Partnership Models in China: A Marriage of Convenience Part II

Part 2: Understand Yourself

(Read Part 1 here.)

Mergers and acquisitions (M&A) aren’t the right fit for all companies. At the same time, there are a variety of alternative structures available to multinational corporations (MNCs) looking to initiate a joint venture (JV) or business alliance in China, including both contractual and structural arrangements.


With regards to the contract-based alliances, M&A offers the advantage of being an inexpensive way to access the Chinese market — but with limited control. On one hand, this model normally requires lower capital commitments and speeds up the time to market. On the other, there is risk in the complexity of managing third party behavior and in the lack of oversight over the partner.

The alternative is to grow via joint ventures, which bring access to markets and technology while sharing and controlling risks. Having said that, the local culture in China is highly people-sensitive, making a JV model more likely to be a short-term partnership rather than a permanent solution in China. Therefore, multinationals thinking of a joint venture in China should always be prepared for the breakup and factor exit triggers into the negotiation process.

Other companies may choose to pursue direct acquisition of part or all of the equity interest, including full assets and liabilities of an existing company. This model usually helps to deliver faster growth rate than organic growth, easy access to sites/channels, etc. For example, Anheuser-Busch (AB) chose to acquire Harbin Brewery based on the rationale that its western high-end brand positioning hindered its ability to tap into Chinese premier segment but that a Chinese brand works. As a result, AB rebranded Harbin successfully and turned it into one of the major national brands in China, with market penetration outside of the northeast improving from 30,000 tons to 500,000 tons in less than three years.

In summation, each of the partnership models have distinct characteristics and features that need to be evaluated and assessed to ensure the most appropriate structure is deployed.

Read Shailene’s full report on Partnership Models in China here.

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