The transnational corporations, which have expanded their business in China in recent years, have contributed great vigor to China’s economic development, and they are taking a new investment strategy in the country.
China's forthcoming accession to the World Trade Organization (WTO) has given new impetus to overseas investors and will bring them huge business opportunities. Therefore, most transnational corporations will place more emphasis on promoting localization and the integration of their business operations in China into their global development strategy.
In recent years, the transnational corporations have made much progress in investing in China. Most of the world’s top 500 transnational corporations have moved into the country, strongly promoting the adjustment of China's economic structure and its industrial upgrading.
They have invested in 1,196 enterprises, with a total investment of US$30.232 billion, accounting for 66.4 percent of all overseas investment last year.
It is reported that Sony Co. had achieved a total investment of US$100 million by October 2000. Sony color TV has captured 10 percent of the market, while video camera has gained a 60 percent share. According to management of the company, Sony Co. has set up five factories. Among them, two are solely owned businesses and the other three are joint ventures. Sony holds a 70 percent equity share of the three joint ventures.
Siemens has set up more than 50 companies in China since its first representative office appeared in Beijing in 1982, 20 percent of which are wholly owned, according to Bi Baili, a senior manager from Siemens Co. (China). The total sales volume has hit 2.4 billion Eurodollars, surging 15 percent year-on-year.
In those joint venture enterprises, foreign investors have vowed to increase their investment and expand the production scale to ensure a bigger share of the Chinese market.
Many reasons have served to spur overseas investors to establish enterprises of exclusive ownership. When they first came to China, they knew little about the market, and therefore needed to make the utmost of native resources. Now, there are various conflicts between Chinese and foreign investors in terms of enterprise culture, management ideas and quality of the work force, which encourage foreign investors to expand their investment and run the enterprises totally by themselves.
The growing presence of development areas has also exerted a significant influence on investment structure. Previously, overseas investors had to find a Chinese enterprise as a media carrying them into the Chinese market. But by and by they have become well acquainted with the market and even the culture and a native partner is by no means a must.
What needs attention is that over 100 research institutes had been set up in China by multinational companies by the end of last year. These research bodies are devoted to various areas including computer, telecommunication, and chemistry, according to latest statistics from the Ministry of Foreign Trade and Economic Cooperation. Analysts also point out that the multinationals’ research centers are expected to double in the next five years.
It is claimed that China has been the second most popular investment recipient country in the world for six years. Many famous internationals have considered China as their major market. To own more shares in the market, they carry out research to get more ideas about the mainland consumption status.
Siemens Co. has set up independent R&D centers on medical treatment. It has also studied on telecommunications project with China Telecom Research Institute, which caters to the features of Chinese market.
Nowadays, China has become a repository of technology and talent. Transnational corporations, therefore, need to exert their utmost efforts in regard to native talent and relative technology to make their products more suited to the domestic market.
The distribution of multinational R&D centers has a very close relationship with manufacturing distribution. Manufacturing investors are more likely to set up R&D centers where they have already poured in the most funds, leading to a concentrate of investment and upgraded manufacturing ability.
Chinese investors in overseas markets focus their eyes on trade enterprises and will not have the ability to survive when their commodities are sold out. However, their foreign counterparts have established manufacturing enterprises and representative offices in China, boasting competitive products through technological renovation.
(www.ccgp-fushun.com by Shan Xingmei 05/10/2001)
