Aug. 24 – The new issue of China Briefing magazine, titled Reevaluating China Joint Ventures and M&As, is out now.
In the wake of the Global Financial Crisis and the realignment of the Chinese economy from an export-oriented model to one focused on domestic consumption, Sino-foreign joint ventures (JVs) and mergers and acquisitions (M&A) by foreign investors in China are gaining momentum.
Long considered investment structures to be entered carefully, but not overlooked, different motivations to enter JVs and undertake M&As are evolving. Although China M&A deals will only account for 8 percent to 9 percent of the worldwide total in 2011, there has been a sharp increase compared to the 2 percent to 4 percent they accounted for in the early 2000s, according to JP Morgan. Yet a profound (and not unfounded) distrust of JVs and M&As lingers among foreign investors, largely fueled by the high profile, multinational China JV and M&A deals that have gone wrong in recent years.
The separate needs of Chinese and foreign companies are hardly incongruent – quite the opposite. Particularly for small and medium-enterprises (SMEs), JVs and M&As deserve a bit of a reevaluation, as the Sino-foreign JV and M&A landscape today is quite different from several years ago.
For many foreign companies, China has become a target market and the local market knowledge and established contacts are held only by Chinese companies. On the Chinese side of the cooperation equation, at the SME level, current drivers of JV and M&A activity are capital and ownership succession strategy. The inability of Chinese private SMEs to access capital has made it difficult for them to expand or even maintain their business. Meanwhile, in their forties and fifties, China’s first generation of entrepreneurs are looking to pass the torch, while their children – with goals and values characteristic of people far more than just a generation apart – are looking away.
In this issue, we take a look at each of these investment vehicles – the current market circumstances, the motivations and challenges faced – and provide a few practical insights into key issues such as forming a JV contract and finding an M&A partner.
In This Issue:
This issue of China Briefing – Reevaluating China Joint Ventures and M&As – is available from the Asia Briefing Bookstore, priced at US$10.
Dezan Shira & Associates is a boutique professional services firm providing foreign direct investment business advisory, tax, accounting, payroll and due diligence services for multinational clients in China. For more information on JVs and M&As in China, please contact firstname.lastname@example.org, visit www.dezshira.com, or download the firm’s brochure here.
Setting Up Joint Ventures in China (Third Edition)
Starting with choosing a joint venture structure, assessing a potential partner, and conducting legal and financial due diligence, this guide walks you through, step-by-step, the key points of setting up a joint venture in China.
Mergers and Acquisitions in China (Second Edition)
This guide is a practical overview for the international business to understand the rules, regulations and management issues regarding mergers and acquisitions in China. It will help you to understand the implications of what can initially appear be a complicated and contradictory subject as well as points you at the structures you should use and some of the common pitfalls you may encounter.