joint venture in China
Joint ventures are a good way for China to get capital investment, advanced technology, equipment, and management experience from abroad.
Joint ventures are mainly of two types in operation in China:
Equity joint venture: this type of joint venture may be run in China or overseas, or in Hong Kong and Macao. Both Chinese and foreign partners pool together their resources after negotiating the proportion of the investment, operate and take risks and assume profits and losses jointly.
Contractual joint venture: this type of joint venture is like this. Foreign partners provide funds, equipment and technology, while Chinese partners provide land or the right to use the site, factory, building, premises, labor and specific management. The responsibilities, right and obligations are set by two parties of the cooperation according to the contract.
I have conducted an investigation into various factors directly affecting us including financial stability, sales growth, productivity, employee morale, and so on, and reached a conclusion that we must venture into the overseas market for the following two reasons.
First, the rate of sales growth has dropped from 25 percent to 10 percent for the past five years. This means that the domestic market is not large enough to accommodate our supply. We need a new, larger market to supply our products.
Second, the employee morale seems to be slackening, as the absenteeism has increased by 8 percent for the past five years. It seems that some workers are much too protected and have lost self-discipline. It would be a good idea to let them have a new experience by sending them to work overeas.
