Menzies Chapter One

Doing Business in China

Doing Business in China

Getting Ready for the Asian Century

Jane MenziesMona Chung Stuart Orr

Doing Business in China: Getting Ready for the Asian CenturyCopyright © Business Expert Press, 2012.All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means—electronic, mechanical, photocopy, recording, or any other except for brief quotations, not to exceed 400 words, without the prior permission of the publisher.

First published in 2012 byBusiness Expert Press, LLC222 East 46th Street, New York, NY 10017www.businessexpertpress.com

ISBN-13: 978-1-60649-344-1 (paperback)

ISBN-13: 978-1-60649-345-8 (e-book)

DOI 10.4128/9781606493458

Business Expert Press International Business collection

Collection ISSN: 1948-2752 (print)Collection ISSN: 1948-2760 (electronic)

Cover design by Jonathan PennellInterior design by Exeter Premedia Services Private Ltd., Chennai, India

First edition: 2012

10 9 8 7 6 5 4 3 2 1

Printed in the United States of America.

From Jane Menzies: To JohnFrom Mona Chung: To Holly

From Stuart Orr: To Rose

Abstract

Th e Asian Century will bring many changes to world trade and to the global economy. It is predicted that China will be the largest single economy in this new economic era; understanding how business operates in China will hence be central to success in the Asian Century. Th is book will be of particular interest to researchers, managers, and anyone interested in international business in China. It examines the experiences of a wide range of Australian businesses that have internationalized to China, including planning for, establishing and operating a business in China, staff selection and management, the trade and investment environment, legal practices and regulations, politics, corruption and intellectual property protection. Australian businesses were selected for this project because of Australia’s strong economic connection with China and the stability of the Chinese economy over the last 20 years, including during the GFC. China has been Australia’s top trading partner since 2007. Th e consistency of the Chinese economy and the long-term commitment of Australian businesses to operations in China provided a valuable perspective from which to examine foreign business operations in China. Over the last 20 years, the Chinese economy grew tenfold, to become the second largest in the world. Th e longitudinal perspective of many of the participants over this period of change enabled them to off er insightful observations regarding the fundamental drivers of business practices in China. Th e fi ndings presented in this book are based on interviews collected from 40 organizations, ranging from global mining and banking organizations to small manufacturing or service companies, covering a range of industries, and entry modes.

Th is book examines the process of preparing for successful operations in China, the opportunities off ered by the Chinese market, and the obstacles to establishing and maintaining business operations in China. Th e research utilizes a number of frameworks to consider business in China, including foreign direct investment and trade, cultural, political and legal, intellectual property, strategy, market entry, and human resource management frameworks. Th e fi ndings presented in this book are based on a rich and well-considered collection of observations provided by senior executives with long-term experience of operating businesses in

China. Th is book provides generalized fi ndings that can be transferred to other developed country contexts and evaluates the appropriateness of international business and trade frameworks for the Chinese context.

Keywords

Australian business internationalization, China, doing business in China

Contents

Acknowledgments .........................................................................................xi

Foreword ...................................................................................................xiii

List of Abbreviations .................................................................................... xv

Chapter 1 Introduction ............................................................................1

Chapter 2 Exploring the Trade and Investment Environment in China ............................................................................... 15

Chapter 3 Understanding the Cultural Gap Between Australia and China ............................................................................ 37

Chapter 4 Using the Political Structure in China: Can We Ever Make Sense of It? .................................................................. 61

Chapter 5 Th e Legal System: How Can You Use It to Your Benefi t? .................................................................... 81

Chapter 6 Intellectual Property in China—Are the Issues All Th ey Are Cracked Up to Be? ................................................ 97

Chapter 7 Motivations, Planning, and Strategies for China ................ 115

Chapter 8 Entry Mode and Location Choices in China ..................... 135

Chapter 9 Human Resource Management in China: Can You Find Skilled Staff and Retain Th em? .................................. 157

Chapter 10 Conclusions ........................................................................ 175

Notes ....................................................................................................... 191

References ................................................................................................. 207

Index ....................................................................................................... 223

Acknowledgments

Th e authors would like to acknowledge the assistance provided by the Australia China Business Council (ACBC)—Victoria Branch for their active support in completing the project. Th ey would like to thank the members and other individuals who gave us their time and talked with us about their business activities in China. Th ey would also like to acknowledge the fi nancial assistance provided by the Faculty of Business and Law, Deakin University, to complete the project. Th e authors would like to acknowledge the copy editor, Lynn Spray. Dr. Menzies would like to acknowledge the support provided by Dr. Ilan Alon and Th e China Center, at Rollins College, Winter Park, Florida, who hosted Dr. Menzies as part of her sabbatical, which enabled her to devote considerable time to writing this publication to book.

Foreword

China’s popularity as a research topic for both inward and outward trade and investment has increased steadily in the past two decades. Understand-ing the interactions of diff erent countries with China is a vitally important dimension of internationalization, as diff erent contexts can result in a dif-ferent interplay between home and host country variables, such as politics, culture, economics, resource base, legal factors, among many others.

Australia is similar, on many levels, to other Western Anglo-Saxon countries such as the United States or the United Kingdom, though it has a much smaller population (22.6 million people) and its organizations tend to be smaller, have fewer resources, and are less international than their American or European counterparts. Despite the reduced access to resources, Australian organizations have been successful in the Chinese market across many sectors, including natural resources, automotive, education, engineering, building and construction, heavy industries and banking to name a few, all of which are discussed in this book.

Th is book presents research describing the abilities, choices, and mind-sets of managers from Australian organizations when they interna-tionalize to China, from a number of theoretical perspectives. In particular, this book focuses on the motivations, strategies, and entry mode choices that organizations select. Th is book also presents a variety of managers’ perceptions on the frameworks pertaining to trade and investment, cul-ture, politics, law, and intellectual property rights. Th e human resource management issues that these organizations face are also explored.

Th is book makes a unique contribution to a small, but growing, literature on Australian companies in China. Th e authors should be commended on an enjoyable, informative, and absorbing read on entry into the world’s second largest economy—China, the Middle Kingdom.

Dr. Ilan Alon1

Department of International BusinessRollins College

Winter Park, Florida

List of Abbreviations

ACBC Australia China Business CouncilBSA Business Software AllianceCCOIC Arbitration Court of the China Chamber of International

CommerceCIETAC China International Economic Trade Arbitration

CommissionCIT Corporate Income TaxCJV Cooperative Joint VentureCPC Chinese Communist PartyDFAT Department of Foreign Aff airs and TradeEJV Equity Joint VentureFDI Foreign Direct InvestmentFESCO Foreign Enterprise Service CompanyFIEs Foreign Invested EnterprisesFIRB Foreign Investment Review Board FTA Free Trade AgreementGATS General Agreement on Trade in ServicesGATT General Agreement on Tariff s and Trade GDP Gross Domestic Product GDP PPP Gross Domestic Product Purchasing Power ParityGFC Global Financial CrisisHCNs Host Country NationalsHR Human ResourcesHRM Human Resource ManagementIP Intellectual PropertyJV Joint VentureM&A Merger and AcquisitionMNE Multinational EnterpriseNPC National People’s CongressOECD Organization for Economic Cooperation and DevelopmentPBSC Politburo Standing Committee

xvi LIST OF ABBREVIATIONS

PCNs Parent Country NationalsPCT Patent Cooperation TreatyPRC People’s Republic of ChinaR&D Research and DevelopmentRMB Renminbi RBV Resource-based View SEZs Special Economic ZonesSIPO State Intellectual Property Offi ceSME Small to Medium EnterpriseSOE State-owned EnterpriseT&D Training and DevelopmentTCNs Th ird Country NationalsTM Talent ManagementTRIMS Trade-related Investment Measures TRIPS Trade-related Aspects of Intellectual Property Rights WIPO World Intellectual Property Organization WOFE Wholly-owned Foreign EntityWTO World Trade Organization

CHAPTER 1

Introduction

China, also known as the Middle Kingdom or Zhōngguó, has been an attractive emerging market for international businesses that can be expected to off er new opportunities, well into the future. It is predicted that China will grow and fl ourish until it is the world’s largest economy in 2016. Along with its own rapid growth, China off ers many foreign companies great potential for their future growth. Despite the attractive-ness of this country, it is diffi cult to understand how it operates, and there are many minefi elds waiting for the unwary. An understanding of the context, the drawbacks, and issues associated with internationaliza-tion to China, will assist with understanding how entry decisions should be made for this unique market. Th e purpose of this book is to provide an overview of the Chinese business environment, and present the fi nd-ings from research, conducted with Australian managers who either are involved in their organization’s international activities in China or have had the experience of internationalizing their business to China. Th ese viewpoints are invaluable in understanding the dynamics of this market for researchers, would-be investors, and those interested in exporting or participating in international trade.

China has experienced stunning double-digit growth rates in gross domestic product (GDP) for over two decades and, as of 2010, it is the second largest economy in the world.1 It is predicted that China’s economy will surpass that of the United States by 2016 in GDP pur-chasing power parity (PPP).2 Th is is just one dimension of China’s eco-nomic success; however, it is predicted that it may take another 30 years or so for China to “catch up” and become the largest economy in real terms. Th is prediction, however, has changed dramatically since the Global Financial Crisis (GFC). China will have to develop and maintain a range of economic fundamentals in order to reach this goal. However,

2 DOING BUSINESS IN CHINA

serious “Black Swan” events,3 such as the recent GFC and European Debt Crises, may impede China’s future growth.

The Context of China

China’s entry onto the world economic stage occurred in 1978, with the implementation of Deng Xiaoping’s “this Open Door Policy.”4 Since then China has opened its borders and economy to commercialism, indus-trialization, foreign direct investment (FDI) (now both inwards and outwards), and international trade. China’s economic growth has been astonishing in the past 30 years; and its move from a closed-door, com-munist, centrally planned economy to a “socialist market economy,” or what has been termed by others as “the world’s largest capitalist economy” with such success, has been even more astounding. Along with these economic developments, numerous changes have been made on a social, cultural, political, and legal front. As a result, the Chinese people have seen a positive eff ect on the economy, country, standard of living, quality of life, and security in China.5

Culture is a pervasive issue for foreign business in China and is not well understood by foreign managers. For this reason, the theme of Chinese business culture runs throughout this book. Understanding the deeper cultural values is often the key to creating a successful business in China.

In the past, China has been perceived as the “factory of the world” due to its low-cost, endless supply of hardworking labor. China’s comparative advantage as a low-cost manufacturing nation is currently being eroded by increasing wage levels (wage infl ation has ranged between 7% and 25% per annum in recent years)6 and greater worker protection, which increase business costs. In response to this, the government is working to develop the innovation-based segment of the economy, investing in education, a strong patent system/patent portfolios, and an emphasis on research and development. In fact, the focus of China’s 12th fi ve-year plan is the development of an innovation economy.7 Only time will tell whether China will be successful in this respect. Considering its past success in developing other parts of its economy and the power of the

INTRODUCTION 3

government, China is likely to be successful in this endeavor as well. A common saying in the Chinese business community is, “things get done in China, but it is not always easy.”8

The Context of Australia–China Business Relations

China’s growth has been the single largest contributor to global growth over the past 5 years, and this is expected to continue until, at least, 2016.9 In 2011, China accounted for 45.1% of the world’s crude steel output10 and 58.6% of the world’s pig iron output.11 As a major global minerals supplier located close to Asia, Australia has taken advantage of the economic development in China. Today, Australia enjoys a mineral boom because of its supplier relationship with China.12 In 2010, Aus-tralia represented China’s 6th principal import source, with 4.1% of trade imported from Australia.13

China is not only a resources market for Australia; other Australian companies have been pursuing the Chinese market since the introduc-tion of the Open Door Policy in 1978.14 Overall, however, the results of this pursuit have been somewhat inconsistent. Some Australian compa-nies have unquestionably had success in China. For example, the ANZ Bank has one of the most developed Chinese operations of the Australian banks operating in China. It has managed to open a number of branches throughout China and has progressed successfully through the stages, as specifi ed by government regulations, to become an incorporated bank in China in 2010.15 Other Australian organizations have not been so suc-cessful and have had to withdraw from China. For example, the large Australian beer manufacturer, the Foster’s Group, was unable to make a profi t from their Chinese operations and pulled out of China in 2006.16

China is now Australia’s largest trading partner,17 and its importance to the Australian economy has grown alongside China’s increasing eco-nomic, political, and strategic infl uence in the Asia-Pacifi c region and in the global economy.18 In 2011, Australian investment in China amounted to A$16.9 billion,19 making it Australia’s 11th largest investment destination.20


In terms of trade, 3,245 Australian companies were exporting to China in 2006.21 Currently, major areas of opportunity include min-ing and energy; agribusiness; manufacturing; construction; technology; management; consultancy; regional development; and fi nancial, legal, education, engineering, and architectural services.22 Major exports from Australia to China include iron ore, wool, copper ores, and coal.23 In the area of services, Australia’s major exports to China are education and education-related travel and personal travel (e.g., Chinese visitors to Aus-tralia). Th ere are approximately 1,000 Australian exporters entering the Chinese market each year,24 with about 400 Australian businesses operat-ing in China; most of them engaged in manufacturing, property, business services, fi nance, insurance, education, mineral exploration, and informa-tion services.25 Recognizing the signifi cance of these business relation-ships, Australia and China began negotiations for a Free Trade Agreement (FTA) in 2005.26 Th e FTA aims to facilitate Australian exporters and businesses in gaining greater and smoother access to the Chinese market.

Australian-Chinese business relationships are important to Australia, mainly due to China’s demand for resources. However, many other sec-tors of Australian industry have been successful in China, such as the food and beverage, education, and manufacturing industries. Australian organizations have actively participated in China-related activities, but little is known about how these organizations internationalize to China. Hence, it is important to develop our understanding of how they do busi-ness in China.

Th is book presents the fi ndings of this research into Australian organi-zations’ entry strategies into China. It provides an explanation of and insights into how Australian organizations make decisions when entering the Chinese market place and the factors infl uencing those decisions. Forty Australian organizations with business activities in China participated in the research. Senior executives, directors, managers, and consultants famil-iar with their international business activities in China were interviewed to collect the data. In order to illustrate the predominant factors and their impact, a business strategy model was developed for entering the Chinese market. Th is model incorporates all the factors, which were identifi ed as having an impact on an organization’s decision-making process (Figure 1.1). Each aspect of this model will be considered in detail in Chapters 2–9.

INTRODUCTION 5

The Study

To conduct the study, initially support from the Australia China Busi-ness Council (ACBC) was gained by approaching Th e Honorable Jim Short, who then approached ACBC’s board for their support of the pro-ject. Th e board gave the researchers approval to contact ACBC members to participate in the study—invitations were e-mailed to all members of the Victoria branch. Nonrespondents were followed up with telephone calls to encourage participation. In addition, the research team members’ personal contacts were used to select companies who were not members of ACBC. Th e snowballing method27 of participant recruitment was also used to increase participant numbers. Th is involved asking the interview-ees to identify potential interviewees from other companies they thought would be suitable and available to participate in the study.

Once the participants had agreed to be involved in the research, the aims and background of the study were explained, and confi dentiality and anonymity were assured. An appointment was then made to con-duct the interview. Th e interviews mainly took place at the participants’ offi ces. Most interviews lasted approximately an hour, and the interviews were recorded and transcribed by a professional transcriber. One partici-pant did not want a recording to be made at the interview and notes were taken instead. Th e interview transcripts were then analyzed using a the-matic methodology, which identifi ed the major themes representing the viewpoints of the participants. A total of 43 interviews were conducted

Figure 1.1. Business strategy model for entering the Chinese market.

Trade and investmentframework

Cultural factors

Political factors

Legal and regulatoryenvironment

Intellectual propertyframework

Motivations,strategy, and planning

Entry modeand location

Human resourcemanagement issues


for the 40 Australian organizations (in some cases, more than one partici-pant was interviewed from the organization). To conduct this research, a grant worth $12,000 was provided by Deakin University. Th e ACBC, Victoria branch, supported the research in kind.

The Organizations Involved in the Study

Th e descriptive features of the organizations represented by the partici-pants, including industry, entry mode(s), business activity in China, year started in China, and location(s), are presented in Table 1.1. Th e partici-pants are represented by pseudonyms, which highlight their key features.

Th e largest sector in the sample consisted of organizations in the manufacturing industry (10 out of 40). Other industries investigated in the study were business and property services (5); building, construction, and engineering (3); education (4); agriculture, forestry, and fi shing (4); and fi nance and insurance (3). Th ere were a small selection of organiza-tions that were scattered across various industries, such as accommoda-tion, restaurants and cafés, mining, publishing, information technology, government, administration and defense, and health and community services.

Several types of entry modes were represented in the data, with some fi rms utilizing multiple entry modes. For example, one fi rm engaged in both acquisition and greenfi eld modes. Th e modes identifi ed in the research data included the following: fl y-in-fl y-out mode (8); using representative offi ces (2) or a registered offi ce (1); joint ventures (6); using agents and partner-ships to source customers, or, in the case of education institutions, sourcing students (5); wholly-owned foreign entities (WOFE) (13); licensing (1); supplier relationships (1); exporting (6); and exporting assistance (1).

Th e popular internationalization locations in China amongst the par-ticipants included Shanghai (24), Beijing (15), Guangzhou (9), Shenzhen (4), and Tianjin (6). Various other locations are shown in Table 1.1. Th e organizations represented in the data had participated in China over very diff erent periods of time. One organization established its business rela-tionships in China in the late 1890s, whilst another organization had established its operations there in 2007. Th e majority of companies in the study had internationalized to China in the early 1990s.

INTRODUCTION 7

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INTRODUCTION 9

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ssue

s whe

n do

ing

busi

ness

in

Chi

na

1997

Shan

ghai

offi

ce

18A

uto

Com

pone

nts

Co

Man

ufac

turi

ngW

OFE

Man

ufac

ture

s pro

duct

s in

Chi

na fo

r sal

e to

Tie

r 1 a

utom

otiv

e m

anuf

actu

rers

2006

Cha

ngch

un

19Fi

bre

Co

Agr

icul

ture

, for

estr

y,

and

fi shi

ngFl

y in

fl y

out

Mar

kets

and

edu

cate

s con

sum

ers o

n in

dust

ry p

rodu

cts

1998

—

20IT

Co

Info

rmat

ion

tech

nolo

gyFl

y in

fl y

out

IT c

onsu

ltin

g in

larg

e ba

nks

1999

Bei

jing

and

Shan

ghai

(Con

tinue

d)


Cas

eP

seud

onym

Indu

stry

typ

e28E

ntry

mod

e(s)

Key

act

ivit

ies

in C

hina

Yea

r st

arte

d in

Chi

naL

ocat

ion

in C

hina

21Im

port

/Exp

ort

Co

Bus

ines

s and

pro

pert

y se

rvic

esEx

port

ing,

fl y

in fl

y ou

tIm

port

s and

exp

orts

pro

duct

s in

clud

ing

food

, min

eral

s, cl

othi

ng,

and

also

pro

vide

s adv

ice

and

cons

ulti

ng

1986

—

22W

ool C

oM

anuf

actu

ring

Expo

rtin

gEx

port

s nic

he, w

ool p

rodu

cts t

o C

hina

, and

att

ends

trad

e sh

ows

—Sh

angh

ai

23B

ook

Co

Publ

ishi

ngLi

cens

ing

Lice

nses

a st

ate-

owne

d en

terp

rise

to

pro

duce

thei

r boo

ks, f

or sa

le in

C

hina

. Wri

tten

in M

anda

rin

2004

Shan

ghai

24En

gine

erin

g C

oB

uild

ing

cons

truc

tion

, an

d en

gine

erin

gW

OFE

Prov

ides

des

ign,

pla

nnin

g, a

nd

build

ing

serv

ices

in C

hina

1990

Offi

ces i

n H

ong

Kon

g,

Bei

jing,

Gua

ngzh

ou,

Shen

zhen

, and

Mac

au

25U

ni C

o 2

Educ

atio

nA

gent

s R

ecru

its C

hine

se st

uden

ts, b

uild

s in

tern

atio

nal l

inka

ges,

enga

ges i

n ac

adem

ic a

nd re

sear

ch e

xcha

nges

, de

velo

ped

an a

lum

ni a

ssoc

iati

on,

prov

ides

car

eers

, and

em

ploy

men

t se

rvic

es

—N

anjin

g an

d al

l ove

r

26So

ftw

are

Co

Info

rmat

ion

Tech

nolo

gyJo

int v

entu

re (

95%

so

ftw

are

co a

nd 5

%

loca

l Chi

nese

par

tner

)

Prod

uces

soft

war

e in

Chi

na, f

or th

e C

hine

se m

arke

t in

Chi

nese

2005

Che

ngdu

(H

Q),

Bei

jing,

Sh

angh

ai, G

uang

zhou

, an

d H

ong

Kon

g

Tab

le 1

.1.

Cha

ract

eris

tics

of t

he O

rgan

izat

ions

Inv

olve

d in

the

Stu

dy (

Con

tinu

ed)

INTRODUCTION 11

Cas

eP

seud

onym

Indu

stry

typ

e28E

ntry

mod

e(s)

Key

act

ivit

ies

in C

hina

Yea

r st

arte

d in

Chi

naL

ocat

ion

in C

hina

27Pa

int C

oM

anuf

actu

ring

Expo

rtin

gEx

port

s pai

nt to

bus

ines

s peo

ple

wis

hing

to m

igra

te to

Aus

tral

ia o

n th

e A

ustr

alia

n B

usin

ess M

igra

tion

Sc

hem

e

2002

Shan

ghai

, She

nzhe

n,

Bei

jing,

Gua

ngzh

ou,

Nan

jing,

and

Wuh

an

28B

rake

Co

Man

ufac

turi

ngW

OFE

Man

ufac

ture

s pro

duct

s in

Chi

na, f

or

sale

in C

hina

, and

exp

ort w

orld

wid

e20

05N

orth

Eas

t Chi

na

29Lo

gist

ics C

oTr

ansp

ort a

nd st

orag

eEx

port

ing

Prov

ides

frei

ght s

ervi

ces a

nd

cust

oms d

ocum

enta

tion

2001

Shan

ghai

30M

achi

ne C

oA

gric

ultu

re, f

ores

try,

an

d fi s

hing

Expo

rtin

g Ex

port

s mac

hine

s to

Chi

na a

nd

deve

lops

rela

tion

ship

wit

h bu

sine

sses

to

lice

nse

the

use

of th

eir m

achi

nes

1999

Bei

jing

31M

edic

Co

Hea

lth

and

com

mun

ity

serv

ices

Fly

in fl

y ou

t D

evel

ops r

elat

ions

hips

wit

h cl

ient

s, ed

ucat

es c

lient

s on

thei

r pro

duct

s 20

03Sh

angh

ai, G

uang

zhou

, N

anjin

g, B

eijin

g, T

ianj

in,

Xia

n, a

nd Z

hong

guó

32C

hain

Co

Man

ufac

turi

ngW

OFE

(G

reen

fi eld

and

A

cqui

siti

on)

Man

ufac

ture

s cha

ins a

nd h

eavy

in

dust

ry p

rodu

cts i

n C

hina

, for

the

Chi

nese

mar

ket a

nd a

broa

d

2007

Shan

ghai

and

Han

gzho

u

33R

espo

nsib

ility

C

oB

usin

ess a

nd p

rope

rty

serv

ices

WO

FEPr

ovid

es c

orpo

rate

soci

al re

spon

si-

bilit

y co

nsul

ting

and

risk

adv

ice

2003

Shan

ghai

and

Hon

g K

ong

34R

esou

rces

Co

2M

inin

gW

OFE

, exp

orti

ngEx

port

s res

ourc

es to

Chi

na, h

as o

ffi ce

s in

Bei

jing,

Gua

ngzh

ou, a

nd S

hang

hai

1960

sB

eijin

g, G

uang

zhou

, and

Sh

angh

ai

(Con

tinue

d)


Cas

eP

seud

onym

Indu

stry

typ

e28E

ntry

mod

e(s)

Key

act

ivit

ies

in C

hina

Yea

r st

arte

d in

Chi

naL

ocat

ion

in C

hina

35G

ambl

ing

Co

Cul

tura

l and

re

crea

tion

al se

rvic

esW

OFE

Ope

rate

s gam

ing

and

lott

ery

outl

ets

thro

ugho

ut S

hang

hai

2005

Shan

ghai

36Tr

ade

Fina

nce

Co

Fina

nce

and

insu

ranc

eEx

port

ing

assi

stan

ce

and

fl y-i

n-fl y

-out

mod

ePr

ovid

es e

xpor

t tra

de fi

nanc

e an

d pa

ymen

t met

hods

. Int

erac

ts w

ith

Chi

nese

bus

ines

s and

supp

liers

.

2005

Shen

zhen

, Gua

ngzh

ou,

Don

ggua

n, S

hang

hai,

and

Nin

gbo

37U

ni C

o 3

Educ

atio

nA

gent

s Pa

rtne

rshi

p pr

ogra

ms i

n va

riou

s co

urse

s, ar

ticu

lati

on p

rogr

ams,

recr

uitm

ent,

and

pipe

linin

g of

st

uden

ts. O

ffsho

re le

ctur

ing

2000

Bei

jing,

Jina

n, K

aife

ng,

Cha

ngsh

a, L

iaon

ing,

and

H

uang

38Ta

fe C

oEd

ucat

ion

Age

nts,

join

t ven

ture

Path

way

s pro

gram

for s

tude

nts c

om-

ing

to A

ustr

alia

to st

udy.

Offs

hore

te

achi

ng

1990

sC

heng

du, H

unan

, Sh

enya

ng in

Lia

onin

g Pr

ovin

ce, K

aife

ng,

Zhen

gzho

u, Ji

nan,

Ti

anjin

, and

Lan

zhou

39B

ank

Co

3Fi

nanc

e an

d in

sura

nce

WO

FEB

ranc

hes i

n a

num

ber o

f loc

atio

ns,

offe

rs a

num

ber o

f ban

king

serv

ices

, an

d is

wai

ting

for e

xten

ded

bank

ing

appr

oval

s

1987

Bei

jing,

Sha

ngha

i, an

d H

ong

Kon

g

40R

etai

l Co

Man

ufac

turi

ng/r

etai

l tr

ade

Supp

lier r

elat

ions

hips

Sour

ces r

etai

l pro

duct

s fro

m a

smal

l gr

oup

of su

pplie

rs20

00G

uang

zhou

Tab

le 1

.1.

Cha

ract

eris

tics

of t

he O

rgan

izat

ions

Inv

olve

d in

the

Stu

dy (

Con

tinu

ed)

INTRODUCTION 13

Intended Audiences for This Book

Th is book presents the fi ndings and analysis of a research study investi-gating the internationalization of Australian businesses into China. Th is book will be of considerable value to those researching Australia–China business relationships, as there has been little research conducted in this area, and little is known about the internationalization of Australian fi rms to China. Th is book thus makes a signifi cant academic contribu-tion to this important area of research. A better understanding of this phenomenon is especially important as the Australian government is cur-rently attempting to develop its relationship with China, responding to the anticipated emergence of the Asian Century.29 Th is research also has practical signifi cance for businesses that are new to or are considering entry into the Chinese market and provides observations that would be of interest to practitioners. Th is research is also important for managers who are planning to have careers in China in the future. Th is book provides a thorough background of the Chinese business environment, based on a number of theoretical perspectives, and draws conclusions regarding the key issues identifi ed in the research for organizations internationalizing into China.

Structure of This Book

Th is book fi rst explores the trade and investment climate in China (Chapter 2), and analyzes the perceptions of the participants towards Australia’s negotiations with China on a FTA, and China’s accession to the World Trade Organization (WTO). Chapter 3 is devoted to under-standing the deeper cultural values associated with “doing business in China,” identifi ed by the participants. Th is chapter examines the Chinese business culture and utilizes the research fi ndings to identify a number of approaches, which could be used to address the cultural diff erences that foreign businesses will experience in China. Chapter 4 describes and analyzes the political system in China and specifi cally identifi es how politics in China should be managed. Th is chapter utilizes the fi ndings to identify a number of approaches for dealing with the political condi-tions in China. Chapters 5 and 6 provide an understanding of the legal


and intellectual property (IP) regulatory framework in China. Chapter 5 focuses on the legal system, and the perceptions that managers had of the system, whilst Chapter 6 focuses on an analysis of the IP issues that the participants experienced. Th is chapter utilizes the fi ndings to identify a range of approaches, which organizations could utilize to protect their IP-related assets in China. Chapters 5 and 6 also provide a critical assess-ment of the challenges associated with dealing with the Chinese legal system and IP laws. Chapter 7 focuses on the motivations, planning, and strategies that the participants used to enter China. Transaction cost, OLI (ownership, location, and internalization), internationalization, and the resource-based view theories were utilized in Chapter 8 to examine the entry modes that participants adopted when internationalizing to China and their locational choices. Th e international human resource manage-ment literature was utilized in Chapter 9 to evaluate the human resource management issues that the participants identifi ed as relevant in the Chi-nese environment. Th is chapter focused on staffi ng preferences, dealing with skills shortages, and attracting and retaining staff . Chapter 10 con-cludes this book with a summary of the key fi ndings and analysis of the data. Practitioners will fi nd this chapter of interest as the fi ndings off er suggestions for decision-making processes, which will increase the likeli-hood of success in establishing Chinese foreign business operations.

Conclusion

Deng Xiaoping, the mastermind behind the economic reforms in China, is famous in China for the saying “Search for stones to cross the river.”30 Deng Xiaoping used this statement to indicate that the people of China needed to search for stepping-stones to make the transition from a cen-trally planned economy to a modern day market economy, which is inte-grated with the world. Foreign businesses planning to enter the Chinese market, whether by exporting, FDI, or joint ventures, should also heed this advice and “search for stones to cross the river.” Th is book presents and evaluates some of those “stones.” It is hoped that this book will provide guidance for achieving success and prosperity in the Middle Kingdom, Zhōngguó.

Menzies Chapter One

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