Doing business in china
Preface This research paper would seek to explore some of the intricacies and perils experienced by foreign corporation seeking to engage in business activities in China, along side some of the possible rewards that await those that do so successfully. Following a brief synopsis of China’s current economic universe and more specifically, China’s telecom space which has been going through staggering transformations in recent years, this paper will offer a more in depth look at the China entry story of Alvarion, a prominent Israeli telecom player. We feel Alvarion’s story exemplifies in several aspects the perils, hardships and rewards of doing business in China, with a present day interim happy ending following almost seven years of rigorous and multi layered China entry endeavors. The Chinese Economy: a Brief Synopsis Following decades of a rigidly maintained centralized economy, imposed by the Communist party ruling China since the late 1940’s, new winds of economic reform, openness and change started blowing throughout the country in the late 1970’s. Deng XiaoPing, who at the time headed China’s Communist apparatus, declared the “Open Door Policy,” aimed at revolutionizing and modernizing China’s ailing economy. Roughly 25 years later, Deng’s change in policy made China’s economy one of the fastest growing economies in the world. Since the initiation of said policy, Chinas economy has grown at an average annual rate of nearly 9% (maintaining staggering growth figures despite the apparent regional and global economic slowdowns in recent years), and the number of foreign firms doing business in or with China has grown exponentially. ... firms alone have invested over $25 billion in China - 90% of it within the last ten years, alongside dozens of billions of dollars in direct foreign investments from Japanese, European and other Asian entities (mainly from Singapore and more recently, Taiwan). In 2000, exports from China to the rest of the world were up 28%. ... This shows that in key sectors, such as energy, telecommunications, medical equipment, construction, services, franchising, and many others, China is an interesting and viable market. ... However, while the economic door was indeed gradually opened, China’s rigid and at times Orwelian regime maintained its iron political grip on the country. This significant dichotomy between a quasi-free market economy and a rigid communist political system constantly imposes considerable strains on many aspects of China’s handling of its economic and other domestic and international policies. The gradual dissolution of this hybrid system or its possible stagnation or even worsening would greatly determine China’s ability to sustain its economic growth in coming years. Foreign companies continue to have mixed experiences in China. ... To be a success in China, foreign companies must thoroughly investigate the market, pre-qualify potential business partners, take steps to assure that they will be paid, and craft contracts which minimize misunderstandings between the parties and foresee the considerable differences that exist between Western and Chinese contractual and other business related cultures. China: The Telecommunications Market According to the Ministry Information Industry (MII), China’s telecommunications network has exploded since1990. With 214 million wireline subscribers and 207 million mobile subscribers as of year-end 2002, China now boasts the largest wireline and wireless networks in the world. China will have an additional 33 million fixed phone and 52 million mobile phone subscribers this year; it will also continue to invest more than $25 billion in fixed assets in the telecommunications sector. ... As China’s economic development has progressed, it has generated increased demand for additional communications services and equipment. ... China has one of the most competitive telecommunications equipment markets in the world, which, alongside the explosive growth of the country’s telecommunications networks, has drawn all of the major international equipment suppliers to establish joint venture manufacturing operations there since the 1980’s.