Study On The Risk Of "Joint Venture-losses-merger&Acquisition" In The Alliance Between Chinese And Foreign Enterprises

With the enforcement of China’s reform and opening up policy, the amount offoreign direct investment has greatly increased, and the form of investment isgradually changing, from the initial joint venture to sole proprietorship. Based on theoriginal joint venture, Multi-national Corporations gradually expand its equity, evenowning the JV. In fact, the Multi-National Corporation’s investment objective inChina is not only staying in the level of joint venture. Transforming joint venture tothe merger and acquisition or sole proprietorship is the ultimate goal of manyMulti-National Corporation in china. For China’s enterprises, Multi-NationalCorporation’s strategy and path of “joint venture–merger&acquisition” is their riskof “joint ventures-M&A” in the alliance. This makes many Chinese enterprises livein a very passive position in the process of foreign alliances, enabling to achieve their“market for technology” original intention, even destroying the development ofenterprises accumulated over years.This paper firstly explores the “joint venture-losses-M&A” path of foreignenterprises in China and then proposes the three stage model of a foreign capitalenterprise targeting to Chinese enterprises, analyzing foreign enterprises’ motivationof conspiracy. Then, using the data of China’s listed Sino-foreign joint venture in1993-2009from the perspective of dynamic performance, this paper distinguishes thephenomenon and feature of “conspiratorial loss” on Sino-foreign joint ventures, inorder to demonstrate the “conspiratorial loss” is a key cause of Sino-foreign jointventures of malicious mergers and acquisitions. Thus, it establishes a risk influencefactor model in the alliance between Chinese and foreign enterprises. It makes aconclusion that equity control, general manager and board control are importantfactors resulting in the mergers and acquisitions of Sino-foreign joint ventures, thenformulating risk prevention measures, which enrich the related theory of the “jointventure-M&A”. At the same time, this paper provides reference to help Chineseenterprises to use foreign capital reasonable and scientific, to safeguard China’seconomic security and promote economic development in China, to providedecision-making reference for the relevant legislation of our country supervisiondepartment.