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The
profit and risk of equity joint ventures is shared in proportion
to each party’s respective equity. Profit is distributed in
the form of dividend to the parties in proportion to each
party's respective ownership interest. Parties may contribute
their respective capital to the equity joint venture in the form
of cash, capital goods, industrial property rights, and other
assets. Normally, the Chinese partner will contribute cash, land
development or clearance fees and land use rights while the
foreign partner commonly contributes cash, construction
materials, technology, equipment and machinery. All
contributions must first be approved by the relevant Chinese
authorities and later certified in a report from a
Chinese-registered CPA firm.
The
partners to an equity joint venture have joint management of the
venture. The board of directors has the authority to make all
the major decisions concerning the venture. The joint venture
partners are responsible for appointing the board members, and
representation is in proportion to each party's respective
ownership interest in the venture.
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