It is one of the largest capital investments for a Sino-foreign joint venture project to date in the People's Republic.
Under the new agreement, Chinese companies will own at least 51% of the joint ventures, and the foreign joint venture partners will need to provide key areas of technology to even have minority ownership.
As compared to a Sino-Foreign Joint Venture, a WFOE enables a company to implement its worldwide strategies without having to consider the wishes of a Chinese partner, and with only direct employees involved, a WFOE makes it easier for a company to protect its intellectual property and technology.
One recent visitor there wanted advice on an unfair-dismissal suit he is bringing against a foreign joint-venture.
In January, for example, both groups opposed the government's decision to lift, for future projects, a rule known as Press Note 18 that acted as a deterrent to investment by giving Indian firms a veto over their foreign joint-venture partners' other investments in India.
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Foreign and joint-venture sales account for up to 80% of the market in some of China's larger cities.
That makes the foreign assemblers dependent upon their joint venture partners for further expansion.
But, a joint venture provides the foreign partner with the ability to leverage the management, manufacturing and marketing infrastructure of its Chinese partner, an advantage that should not be overlooked.
Remy, Inc. (formerly Delco-Remy, and formerly part of GM) is already building starters and alternators in China through both a wholly foreign owned enterprise (WFOE) and a joint venture with a unit of ASIMCO.
However, Russia's current president, Vladimir Putin, has made life much tougher for western oil firms by restricting exploration by foreign outfits, making conditions stricter for joint-venture partners, and showing what would happen to dissenters with the dismemberment of Yukos.
Once foreign ownership crosses 25 percent, a company is considered a joint venture and subject to additional restrictions.
Foreign banks may be permitted to own majority shares in joint-venture banks in Myanmar (Burma) under new legislation that could be passed by April.
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AirAsia in March received approval from India's Foreign Investment Promotion Board to start a budget carrier in India in a joint venture with Tata Sons Ltd. and a privately held Indian company, Telestra Tradeplace Pvt.
Since Islamabad's reforms now allow foreign investors to own 100% equity in local companies, Shell Pakistan is negotiating buyouts of its joint venture partners in order to gain greater control of its operations.
In addition, the company owns about 2.5% of Iridium, a satellite-telecoms venture led by Motorola, and shares in several lucrative natural-resource joint ventures with foreign firms.
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