Sino-Foreign Equity Joint Venture (EJV) is a limited liability company incorporated by a Chinese partner and a foreign company. It is capable of capable of buying land, hiring Chinese employees independently, constructing buildings etc. The partners share profits, losses and risk in equal proportion to their respective contributions to the venture’s registered capital.
Joint ventures are usually established to exploit the market knowledge, preferential market treatment, and manufacturing capability of the Chinese side along with the technology, manufacturing know-how, and marketing experience of the foreign partner. Equity joint venture shares network and the famous brands already established by the Chinese enterprise with foreign investors and enables them to have substantial and lawful reduction of various fiscal charges.
Equity can include cash, buildings, equipment, materials, intellectual property rights, and land-use rights but cannot include labor. The value of any equipment, materials, intellectual property rights, or land-use rights must be approved by government authorities before the joint venture can be approved.
After a joint venture is registered, the entity is considered a Chinese legal entity and must abide by all Chinese laws. As a Chinese legal entity, a joint venture is free to hire Chinese nationals without the interference from government employment industries as long as they abide by Chinese labor law. Joint ventures are also able to purchase land and build their own buildings, privileges prevented to representative offices.