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Entering China: an unconventional approach

Author: Vanhonacker, Wilfried R. INSEAD Area: MarketingIn: Harvard Business Review, vol. 75, no. 2, March/April 1997 Language: EnglishType of document: INSEAD ArticleNote: Please ask the Library for this articleAbstract: If you're thinking about doing business in China, you've heard the conventional wisdom that the best way to enter China is through an equity joint venture (EJV) with a well-connected Chinese partner. China is changing, and so are the opportunities and challenges facing foreign companies that want to operate within its borders. Although EJVs are still necessary in some regulated sectors, and foreign investment is prohibited in others, there is a growing trend toward a new and possibly much more effective way of doing business in China - as a wholly foreign-owned enterprise, or WFOE. EJVs and WFOEs are substantially the same in terms of taxation and corporate liability. They also operate under similar foreign-exchange rules and comparable import and export regulations for licencing, quotas, and duties. Their only real technical differences are that WFOEs take less time to establish than EJVs, are not required to have a board of directors and are prohibited in some sectors in which EJVs are approved
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If you're thinking about doing business in China, you've heard the conventional wisdom that the best way to enter China is through an equity joint venture (EJV) with a well-connected Chinese partner. China is changing, and so are the opportunities and challenges facing foreign companies that want to operate within its borders. Although EJVs are still necessary in some regulated sectors, and foreign investment is prohibited in others, there is a growing trend toward a new and possibly much more effective way of doing business in China - as a wholly foreign-owned enterprise, or WFOE. EJVs and WFOEs are substantially the same in terms of taxation and corporate liability. They also operate under similar foreign-exchange rules and comparable import and export regulations for licencing, quotas, and duties. Their only real technical differences are that WFOEs take less time to establish than EJVs, are not required to have a board of directors and are prohibited in some sectors in which EJVs are approved

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