The Joint Venture Law stipulates that an equity joint venture established within the territory of China must be approved by the Chinese Government and registered accordingly. Joint ventures in China are legal entities and subject to the jurisdiction and protection of Chinese Law. An equity joint venture takes the form of a limited liability company. The liability of each party to a joint venture is limited to the capital subscribed by it. Parties to an equity joint venture are jointly responsible for investment and management, and share risks, gains and losses.
All assets are liable in the payment of debts.
It is general policy that joint ventures established within China's territory must promote the development of China's economy and the raising of scientific and technological levels. The law also stipulates that an application for establishing a joint venture will not be approved if it is considered that it will be detrimental to China's sovereignty, will violate Chinese law, will not conform with the requirements for the development of China's national economy, will cause environmental pollution or will, due to obvious inequity in the agreements and articles of association signed, impair the rights and interests of one of the parties. Joint ventures are now permitted in most industries, except those restricted due to strategic or economic reasons. Likewise, virtually the entire country has been opened to foreign investment, except for certain restricted regions. A typical process, beginning with the identification of a potential joint venture partner and ending with the official state approvals, can take from one to two years or even longer.