If You Have To Do a Joint Venture

Do not provide cash, your technology, high technology equipment and they provide, land, buidings, people, old equipment.

Be ever so careful of joint venturing with some Chinese owned company that has excellent local contacts. Those very contacts will likely be your undoing. Possession and having home field advantage are considerable advantages.  I have seen companies locked out of their facility because it was on the land of the JV partner, and the government was sympathetic. I have seen companies without water and electricity as the JV partner could shut those down.

I have not personally seen these things happen in a National Level Industrial Park.

The best JV partner is a passive investor who is not interested in your market at all.  They do not struggle with you over the management and just want more profits.

If you had some great workers and some average workers and some problem workers, which would you send to the partner where you only own 30%?  Which people would you keep in your 100% owned company?  Do not accept anyone from the joint venture partner unless you are extremely savy.

Have both partners contribute cash and then buy things. That is very clean. Keep control of the people who will be on the inside. Rent or build where they do not have power to shut off your breathing if things go wrong.   They can also go to their their friend at the court and get your bank account frozen even before you are named guilty for anything.  It is a possible negotiating method to freeze your bank account. I have also seen this.

Take cash from both parties and invest in a reputable and appropriate park for your industry or service.

Trust and check everything. Have good help. Making the first steps well can do so much to make things work down range.   If you are cash poor, and will be outside a very reputable location or even in a third tier city, you can still succeed, but you need very sharp  China help.

Thoughts?

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Posted in: China, Chinese Culture, Market Entry, Negotiating

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