China's emerging economy
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Is it too late to enter the Chinese market?Foreign companies have long seen the country with its 1.3 billion people as a potential way to expand successfully and at a low cost. But have those foreign companies who have yet to make their move missed the boat?
China's State-owned enterprises, which have benefited greatly from the country's 4 trillion
Yuan stimulus package, appear to have an impregnable position as never before. Moreover, dealing with a country which has its own and particular culture is all the more complicated.
China is a very attractive market for many companies because it is one of the biggest in a lot of sectors and it permits unmatchable economies of scale, however entering China has a cost, a “regulation cost” which is very high.
The Chinese government has always wielded a strong hand over business and prevents foreign companies from entering core sectors by legislating against them and favoring
Chinese enterprises; regulations and rules are selectively applied to the advantage of Chinese companies. Censorship laws are very repressive, and the government wants to keep control on foreign companies. Therefore some sectors are restricted to being joint ventures with a fifty percent stake owned by Chinese businesses.
Indigenous Chinese companies, particularly in key sectors such as technology, are increasingly competitive and have a more solidly entrenched position because the law favors them and a lot of companies in important sectors such as communications, energy, finance, resources and media are state owned..
Furthermore, regulations seem to be changed overnight. Due to the flexibility of regulations foreign businesses are faced with unpredictable uncertainties in their market.
Another problem with Chinese regulation is the loopholes.
As cited in the text, China is no longer one of the cheapest in terms of production. In the same way as the price of raw materials has risen and so has the cost of