Foreign Companies Allowed To Create JVs With
Chinese Nationals in Beijing
The Beijing municipal government has announced that foreign
enterprises will now be allowed to set up joint ventures
with Chinese nationals, instead of having to set up JVs
with Chinese companies. This move will be particularly
attractive to foreign companies investing in hi-tech in
Zhongguancun, the hi-tech center of Beijing.
Current Chinese law only allows joint ventures with Chinese
companies, not individuals. This new policy is directed
at attracting more investment in Zhongguancun, which is
known as the Silicon Valley of Beijing. The announcement
of the new policy was made by Zhao Xinxin, who is in charge
of business investment in the Beijing municipal government.
Zhao added that the city was not interested in attracting
JVs for companies which used large amounts of electricity
and water. Since last year, China has been suffering from
severe electricity shortages due to insufficient electricity
generation capacity.
The policy would be especially attractive for services
and software development. Zhongguancun is located close
to Tsinghua
University, China's leading university for technology.
Microsoft's largest research center outside of the US
is located
in Beijing.
In some areas of software development, such as mobile
phone services and online gaming, Chinese companies are
ahead of their western counterparts. Starting salaries
for a new university graduate in software development
are in the region of US$600 - 800 a month.
JVs have long had a poor reputation among non-Chinese
companies because they often involved partnerships with
Chinese entities which had different goals from the foreign
partners. Now that Chinese have had more exposure to western
business practices, and because a large number of Chinese
have returned to China from the west, forward looking
companies are more willing to take a second look at this
type of business organization. Most of the larger multinationals
are now organized as wholly-owned foreign entities (WOFEs).
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