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Foreign Investments

Since 1978, China has encouraged foreign investment as a cornerstone of their development efforts. Since that time many laws have been written an re-written defining and re-defining the nature of this investment. Foreign investment has grown in enormous proportions fueled by the lure of a 1.2 billion person marketplace and low cost labor. All of this despite ongoing concerns over the safety of the investment in a "communist" country.

Key Stats-1997(Source: Chinese Embassy), in USD:

  • Foreign Exchange reserves: $140 billion

  • Overseas Investment in China: $51.9 billion

  • Jobs created by Foreign funded business: 17 million

  • Trade Surplus: $34 billion.

  • The U.S. trade deficit with China is the second only to Japan and is expected to exceed Japan in the near term.

To WOFE or to JV?, that is the question:

Foreign investors can establish their operations as a Wholly Owned Foreign Enterprise(WOFE or WFOE) or as a Joint Venture(JV) with a local Chinese partner. The Chinese government clearly wants JVs. But, is that in your best interest? If you are simply setting up an assembly or manufacturing operation for export, taking advantage of low cost labor, then a WOFE may be the answer. If you are planning to gain access to the domestic market, then JVs are the likely solution. But, this is no ironclad rule. You need to explore the ins and outs of each alternative. And to make it more complex, their are a variety of ways to set up the Joint Venture.

For more information, see Domestic Sales issues or Forms of Incorporation. The latter topic explores and compares the differences between JVs and WOFEs.

Business Risk:

There is risk in any investment. That is what business is all about...risk....and reward. Anyone looking to invest anywhere and on any project should perform an assessment on the project inclusive of Business Risk.


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