Advantages And Disadvantages Of Contractual Joint Venture

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2.3.2 Contractual joint ventures (CJVs)
They are also known as cooperate business and are established jointly by domestic and foreign investors. Contractual joint ventures may or not may be formed as legal entities. Moreover, investment contribution can be inform of land, technologies, capital and so on. Unlike equity joint ventures where profit or losses are shared equally, in CJVs, investors share the profit or losses according to the agreed terms and condition of the contract. A good example of CJV enterprise in China is a scenario in which foreign investors supply technology or capital whereas the domestic investors supply labour, land, factory building, materials and many more. In the recent years, contractual joint ventures have become the most important form of foreign direct investment inflows because of it is flexible and low risks. In 1980s, CJVs accounted for around 50 percent of the total FDI inflow, however, in 2007, they only accounted for 12 percent of total FDI inflow in 2007.
Contractual Joint Ventures are flexible and easy to establish than the equity joint ventures. Additionally, there are low restriction on foreign investors, low financial risk and political interference. Some of the disadvantages of contractual joint venture include inadequate return for foreign investors.
2.3.3 Wholly Foreign-owned Enterprises (WFEs)
These are entities that are totally owned by foreign investors in China such as foreign companies, organizations, enterprises,

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