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Throughout the incorporation process you will become more and more familiar with departments like the Administration of Industry and Commerce, the Bureau of Foreign Trade and Economic Cooperation (called Foreign Investment Bureau in some cities), the state and local tax bureau, the administrative committees of development zones, customs and so forth. This article compiled procedures of setting up a joint venture in Shanghai for your references.
The establishment procedure involves central, provincial and/or local level authority approvals depending on the sector involved, the amount of the total investment and the location. The Ministry of Commerce is the final approval authority for a JV or a WFOE, but it delegates part of its power to its local counterparts, the Bureau of Foreign Trade and Economic Cooperation at provincial and municipality levels. Some specific industries may require additional licensing, which needs to be obtained at the outset.
Furthermore, there are two types of JVs in China: the equity JV and the cooperative JV (which is also sometimes known as the contractual JV). They appear similar on the surface, but have different implications for the structuring of your entity. This point is not always understood by some of the more rural local governments. We explore the detailed differences between these two types, as well as all other issues regarding properly setting up and operating a JV in China.
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