Despite the fact that more and more foreign investors intend to form a Wholly Foreign Owned Enterprise (WFOE) rather than a Joint Venture (JV), there can be genuine reasons as to why a JV partner would make sense.

Industry restrictions: Though China is step by step opening to foreign investors since its entry into WTO, there are still certain industries that China wants to maintain control. Such industries include mining, aerospace, oil and gas, telecommunication and others.

Resources sharing: A JV partner could readily share with you their existing supply chains, channels, manpower, production facilities which might cost a foreign investor huge investment and long time to establish otherwise. By leveraging JV partner¡¯s resources, a foreign investor might quickly access into the China market.

However, the prerequisite of a successful JV is you find the right JV partner in China; otherwise, you will soon face all the possible issues that a JV might have. The most frequent issues include: culture differences, management conflict, who makes decision etc. So when you are planning to form a JV in China, due diligence is a must step before you decide which company you partner with.

Due Diligence services can include:

Business Information collection

Information about enterprises throughout China; information collection on government and municipal policies, laws, current and historical business trends; and open profiles of various enterprises and key decision makers who can have an influence on the proposed project.

Commercial Credit and status investigations

including: company registration; analysis of corporate history; corporate structure; company background, key person information, information on executives; financial profiles; banking relationships; auditing advisor and controls, operating situation; staff size; range of products; facilities; profiles of subsidiaries and affiliates; current challenges, market capabilities and more.

Business Fraud Investigations

in-depth investigation on business fraud and also provide you with professional legal consultant service to solve the problem and diminish your losses.

Investment services including investment feasibility analysis

business partners' credit and status reports; locating and recommending agent and joint venture partners for foreign companies; bank, accounting and legal services selection investigation and recommendations, comprehensive inquiry services; and more.

Being a lawyer in China, I have experienced many cases caused by the unsuccessful JV partnership. Though Beijing Limin Law Firm could provide due diligence services and help foreign investors to choose the local partner, we still recommend our client to choose WFOE option unless it's industrial restricted to form a JV. By running a WFOE, you will have the full control and flexibility to develop the market.

Any questions or demand on due diligence, please feel free to contact Beijing Limin Law Firm.