In anticipation of Chinas WTO accession, the Joint Venture Law was amended last March. How will these amendments affect Joint Ventures in China?
The recent amendments to the Equity Joint Venture law have been hailed by the media as a step towards China’s compliance with WTO rules and an incentive to attract more foreign investment. The most significant amendment in the Equity Joint Venture Law gives joint ventures more freedom in their procurement of raw materials and equipment. The “old” law stipulated that joint ventures must give priority to domestic suppliers and that imported materials and equipment must be purchased with foreign exchange raised by the joint ventures themselves. However, in practice, joint ventures could already buy most materials internationally. Priority to Chinese products was necessary if the foreign equivalent was more expensive or inferior in quality, and the government rarely intervened. Thus, the amendment adopts the current practice as a rule, which will provide Equity Joint Ventures with more confidence and certainty. Any scheme that favors local products is contrary to WTO rules, because it pote
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