Invest in China

Résumé du document

In the last three decades, China has known a fundamental shift. Indeed, China turned its socialist planned economy into a market economy. The government, through a lot of reforms, is gradually opening its doors to the free market. The entry of China in the WTO in 2001 has forced the government to lower barriers to the free flow of goods, services and capital between nations of the whole world. Moreover, by seeing China's economy growing as quickly as it does, more investors are attracted by this country. China is now integrated in the process of globalisation, and takes part of the Newly Industrialised Economies (NIEs). Globalisation means that the world economy is more integrated and nations' economies are more interdependent. This process is expressed through the globalisation of production and the globalisation of market. The first one refers to a way of sourcing products from countries by taking advantage of their difference in costs and quality of factors of production; and the second one to the lowering of barriers at the entry of most of the countries which conduct trade into the huge global marketplace. As Root (1994) said, "there are no longer domestic markets". Indeed, competitors can now leap import barriers by producing inside the host country.

Extraits

[...] The question is to know if the company has to transfer its home executives or if it has to hire host country executives. In the first case, it can lead to an ethnocentric behaviour: the manager feels that his own culture is superior to the host country one (Hill). So, it could create tension in the business between the two different parts. On the contrary, if the investing company hire host executive, they will know more about the market; but, it would be more difficult to control and to make sure that them and the company have the same goal. [...]

[...] The success will also depend on the type of product and the sector chosen. [...]

[...] It shows a very positive picture of the general health of China's economy. Secondly, this model is about the population and manpower. The Chinese population reached 1,300 million in 2004 (mission économique, 2004), it represents a huge amount of potential consumers. Then, Chinese are hard workers and are high qualified as the Chinese, traditionally place very high value on education. The migration of engineers perfects their skills and improves the technology. The third step deals with the production of the country. [...]

[...] The main value are loyalty to one's superior, honesty in dealing with others, and reciprocal obligations. This last value is linked with another important notion in the Chinese culture, called “Guanxi”. It means relationship. This ideology is acting as a network, in which people do favours for others; if there they are not paid back, transgressors' reputation will be tarnished. Foreign investors really have to be aware of cross cultural differences if they want to preserve their business from risks. [...]

[...] Then, to encourage investment, the government is offering tax incentives such as the two year exemption from corporate income tax, which has to be paid after an investment. Finally, entering the Chinese market has the opportunity to tap a new market in which consumers have an increasing purchasing power. In order to weigh this potential, the “Indirect estimates market size” model (Root, 1994) could help us. It is divided into five parts. First of all, it is focused on national statistics. [...]