Licensing in China: Practical Considerations and Tax Implications

The opening of the People\u27s Republic of China to foreign investors has provided significant benefits: China has received aid in its plan for economic modernization and foreign companies have discovered new opportunities for trade and investment. Foreign investments generally have taken one of two forms: equity joint ventures and cooperative joint ventures. This Article first explains and compares the workings of and tax rules applicable to these two forms of investment. The author then notes that, because of the emphasis of the Chinese on the transfer of technology, direct investment is often preceded by licensing agreements. The author provides practical advice on finding suitable trading partners, transferring technology, obtaining necessary government approval, and financing licensing ventures. In conclusion, the author points out that a number of successful ventures have been established for a number of years and finds that the wise investor may successfully operate an investment venture in China through care and flexibility