Because of this blog, our China lawyers get a fairly steady stream of China law questions from readers, mostly via emails but occasionally via blog comments as well. If we were to conduct research on all the questions we get asked and then comprehensively answer them, we would become overwhelmed. So what we usually do is provide a super fast general answer and, when it is easy to do so, a link or two to a blog post that may provide some additional guidance. We figure we might as well post some of these on here as well. On Fridays, like today.
Today’s question comes from a reader who sent me a link to a Wall Street Journal article, entitled,
China’s Tech Rules Make It Hard for U.S. Firms to Take Control along with the following core question/comment:
You are always talking on your blog about how foreign companies are better going it alone in China and not entering into joint ventures and not entering into VIE contract arrangements. Do you think HP, Microsoft, Qualcomm and Cisco don’t know any better?
I think HP, Microsoft, Qualcomm and Cisco know exactly what they are doing and we have never said that foreign companies should never enter joint ventures with Chinese companies. My sense/guess is that HP, Microsoft, Qualcomm and Cisco have conducted thorough cost-benefit reviews of these deals and determined the rewards outweigh the risks. Our position on joint ventures are something to be wary of and to be avoided if possible. But we fully realize that there are times where the best way (and even sometimes the only way) forward in China is via a joint venture or some other sort of tied-in relationship with a Chinese entity.