both parties that indicate they have agreed to start a joint venture.
• Project proposal: Once the letter of intent is drafted, the Chinese partner is required to prepare a project proposal, including all business assumptions by the two investors about the business.
• Feasibility study: A feasibility study is done after the proposal, and it forms the basis for further work. It determines the viability of the business idea before the business can commence.
• Name approval: Before you can commence with setting up a joint venture in China, you need to get the preferred name approved by the local Administration of Industry and Commerce (AIC).
• Create the Contract and Articles of Association:- These documents are very important because they define the basis of the joint venture operations. For example, the articles of association define the management rule principles.
• Get a Leasing Contract for the JV: As you go about preparing the documents, make sure also to get a leasing contract for the business operations. Therefore, make sure to select the location depending on the nature of the business. For example, Shenzhen is a hub for smartphones and IT equipment. While Shanghai has cut a name as a center for financial and automobile businesses.
• Certificate of Approval for the Joint Venture (JV): Once you have all the documents and AIC accepts them, a letter of approval will be issued by the Municipal Commission of Commerce (MOC). This approval is what you will use to apply for a certificate of incorporation.

Does the process of setting up a joint venture in China look complex? Most people find it complex, and, therefore, you should consider seeing help from a professional agency.