BUSINESS

[Name of the Instructor]BUSINESS

Answer Number 1

There are several foreign investment alternatives for JR. For Instance,

Equity joint Venture is one of the options available to JR. It consists of at least 2 or more investors such as, one Chinese investor and other JR. They both jointly operate the company. This is formation of a limited liability company in which management, risk, participation and profit is shared among both the parties with respect to their related share of investment. In EJV, JR must have to incorporate 25 % of the registered capital. This sort of investment considers investor as a legal entity in China with limited liability under PRC Law.

This sort of investment will provide JR certain advantages such as, enter in Chinese market and gain new technological advancement. Know-how of the Chinese distribution network, Know-how of the market and Market share in China. Because of the Equity Joint Venture JR can be able to invest in certain restricted sectors of China such as, manufacturing, Life Insurance or telecom Sector. Another main advantage of Joint Equity Venture it provides limited liability to JR up to their capital contribution. Risk and Loss are shared by both the companies in accordance with their ratio of capital. This provides advantage to JR that they don't have to bear the full loss in case of any mishap. Another advantage for JR, they can get the exemption of tax on machinery or technology imported from outside China.

Despite of its advantages there are also some disadvantages such as; JR has to make effort in order to make understanding with Chinese investor. Different culture resists JR in order to make good understanding. JR has to share the profit with Chinese investor in accordance with the share of their capital. Employees can form labor unions in accordance with PRC labor laws which can be against JR. There is no exemption of Tax in Equity Joint Venture.

Wholly Foreign Owned Enterprise, according to this type of investment JR can establish its own company in China without any venture with Chinese party. China encourages this type of investment in order to encourage manufacturing activities that are related with export or that can introduce advance technology.

There are certain advantages of this sort of investment to JR such as, it will get independence or freedom to operate their business or to implement the strategies of their parent company in China. It will allow JR to earn profit and convert it into US $ which will also beneficial for their own country economy. This will allow JR to protect its technology; there will be no additional requirements for export or import operations. JR will enjoy full control over human resource and get greater efficiency in operation and management.

Despite of these advantages certain disadvantages are, there is limitation on the scope of the business. JR cannot enter into restricted sectors

Leasing, this type of investment enable China to adopt foreign investment. A contract is a form between the Lessor and Lessee. Rent interest and payback period ...