It was disclosed, however, by insiders that Danone chose to quit because they failed to acquire a controlling stake in Bright Dairy. Danone is known in China for its quick moves of acquiring or controlling leading Chinese enterprises. Despite successes in other projects, Danone recently split with Wahaha Group after failing to acquire the former joint venture partner.

Cooperation between Danone and Bright Dairy began in 1992, when the two sides invested $3.9 million to establish a 50-50 joint venture. Danone craved a stake in Bright Dairy since 2000 when Danone began to buy stakes, from 5 percent originally up to 20.1 percent, to become the dairy company's third largest shareholder.

Bright Dairy & Food Co. Ltd. completed restructuring in June 2006 and became the controlling shareholder of Shanghai Dairy Group and S.I. Food Products Holdings Ltd. As a result, Danone had to quit.

"Foreign investors cooperate with you for profit, cheap labor and mature distribution networks," said Fan Kexiong, General Manager of Shanghai Xinke Machinery Corp. Ltd., another joint venture breakup survivor. "They will kick you out of the game once they get familiar with the market and establish their networks."

These lessons can be bitter, claimed Fan. "They eat up the lion's share as they control overseas distribution networks. They buy products from Chinese partners at manufacturer' prices and sell them to overseas customers at prices much higher. Taking advantage of the domestic distribution networks we have spent several decades to perfect, they founded another company to compete with us," Fan added.

"Multinationals sought joint venture cooperation with Chinese companies mainly for the advantages of the Chinese partners' networks," said Li Yanjun, a researcher with the CAITEC. "The advantage has lost its attraction to foreign investors as the Chinese market and its industrial sectors have all become standardized with growing transparency in fulfilling of the country's WTO commitments."

A blessing in disguise

With so many cases of joint venture breakups, people have began to question whether it was a good decision for both sides to establish a joint venture in the first place. Who is the winner and who is the loser?

Fan believes it was right to form the partnership in principle, as everyone needed the stones for a path to wade through the river during the first years of China's opening-up policy. The formation of joint ventures served as stepping stones for China to attract FDI.

"We can't evaluate the breakups by discriminating the right from the wrong, or the winner from the loser," said Li. "There were wins and losses on both sides in the past two decades, and they all made contributions to China's economic growth." Thanks to the joint venture experiments, enterprises such as Haier, Lenovo and Huawei have been able to distinguish themselves.

Joint ventures chose to break up at certain points of development, which, according to Li, reflects the increasing openness of China's economy. China secured WTO membership in 2001, leading to the in-depth opening of the Chinese market. As a result, foreign enterprises forming joint venture projects to gain a stake of the market feel it is time to run independent businesses.

Ma Yu, a senior researcher with the Ministry of Commerce, offered another reason related to cultural and interest differences.

Foreign investors pursue profit maximization while state-owned enterprises (SOEs) aim for large size and big sales despite the risks of losses. A typical example Ma gave is their decisions during crisis management. "The foreign partners would like to have a layoff when the company suffers losses, but the Chinese partner will object as a major responsibility for SOEs is to offer local residents employment."

With different goals, it is hard to achieve a win-win result in joint venture projects. Foreign investors are vying with each other for large portions of China's huge market potential. They don't want to share the costly responsibilities of China's SOEs.