Behind the open door : foreign enterprises in the Chinese marketplace

This study describes the experiences of foreign-invested firms in the mainland Chinese economy and discusses the implications of those experiences for the foreign commercial policies of the industrial countries, including the United States. It draws on extensive interviews with expatriate managers and other professionals currently at work in China. Whereas recent books on Chinese marketplace conditions focus on a single firm or issue or lack a discussion of policy conclusions (because they are prepared for a commercial audience), this study is distinguished by the breadth of industry interviews and its concern for policy implications. Rosen makes a rare attempt to deduce the policy implications of current experiences of foreign firms in China, presenting conclusions that go beyond those found in today's usual policy debate. Behind the Open Door is a must for China specialists and should be read by anyone with general or business interests in China or the Asia-Pacific region. The book is an ideal text for MBA programs that focus on the region, and for political science and Asian studies courses on China. Introduction......Page 4 Why Study the Expatriates?......Page 6 A Methodology for Drawing upon Expatriates' Insights......Page 7 How Compatible Is China's Present Investment Environment with International Expectations?......Page 11 Has China Really Turned a Corner, and Should Foreigners React Differently to Its New Leadership?......Page 12 Will the Chinese Economy Be More Open to Foreign Participation in the Future?......Page 13 Will World Trade Organization Accession Address the Commercial Priorities of China's Trading Partners?......Page 14 Do Economic Trends Augur for Cooperation between US and Chinese Authorities, or Confrontation?......Page 15 What Is the Prognosis for Foreign Firm Performance in China in the Coming Years?......Page 16 Results......Page 18 Introduction......Page 20 The Investment Regime......Page 24 Guidelines for Investment......Page 25 The Approval Process: Basic Requirements......Page 28 Why China Is Opaque......Page 33 Keeping Up with the Joneses and the Yamamotos......Page 36 Ignorance and Error......Page 37 Strategic Positioning Issues......Page 38 Locating Strategically......Page 39 Steering Investors: Industrial Policy......Page 42 Partners......Page 45 Conclusions on Strategic Issues......Page 48 The Negotiation Process......Page 49 Enterprise Type......Page 50 Ownership Share and Management Control......Page 53 Labor Structure......Page 54 Financial Structure......Page 55 Phasing......Page 56 Scope, Distribution Strategies, and Services......Page 62 Incentives......Page 64 Performance Requirements......Page 66 Export Performance......Page 68 Local Content Requirements......Page 72 Technology and Research and Development Requirements......Page 74 Analysis......Page 78 Transitional and Self-Imposed Problems......Page 80 Policy Variables......Page 81 Market Structure......Page 85 Introduction......Page 88 Table 3.1 Employment of Chinese by foreigners, 1980-96......Page 90 Human Resources and Establishment: Pressures Shaping the Labor Contract......Page 92 Table 3.2 Unemployment estimates......Page 93 Nontransparent Approval......Page 94 Pressure to Overstaff......Page 95 The Right Staff......Page 96 Securing Managerial Control......Page 97 Box 3.1 The importance of localizing management......Page 98 After the Contract: Just the Beginning......Page 99 Table 3.3 Overtime at a southern China FIE, 1997......Page 100 Availability, Wage Pressures, and Changing Labor Patterns......Page 101 Table 3.4 Local managers’ salary increases, 1996-2000......Page 102 Figure 3.1 Managers' salary increase, 1996-2000......Page 103 Mobility and the Dang An and Hukuo Systems......Page 104 Table 3.7 Per capita GDP by province, 1996......Page 106 Figure 3.2 Per capita GDP by province, 1996......Page 107 Nonwage Costs......Page 108 Table 3.8 Personnel overhead expenses: contribution of an FIE in Shanghai......Page 109 Training and Quality......Page 111 Retention......Page 113 Insulation......Page 114 In the Background: Human Rights......Page 116 Analysis......Page 118 Transitional and Self-Imposed Factors......Page 119 Policy Issues......Page 120 Market Structure......Page 122 A Concluding Note......Page 123 Introduction......Page 124 What Is Productivity?......Page 125 Table 4.1 Total factor productivity growth in China's state and collective industries, 1980-92......Page 127 The Foreign Experience......Page 129 Table 4.2 China's imports, first quarter 1998: SOEs vs. FIEs......Page 130 Table 4.3 Exports of FIEs, 1985-96......Page 131 Human Resources Availability......Page 132 Table 4.4 China's trade: comparative advantage......Page 133 Training......Page 134 Deployment and Management of Staff......Page 135 Overstaffing......Page 136 Intermediate Goods Inputs......Page 137 Figure 4.1 FIEs in China's trade, 1980-96......Page 138 Technology Application......Page 139 Scale and Capacity......Page 141 Table 4.5 DCAC: one year’s forecast vs. actual demand, 1996......Page 142 Figure 4.2 DCAC: One year's forecast vs. actual demand, 1996......Page 143 Table 4.6 Overcapacity? The case of the auto sector in 1996......Page 145 Capital Factors......Page 146 Financial Efficiency within the Organization......Page 147 Institutional Factors......Page 148 Existing Culture and ÏResistance to ChangeÓ......Page 149 Corruption and Graft......Page 150 Discordant Organizational Structures......Page 151 Scope of Participation......Page 153 Environment and Productivity: A Note......Page 154 Analysis......Page 155 Transitional and Self-Imposed Variables......Page 156 Table 4.8 Roundup of issues: productivity......Page 157 Policy Variables......Page 158 Market Structure Variables......Page 160 Distribution Rules: A Domestic Trade Policy......Page 161 Communist Era......Page 165 Post-1979......Page 166 Foreign Investors and Distribution......Page 169 The Regulatory Environment......Page 170 FIE and Distribution in Practice......Page 172 Ambiguity......Page 174 Collecting......Page 175 Service Provision......Page 176 Physical Infrastructure......Page 177 Distribution and Local Authority......Page 179 Allocated Market Share......Page 183 Market Foreclosure......Page 184 Organizing to Distribute......Page 186 Failing to Plan for Distribution......Page 191 Internal FIE Problems......Page 193 External Pressures, Regional Disparities......Page 194 Transitional Factors......Page 195 Market Structure......Page 197 Introduction......Page 199 China's Legal Environment......Page 201 Predictability and Compliance......Page 205 Seeking Access to the Content of the Law......Page 206 Bridging Gaps in the Law......Page 207 Interpreting the Law to Advantage......Page 208 Building Bureaucratic Capacity......Page 209 Meeting Environmental and Labor Standards......Page 210 Structuring Contracts......Page 213 Conflict Resolution Prior to Litigation......Page 214 Litigation......Page 216 Intellectual Property Rights (IPR) Protection......Page 217 Corruption......Page 220 Superlegal Privileges......Page 223 Some Observations......Page 225 Transitional and Self-Imposed Factors in Legal Regimes......Page 228 Table 6.1 Roundup of issues: law......Page 229 Policy and Market Structure Factors......Page 230 7 Conclusions and Policy Recommendations......Page 233 Table 7.1 Roundup of FIE issues......Page 235 Why, Given Its Domestic Worries, Should China Care about the Concerns of Foreign Enterprises?......Page 238 Has China Really Turned a Corner, and What Should Be the Reaction to Its New Leadership?......Page 240 Will the Chinese Economy Be More Open to Foreign Participation in the Future?......Page 241 Are Foreign Corporations in China Influencing Social Trends in a Positive Way?......Page 243 Will WTO Accession Address the Commercial Priorities of ChinaÌs Trading Partners?......Page 245 Do Economic Trends Augur Cooperation between US and Chinese Authorities, or Confrontation?......Page 247 Will China's Central Government Remain the Conductor of Chinese Reforms?......Page 248 What Is the Prognosis for Foreign Firm Performance in China in the Coming Years?......Page 250 Is China a Source of Endless Excess Capacity That Will Threaten Other Economies?......Page 252 Recommendation 2: Consider the Limits of the WTO......Page 254 Table 7.2 High priority, policy-related issues......Page 255 Recommendation 3: Accommodate Impending Political Reform......Page 258 Recommendation 4: Hold Out a Helping Hand......Page 259 appbiie2636.pdf......Page 0 I. Agriculture, Forestry, Animal Husbandry, Fishery and Related Industries......Page 261 II. Light Industry......Page 262 IV. Communication and Transportation as well as Post & Telecommunications Services......Page 263 VII. Ferrous Metallurgical Industry......Page 264 IX. Petroleum, Petrochemical and Chemistry Industries......Page 265 X. Mechanical Industry......Page 266 XI. Electric Industry......Page 267 XII. Building Material, Equipment and Other NonMetal Mineral Product Industries......Page 268 XIV. Medical Equipment Industry......Page 269 XVII. Service Business......Page 270 IV. Machinery Industry......Page 271 I. Agriculture, Forestry, Animal Husbandry, Fishery and Related Industries......Page 272 IV. Communication and Transportation, Post and Telecommunications Industries......Page 273 VIII. Mechanical Industry......Page 274 IX. Electronic Industry......Page 275 XIII. Shipping Industry (the Chinese Party Will Be the Holding Party or Play a Leading Role)......Page 276 XV. Finance and Relevant Trades......Page 277 III. Power Industry and Urban Public Utility......Page 278 X. Journalism......Page 279 XIII. Other Industries Prohibited by the State or by International Treaties China Has Concluded or Taken Part In......Page 280 Appendix B Methodology......Page 281 Conducting the Research......Page 282 Processing the Information......Page 283 List of Sources......Page 284 Senior China Manager......Page 288 Legal Issues......Page 292 Matrix for Organizing Responses......Page 293