01 /Chinese State-influenceA joint venture with a high level of government influence indicates that the ultimate controlling shareholder of the Chinese company is part of the Chinese government, and has a controlling share in the joint venture. In the case of a joint venture with a medium level of state influence, the Chinese company in the agreement is part of the Chinese government but might not does not possess a controlling stake in the joint venture. Finally, the majority of joint ventures (68%) have a low level of state influence.
02 / Minority Share versus Majority ShareLooking at the ownership structure of all Sino European joint ventures in China, we see that in 71% of the cases, the European party does not fails to hold a majority share stake of the share (usually holding 50% or less of the shares).
Moreover, our research displays that for over 35% of all European- Chinese joint ventures, the European partner has only one-third or less of the shares in the joint venture. Under the new Chinese company law, holding a controlling share equals having almost complete control over the entity. This means that 35% of European-Chinese joint ventures are effectively under the control of the Chinese partner.
03 / SectorsWith an investment value of almost €25 billion, the Financial & Business & Services is the largest sector in which European companies invest in China. Other large sectors include Consumer Product & Services, Machinery, Electronics & Electrical Equipment, and Information & Communication. Especially the latter two sectors can be considered as high-tech and key-emerging sectors.
04 / CountriesLooking at the ownership of the European party in the joint ventures in China, we see that in 71% of all European joint ventures in China, the European party does not hold a majority share (50% or less).
Out of the total €82 billion invested by European companies in China, with €25.8 billion invested, Germany is by far the largest investor in China. Other large investors include the Netherlands, the United Kingdom, France, and Italy. It is worth noting that Switzerland and Luxembourg, despite their lower population, is nevertheless still among the largest investing countries in Europe.
05 /Risks of setting up joint ventures in ChinaWe collected the most remarkable joint venture case studies whereby we identified a high risk of technological transfer, unwanted influence by the Chinese government, undetected links to military entities, or an unbalanced level playing field. An example is the case of Stjernberg Automation, a company specialised in laser equipment, which was acquired by a Chinese company in 2017. After the acquisition, the company established a joint venture and several WFOE’s in China, whereby Swedish staff was replaced by local Chinese staff. Stjernberg Automation filed for bankruptcy in 2019, which could imply that after the Chinese acquisition, a bigger focus had been put on the activities in China rather than on the ones in the home country.