ArticlesVol. 1, No. 2, Fall 1987

Legal and Extra-legal Issues in Joint Venture Negotiations

Abstract

More than eight years have passed since the People’s Republic of China took the first concrete step in its policy of opening to foreign business by publishing a law on Chinese-foreign joint ventures (the “Joint Venture Law”). The Joint Venture Law, even sketchier than the recent foreign investment guidelines issued by the Soviet Union in the footsteps of its erstwhile little brother, simply provided a few basic ground rules for the establishment of equity joint venture companies between Chinese and foreign firms. In those early days, almost everything – even the tax rate to be applied to a joint venture – was left to the negotiating table. The lack of legislation, as well as the¬†inexperience of Chinese and foreign businesses in dealing with each other, tended to make joint venture negotiations in the late 1970s and early 1980s protracted, difficult affairs, often characterized by considerable confusion and misunderstanding.