Conducting Business in China
Conducting Business in China
Complying with China’s Terms
China represents one of the most feasible and attractive markets for investors looking to make massive profits. However, their approach towards economic activities and development creates a dilemma for most economically -interested countries. The stringent policy that all companies that market their products in the country must also produce on Chinese soil, has created an economic dilemma for both local and multinational companies. While this approach holds several advantages, it also has numerous drawbacks. It is imperative that companies comply with the regulations and demands that the host country offers in as far as international trade is concerned. The operation of overseas subsidiaries and companies is highly complicated in terms of the parties making profits. Therefore, every country needs to formulate an economic policy that will favor them. In China’s case, the objective is to maximize on the development of intellectual knowledge. Consequently, the policy is made mandatory for China’s benefit and any companies that seek to operate in the country will have to comply with the policy (Li & Farris, 2007).
Most multinational firms such as Microsoft, Google and Vodafone, have experienced numerous legal and administrative complications in their attempts to resist the implantation of the Chinese policy. Most of these businesses have predicted a potential withdrawal from the market altogether. The main fear was that China had the scheme of harnessing overseas knowledge to develop similar domestic products after eradicating the source of the knowledge (multinationals). If a company is discouraged and opts to exit the market, they stand to lose the vast Chinese market as well as the opportunity to leave their presence in the Asian country (Li & Farris, 2007). The unwavering stand presented by China offering compliance, resistance or departure as the only options left profit-oriented companies with no alternative but to comply with the repressive privacy and production policies.
Balance Between Sales and Technology Transfer
The primary goal of a company is to realize profits. In the course of pursuing this objective, companies regularly engage in protectionist behavior that involves preserving the intellectual and management legitimacy from being distributed and implemented by rival companies or states. The Chinese policy concerning the operation of overseas companies sought to use the technology from the Western world to develop their own industries. The solution towards ending the dilemma that exists for companies concerning technological transfer involves making a compromise between technology transfers and achieving sales targets (Taplin & Nowak, 2010).
The rationale behind a compromise as the best alternative lies in the economic conditions presented by China itself. China has offered massive subsidies for production of electrical equipment, vehicle and other products domestically. Therefore, producing goods from China is significantly beneficial to the company as it can benefit from economies of scale that can translate into increased profits. However, care must be taken to ensure that the transfer of technology is coordinated, controlled and monitored. Intellectual property should be safeguarded and released cautiously. In this way, international companies can ensure they comply with Chinese trade policies while maintaining sales targets and production knowledge. Companies have to make the choice to protect their technology since the Chinese policy only promotes the exploitation of multinationals. Already many Chinese companies have used foreign knowledge and innovations to come up with their own technology such as wind turbines and electricity production (Li-Hua, 2004). This creates an uneven playing field with non-Chinese companies on the losing end of the deal.
Li, M., & Farris, G. F. (2007). Innovation management and technology transfer in China. The Journal of Technology Transfer. 94-100.
Li-Hua, R. (2004). Technology and Knowledge Transfer in China. Aldershot, Hants, England: Ashgate.
Taplin, R., & Nowak, A. Z. (2010). Intellectual property, innovation and management in emerging economies. London; New York: Routledge.