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Joint venture challenges and opportunities in China

Many American companies create joint ventures in order to expand their market and lessen the risks that they face. Yet efforts by American companies to form joint ventures in China have often been problematic.

We have spoken in the past on this blog about how Chinese interests try to force the sharing of technology and trade secrets as a condition of forming a joint venture. The problem is that the American company creating joint ventures face a regulatory scheme in China that in some instances makes sharing of this technology mandatory.

Large players in the automotive industry creating joint ventures in China

As a Reuters’ article highlights, joint ventures continue with some involving some extremely large companies. Volkswagen, for example, is in the process of setting up a joint venture with China’s Didi Chuxing to develop purpose-built automobiles.

According to a statement released by Volkswagen, “it will carry out extensive discussions to cooperate with industry leading companies in the field of smart mobility.” With its overcrowded cities, China needs alternatives to private car ownership. Volkswagen efforts may lead to more ride-hailing services.

The automotive industry is also looking for more locations to charge electric vehicles. Therefore, BP Plc has entered into a joint venture with Shanddong Dongming Petrochemical Group.

There appears to be a great demand for such stations in coastal and major cities in China. For example, Shell wants to gain a market presence in China by creating additional convenience stores. This could lead to tripling of the number of gas stations the company already has in China.

While setting up a company in China is complex, use of strategic planning can lead to a successful enterprise. It’s important to seek the advice of attorneys and other professionals who understand the challenges, and know what steps to take throughout the process.

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