CONFIDENTIAL #B
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equity joint venture company is a limited company with a legal identity separate from those of the Chinese and foreign partners. The profits and losses of an equity
joint venture are shared among the partners according to the shares of capital contribution. Foreign participation, by law, shall not be less than 25% of the registered capital of the firm. No maximum foreign holding is set. Capital contributions of the foreign partners are usually in the form of money, capital goods, industrial property rights and other assets. The Chinese partners, on the other hand, usually contribute land and premises. The value of each contribution is determined through joint assessment by the Chinese and foreign
partners.
11.
Contractual joint venture, on the other hand, is
a more flexible form of economic co-operation not bounded by the Joint Venture Law. Its form can vary considerably, from a simple licensing agreement with foreign management to an elaborate arrangement not much different from an equity joint venture. For the contractual joint ventures, the formation of a limited company with a separate legal
identity is not strictly necessary. Instead, an agreement stipulating the rights and duties of the partners is required. The profits are shared at an agreed ratio, which may or may not be in line with the shares of capital contributed by the parties involved, and the payment of profits may be in the form of products manufactured or
cash.
12.
Notwithstanding some differences in organizational structure, equity joint ventures and contractual joint ventures possess similar degree of
management autonomy.
In principle, they have the right:
G.F. 326
CONFIDENTIAL #2