Joint venture: Beijing Chiyi Unmanned Digital Perception Technology
At Datenna, our China experts continuously track and conduct detailed investigations into joint ventures that have been established between European and Chinese entities, located in China. Through a series of articles in our resource library, we highlight striking EU-China joint venture case studies, analysed based on Datenna’s in-depth, unique data on China’s techno-economic landscape. This article elaborates on the joint venture, Beijing Chiyi Unmanned Digital Perception Technology, set up by the German Robowatch Robotics Group and North Navigation Control Technology.
Short read
- The joint venture, Beijing Chiyi Unmanned Digital Perception Technology, was established in 2007 and is a collaboration between the German Robowatch Robotics Group and North Navigation Control Technology, as the main shareholder, plus other Chinese investors.
- The European partner is a German company that makes software solutions for service robotics and development services for robotic vehicles.
- Our research indicates that the risk of Chinese state influence in the joint venture can be classified as high.
- North Navigation Control Technology Co.,Ltd. is a provider of military scientific research systems and products. Among the main shareholders of this company is the China Soldier Investment Management Co., Ltd. which is heavily involved in the country’s military sector.
The joint venture Beijing Chiyi Unmanned Digital Perception Technology Co., Ltd
Beijing Chiyi Unmanned Digital Perception Technology Co., Ltd. is a joint venture whose core business is the research and development of intelligent robot technology and the production of intelligent robot products.
The company was established in 2007 and is a cooperation between the Chinese North Navigation Control Technology Co., Ltd and the German Robowatch Robotics Group. Robowatch Robotics’ activities revolve around the development of software solutions facilitating automated production for small and medium manufacturers. The German company holds 27% of the shares within the joint venture, an absolute minority share within the entity. The registered capital of the joint venture is 1.0M euros.
Links with the Chinese Military sector
The Chinese main partner, with 45% of the shares, is North Navigation Control Technology Co.,Ltd., a state-owned enterprise. The company has a registered capital of € 193.6 million, and has a strong focus on military scientific research systems. North Navigation Control Technology Co.,Ltd., is controlled by two main shareholders. The first of these is North Navigation Technology Group Co., Ltd. directly owned by China North Industries Group Co., Ltd, which is in turn a significant actor in the army’s mechanization, informatization and intelligent equipment development.
The second shareholder is “Zhongbing Investment Management Co., Ltd”, which can literally be translated as “China soldier investment management”. This is an investment vehicle for China North Industries Group Co., Ltd. North Navigation Technology Group Co., Ltd. is in the end controlled by the State-owned Assets Supervision Commission (SASAC) of the State Council. There is, however, a second significant Chinese partner in the Joint Venture, namely the Chinese General Department for Ordnance Industry Systems. The latter is a research institute for Chinese military technology founded in 1982. Together, North Navigation Control Technology Co., Ltd. and the Chinese General Department for Ordnance Industry Systems account for 65% of the shares in the joint venture, leaving the German parties with a minority share. Considering that the ultimate beneficial owner of the North Navigation Control Technology Co., Ltd. is the SASAC of the State Council, the state influence within this joint venture can be classified as high.
The threat of technology transfer
Despite the registered capital of the joint venture being relatively small, 1M euros in total, the critical technology managed within the entity is an element that could easily lead to concerns on technology transfer. It is important to note that the Intellectual Property Rights (IPR) developed within a joint venture agreement generally belong to the jointly funded entity. In this respect, the minority partner is granted only a small amount of control over the know-how and IPR resulting from the cooperation.
Moreover, when a state-owned company is heavily involved in the joint venture, there are reasons to believe that the Chinese government has a strategic interest in the joint venture and the IPR of the foreign company. In this case, where even military actors are involved, and the foreign partner just holds a minority of the shares, concerns arise whether the foreign company’s IPR could be transferred to the Chinese military.
Increased foreign investment protection
The new Foreign Investment Law of China was issued on January 2020 and improvements have been made in the protection of foreign investment within the country. In terms of investment protection, the main breakthrough in the field of IP rights is the facilitation of the settlement on IP disputes and a broader protection of foreign investors’ IP rights, as stipulated by article 23. In particular, the law prevents forced technology transfer practices and requires authorities to take measures to protect trade secrets that the foreign partner might disclose when cooperating within the joint venture agreement scope. At the same time, the process of technology transfer is difficult to determine or prevent, and it is usually part of a tacit agreement between the two parties in order for the foreign party to gain access to the Chinese market.
Robowatch Robotics Group is going to be used for North Navigation Technology Group’s activities in the Chinese military sector. It is undeniable though that holding a minority share means occupying a weaker position within the cooperation, which could potentially expose the foreign firm to know-how extraction activities.