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Negotiating joint ventures in China: A strategic approach

TKP Leung
Dept of Business Studies, Hong Kong Polytechnic University, Hong Kong

PP: 13

Abstract

Since 1978, the successful implementation of the Chinese 'Open door policy' has contributed dramatically to the growth of direct foreign investment (DFI), in particular through joint ventures. However, foreign negotiators always find Chinese negotiations very difficult. The difficulties arise from the complicated Chinese legal framework, the lengthy negotiations processes required, and a frequent lack of understanding by foreign negotiators of guanxi. The Chinese legal framework is a powerful and bureaucratic process which aims to scrutiaize DFI. It subtly determines the multi-stage Sino-foreign joint venture negotiation process. Specific strategies are required to successfully manage this process. What those strategies are and how they are best implemented is the subject of this article.

"The Chinese consider that a contract is an agreement but not necessarily the last word on any issue. Re-negotiation on operational terms and conditions will continue after the contract is signed."

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