In the last decades there is a stronger cooperation between China and The European Union at the governmental level (e.g. negotiations for an EU-China investment agreement or China’s one Belt One Road policy), leading to a better environment and more business opportunities for European business and investors. Setting up a joint venture (JV) with a Chinese partner is still a very common method of entering the Chinese market and in certain industries it is the only way of registering your business in China, such as mining businesses, telecommunication and information technology services, breeding and seeds developing industries as well as in the medicial field

(for more information, see 2015 guidelines for industry catalogues in China). Basically, there are two forms of joint ventures: Equity Joint Ventures (EJV) and Cooperative Joint Ventures (CJV or Sino-Foreign Contractual Joint Venture).

By establishing an EJV with one or more Chinese partners, you create a separate limited liability company in which each party participates in gains and losses according to the percentage of equity that he has contributed to the EJV. An EJV is an independent legal entity, which has its own financial administration. Its income is subject to corporate income tax law. Neither a Chinese party nor the foreign party is allowed to extract the shares out of the EJV. According to Chinese law, an EJV should have at least 25% of its shares coming from a foreign investor and the EJV should have certain portions of its capital represented in the form of equity (cash, real-estate, materials, equipment, intellectual property rights or land-use rights).

In contrast to an EJV, it is possible to have much more flexibility in structuring and operating a CJV. Subject to a cooperative joint venture contract, the parties involved in a CJV may choose to set up a partnership and still operate separately and bear liabilities independently or they can also register the CJV as an independent legal entity. The duration of a CJV, the forms of shares, its business structure, its management structure as well as the ways of risk-sharing and profit-sharing will all be defined by the joint venture contract. Another feature that distinguishes a CJV from an EJV is the flexibility of foreign contributions. On the one hand, there is no minimal foreign investment requirement to initiate a CJV and the contribution by a foreign investor can be in various forms, even as labour, technology, recourses and services. On the other hand, the foreign investing party is allowed to withdraw its registered capital or a portion of shares from the venture during the duration of the CJV contract.

Typically, establishing a JV in China requires you to prepare a number of written documents, including a certificate of incorporation, a feasibility study, articles of association of EJV or CJV, bank reference letters, board resolution of investors, personal details of investors, copies of passport of the legal representatives, rental agreements, appointment letters of chairmen and board members as well as an environment evaluation report (only when environmentally sensitive industries are involved).