Opportunities in China

Australian agribusinesses are increasingly looking offshore in order to access new markets and find opportunities for growth beyond the domestic market. Asian markets, particularly China, are natural targets for these expansion plans as China is the second largest agricultural importer in the world and it is predicted that China will account for 43% of global growth in agricultural demand by 2050.

Benefits of joint ventures

Joint ventures can provide a useful entry point into new markets and may provide a number of benefits to the parties involved, including:

  1. Expertise: Combining complementary skills and expertise of joint venture parties can allow them to greatly increase their chances of success when entering a new market. Australian farmers are among the world’s most efficient producers of cattle and are backed by best practice systems in traceability and food safety. However, an Australian beef producer may not have experience establishing and operating a business in China and could benefit greatly from a joint venture partner with that expertise.
  2. Resources: Joint ventures allow parties to access each other’s resources in order to quickly and cost effectively extend their capabilities. Resources can include access to funding, as well as relationships with customers, suppliers and local regulators.
  3. Relationships: A joint venture provides an opportunity to create or strengthen existing relationships with customers, suppliers and other members of the value chain.
  4. Risk: Joint ventures allow the parties to share risk by spreading the risk and responsibility of the venture between the parties. Unlike a partnership, liability is several rather than joint in an incorporated joint venture structure. As it is inherently risky to enter new markets, the ability to limit potential exposure can be seen to be particularly valuable.

Costa Group

We recently represented the Costa Group on the successful establishment of their joint venture with US based Driscoll to create a berry production company operating in Yunnan province, China. The joint venture is owned 70% by the Costa Group and 30% by Driscoll and will grow berries for the Asian market. Costa Group and Driscoll already have a successful joint venture in Australia, as well as separate operations in Morocco and the Americas within the global berry industry. The parties have indicated that they see China as a major growth region and that combining their complementary skills and resources to will create value.

Key considerations

JV structure

Determining an appropriate structure is a key consideration when establishing a joint venture. A popular structure for launching new businesses in China involves incorporating a wholly foreign-owned enterprise (WFOE) in China with a Hong Kong holding company in which the joint venture parties invest. A WFOE is a limited liability company with 100% foreign ownership and is the investment vehicle of choice for most foreign investors in industries where there are no restrictions on foreign investment and where there are no strategic reasons for engaging a Chinese partner.

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Under this structure, the joint venture parties have the benefit of Hong Kong law, which continues to use English common law as its foundation and has English as an official language. Government approval is not required for the transfer of shares in a Hong Kong company (unlike a WFOE or other Chinese entity) and joint venture agreements do not need to be vetted by government authorities before they are entered into.

It is also worth noting that Chinese authorities are very familiar with Hong Kong companies and their corporate documents, which can make the incorporation process for a WFOE more efficient if its sole shareholder is a Hong Kong company.

JV relationship

Careful consideration should be given to the parameters of the joint venture relationship which will typically be documented in a joint venture agreement, such as a shareholders’ agreement, between the parties. Key matters to address in a joint venture agreement include board representation, decision making and any veto rights held by one or both parties. It is also important to clearly set out any transfer restrictions and procedures for raising additional capital, as well as any default provisions or restraints of trade that apply to the parties.

Where joint venture parties are from different jurisdictions and the joint venture vehicle itself is in another jurisdiction, such as China, the parties will need to agree on an appropriate governing law for the joint venture agreement and understand the consequences for any disputes in future.


Incorporating a joint venture vehicle in a foreign jurisdiction and obtaining the necessary business licenses and approvals to commence operations can often be challenging. For example, establishing a WFOE in China involves name pre-registration, execution of a site lease, foreign investment approval from the Ministry of Commerce (MOFCOM) and registration with the State Administration for Industry and Commerce (SAIC) to obtain a business license, which generally takes a minimum of two months.

It is always important to consider whether the approval of relevant foreign investment or competition regulators is required before establishing an offshore joint venture.

Cross-border integration

Offshore joint ventures are inherently complex as a result of the various parties and legal systems they operate across. It is important to understand the regulatory regimes that apply to the joint venture parties and ensure that arrangements such as funding and licensing of intellectual property comply with all relevant laws.

Intellectual property

It is also important to consider what (if any) intellectual property will need to be licensed or assigned to the joint venture from the parties and how those arrangements will operate. The availability of intellectual property protection, such as patents, copyrights, trademarks and plant breeder’s rights, in territories such as China, and appropriate strategies for intellectual property protection should also be clearly understood.


Offshore joint ventures provide a great opportunity for Australian agribusinesses to expand into new markets, particularly Asia, by leveraging the expertise and resources of venture partners. However, they do pose a range of challenges that need to be considered by the parties involved.