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China Joint Ventures: Joint ventures (JV) are allowed to carry out manufacturing and sales operations in China. A JV is also permitted to sell products through its own sales network.

Equity Joint Venture: A Company, with limited liability, set up by a Chinese company

According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product

and a foreign investor, is an Equity Joint Venture. The parties share profits and losses in proportion to their respective contributions to Joint Venture's registered capital. Starting from 2001, Equity Joint Ventures are governed by the Law of the PRC on Joint Ventures using Chinese and Forei

; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.

Examples of combination products may in

n Investment.

Co-operative Joint Venture: The Law of the PRC on Chinese-Foreign Contractual Co-operative Enterprises governs Co-operative Joint Ventures. A Co-operative Joint Venture is similar to an Equity Joint Venture in many respects, and many of the same regulations apply. Howeve

lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.

, principal features that distinguish a Co-operative Joint Venture from an Equity Joint Venture include the following: Co-operative Joint Venture does not have to be a legal entity. The concept of registered capital is less clear than that in the case of an Equity Joint Venture. Participants i

here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe

a Co-operative Joint Venture are allowed to share profit on agreed basis, not necessarily in proportion to capital contribution. During the term of the venture, the foreign participant in a Co-operative Joint Venture may recover its investment, provided that the JV contract specifies that all

d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.

Combination pro

fixed assets will become the property of the Chinese participant at the end of the joint venture.

Joint Venture - Registration: The foreign investor and its Chinese partner must apply to MOFTEC, or one of its local branches (the "approval authorities"), for approval to set up a JV. Th

ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc

law requires MOFTEC to decide within three months whether to grant approval. If the JV is approved, it must be registered within one month with the State Administration for Industry and Commerce (SAIC) to obtain a license to start business. An Equity Joint Venture is regarded as having been o

easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi

ficially established after this license is issued.

Wholly Foreign-owned Enterprise: Under the 1986 Chinese Law of the PRC on Enterprises Operated Exclusively with Foreign Capital, foreign companies are allowed to establish Wholly Foreign-Owned Enterprises (WFOEs).

nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically

WFOE is treated as Chinese limited liability entity wholly owned by a foreign investor and is not a branch of a foreign company. However, in accordance with state policies and the Foreign Investment Catalogue, WFOEs are excluded in certain industries.

The approval and registration requirement

and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ

to establish a WFOE are similar as those for JV's, except that there is no JV contract.

Representative Offices: Representative offices are normally set up to carry out liaison work of its parent office overseas. They are limited by regulations in establishing manufacturing o

ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi

erations or a sales network in China. Special tax rules are applied to representative offices.

Foreign investors in China must obtain various government approvals to undertake investment projects in China. These include the approval of Ministry of Foreign Trade and Economic Cooperation (MOFTE

ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.

Following aspects would a

), and that of the ministry responsible for supervising the industry to which the project belongs.

Representative offices are normally set up to carry out liaison work for the parent office overseas. The decision by MOFTEC should be issued within 30 days from the submission of the required do

dd to the challenges in developing combination products:

Which markets to tap where the combination products can do fairly well?
Which combination prod

uments. If the application is approved, the foreign company will obtain an approval certificate from MOFTEC.

Required Chinese National Participation: When China launched its economic reform programs in 1978, foreign investors were required to form joint ventures with local Ch

cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin

nese enterprises. This requirement has been relaxed over the years; today, foreign companies are permitted to have a majority interest in joint ventures or to establish WFOEs in certain sectors.

Generally, no specific percentage of local participation in Sino-foreign joint ventures is require

tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen

. Exceptions exist for certain industries in accordance with specific government policies.

Foreign Exchange Control: The Chinese Renminbi currency is supervised by the People's Bank of China (PBOC). The exchange rate is based on the market demand and supply through the inter-

t?

As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel

ank foreign exchange market. The PBOC announces the exchange rate each day and may intervene in the market in order to stabilize the rate. The US dollar/reminbi exchange rate for the period 1994 to 2002 has been approximately 1:8.3.

At present, the Renminbi is still not a freely convertible c

ping new procedures for reviewing their safety, efficacy and quality.

Professional from academic institutions, pharmaceutical industries, health care indust

rrency. However, China has made a significant move toward free convertibility by lifting controls over current account items. In December 2001, it committed not to place any restrictions on current account items unless the International Monetary Fund (IMF) is in agreement. China is the first c

y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products

untry to include IMF regulations into the WTO Protocols.

Chinese Taxation: Tax treatment that applied to foreign enterprises is different from those to domestic enterprises. They are governed under the Income Tax Law of the PRC for Enterprises with Foreign Investment and Fore

.

As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de

gn Enterprises.

Taxable income is computed at a gross income less total costs including expenses and losses. Such a calculation is consistent with international tax practices. The standard national income tax rate for a foreign enterprise, which is engaged in business operations or production

elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.

Companies that provide selfless information through particip

activities, is 30%. These enterprises also pay local income tax at 3%.

For more information on China Business Opportunities, please see our website: http://www.usa-chinanet.com/

tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products

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