中國市場進入好時機
 

這是一個需要回答的重要問題 - 現在是一個進入中國市場的很好的時機，但還是太難承諾嘗試。從一個角度看問題的答案似乎已經很清楚 - 而與其他國家的經濟斗爭相比，中國似乎是很有實力。事實上， 2010年高盛薩克的預測假設所說中國將經歷一個超過11％的增長，隨后仍然是10.1％（臺北時間2010年3月7日）。然而，為什么要小心它是有用的也是有原因的。谷歌的案例展示了進入市場的西方公司如何可能與政府發生的沖突。除此之外，知識產權權利沒有得到充分保護，這是一個長期存在的問題。受限制的所有權，外國投資者在中國的經驗，也是另外一個角度，為什么公司會謹慎對待進入這個特定的市場。事實上，CEO們需要決定所涉及的風險是否會得不償失。
 

Chinese Market A Good Time To Enter

 

It is an important question that needs to be answered – is now a good time to enter the Chinese market or is it rather too difficult an undertaking to attempt. From one perspective the answers seems very clear – while other countries struggle with their economies, China seems to go from strength to strength. In fact, Goldman Sach’s projections suppose that in the year 2010, China will be experiencing a growth of more than 11 percent, which subsequently was to still 10.1 percent (Taipei Times 3.7.2010). However, there are also reasons why it is useful to be cautious. The case of Google shows how a western company entering the market may clash with the government. In addition to this, intellectual property rights are not adequately protected which is an ongoing problem. The restricted ownership rights that foreign investors experience in China is also another point why companies may be cautious about entering this particular market. Indeed, CEOs need to decide whether the risks involved may outweigh the benefits.

 

A recent article published by the Time featured the opinions of James McGregor (1.2.2010), who is a consultant as well as former chairman of the American Chamber of Commerce in China, concerning a number of problems which may arise for foreign investors when entering China. These included the rivalry from state owned enterprises that have special privileges bestowed upon them, the competition that may arise from cheap copies as well as a government policy which only selectively decides to enforce World trade Organization rules. McGregor noted that CEOs are “losing sleep over expectations that their onetime [Chinese] partners are morphing into predators—and that their own technology and know-how will be coming back at them globally in the form of cut-price products from subsidized state-owned behemoths.” The recent global crisis did nothing to relax the Chinese government's attitudes. In fact, it is blaming the united states for the creation of this economic crisis which means that local companies are favored over their foreign counterparts. This means that China now is even more closed to foreign investors and companies entering the market than before.#p#分頁標題#e#

 

However, many of these difficulties are not just part of the recent past. In fact, they have been in existence ever since China adopted the open door policy. Indeed, if one is to enter the Chinese market it is indeed vital to have an understanding of how the different factors interplay in that complex country. In 1978, the Chinese government embarked on the project of liberating the economy from political control. However, the government still maintained a strong hold over businesses since the overriding interest was to balance the need for economic growth with the wish to keep social and political stability. To this day, foreign companies are not allowed to enter certain core sectors of the Chinese economy such as media and telecommunications. Part of its efforts have also meant that state owned companies such as Baosteel, the Industrial and Commercial Bank of China, China National Petroleum and China Mobile underwent restructuring measures and were generally rejuvenated. This also lead to the fact that these companies now are morphing into serious competitors, which is also due to the government support that those companies enjoy (Tan 1996).

 

In addition to this, any potential sector a company may decide to enter in China it will find a market that is characterized by a multitude of competitors, both foreign and local. A look at the figures shows that the number of private companies in China increased from 140,000 in 1992 to 6.6 million by the end of 2008, even as the number of foreign corporations grew to 435,000. Of the Fortune 500 companies, about 480 already have an established branch in China, according to its government. What this means for the marketplace is that local and foreign companies are forced to fight for survival in that very tough business environment. There are a number of reports which state that profits are slowly on the rise, however, large multinationals are still struggling to earn the same margin in China that they do at home. What this means is that there are a number of voices that maintain that soon it might be too late to enter the Chinese market (money.cnn.com 15.4.2010).

 

This means that it is a frightening prospect to enter this very complex and competitive marketplace. However, this does not mean that it is not important for western companies to enter this market anyway. In the past only few were able to predict the pace at which the Chinese economy would recover. Now the challenge is to understand that in the future, China will advance to become one of the world's largest growth engine both in terms of output and consumption. For example, China surpassed the U.S. as the world’s largest automotive market in 2009. Also according to a September 2009 report from the China Enterprise Confederation and the China Enterprise Directors Association, the top 500 Chinese companies’ net profits were $170.6 billion in the first half of 2009, exceeding for the first time the net profits reported by the top 500 American companies, which were $98.9 billion for that period. Not only will China replace the United States as the world’s largest economy faster than predicted, but China’s (and India’s) growth may make Asia the source of about 50% of the world’s gross domestic product by 2030 (Chinapost.com.tw 6.9.2010).#p#分頁標題#e#

 

Simultaneously doing business in China has changed. Many companies are of the opinion that they have understood the difficulties of this particular market. However, the sheer scale and intensity of change that are characteristic for this particular marketplace means that once successful business strategies may be rendered obsolete very soon. Now it is not enough anymore to just create a freestanding business in China. Indeed, in many industries the country is advancing to the role of a game changer, which means that new ways of designing operations are originating from China nowadays. This means that new China strategies need to be developed which should not only be geared at selling goods in China or sourcing parts from there. Indeed, there is a need to integrate the China part of their business with their operations elsewhere, so that China can provide them with a global competitive advantage. This would mean that China as a market and place might need to advance to the core of companies' strategies.

 

In order to enter the Chinese market no, it is important to understand the particularities of the Chinese way of doing business. China's recent past is rich in terms of political, economic and social change. The cultural heritage that is characterizing the country is termed guo qing, which means special national circumstances. The term has been coined to describe the political and institutional changes that the country underwent. Together with China's international exposure and exchange, these factors are very critical to the particular business culture and negotiating styles which are prevailing in China.

 

In the first instance, Chinese business culture is shaped by traditional philosophical approaches, such as Confucianism and Taoism as well as prominent war stratagems. These philosophies have been part of Chinese culture for the past 2000 years, and continue to be important to the Chinese business culture. This is evident in Chinese patience in negotiations, which is a refection of this particular Confucian virtue. Harmonious relationships are to be maintained according to Chinese business ethics, which could be regarded as a remainder of Taoism. However, the typical survival instinct is due to the war stratagems.

 

The contemporary guo qing, however, is also shaped by more recent developments in Chinese history. The particularities hereof are vital to the understanding of the way Chinese business people interact with foreign firms. Part of the contemporary guo qing is the absence of social and development. This was caused by the historic fact that China was subject to numerous exploitation attempts and invasions in the course of the nineteenth and twentieth century, as well as the political and military developments that followed. In effect, these historical circumstances have lead to many cultural traumas and feelings of humiliation which has lead to a deep rooted distrust against foreigners. For the contemporary business culture this means that negotiations with outsiders are conducted in a hard way and win loose bargaining tactics which are used and ultimately underpinned by nationalistic motives. In real terms, Chinese business negotiations are often motivated by the wish for Westerners to pay back their forefathers' crimes against the Chinese nation. On the other hand, the fact that China has missed many economic and social developments due to the lack of continuation in the hast centuries meant that many leaders were and are convinced that China needs to catch up on many technological and scientific innovations that have conquered business environments elsewhere which means that Chinese business culture is very much interested in technology transfers from Western companies. Still, more recently China as a place for business has been becoming more and more integrated into the international business arena which traditionally has been lead and dominated by the west. This development has been prompted by the open door policy which now has been ongoing for the past couple of decades. The integration has been sped up by the fact that there is much foreign investment that has been flowing into the country. Also, China has been very successful at integrating new managerial know how developments and using new and cutting edge technologies. The fact that exchange has been happening on a larger scale in recent times means also that managerial styles of young under forties Chinese business people and their western counterparts are now increasingly converging.#p#分頁標題#e#

 

In order to gain a better understanding of how these different influences shape Chinese ways of conducting business, they will now be examined further. Confucianism is a type of moral ethics combined with practical doctrine which gives guidance on how to conduct interpersonal relationships. In terms of negotiations, it is important to keep its six core values in mind. These conclude the importance of interpersonal relationships, the respect for seniority and hierarchy, moral cultivation, family orientation, the pursuit of harmony as well as the concept of face ( Fang 1999: 109). In Taoism, it is important to observe and respect the creativity of life (Fang 2001: 53). A life which is in harmony with its surroundings is to be attained. The Tao, which is the way, is to be found (Fang 1999: 23). This precisely means that the general order of nature is to be understood, respected and followed. This philosophy is governed by the interplay between yin and Yang, which represent the negative and the positive forces in the world. Through the concept of Wu Wei, which means actionless activity, or to act without acting, the middle way is found between the two forces. This implies that the quest for compromise is key to this philosophy (Fang 1999: 31-32; Qunyu et al 1997: 283: Graham and Lam 2003: 83). Neither of the two philosophies is much interested in absolute truths. They are rather tools which are designed to help people find a way that works for them to live their lives. Both philosophies have been integral to political, educational and economical developments that have shaped the country over the course of the past few thousand years. This means that they have been embedded and internalized by people still shaping their thinking patterns and general conduct. Especially Confucianism is very much placing an emphasis on interpersonal relationships. With respect to business environments this means that Chinese people are likely to think of a business deal as founded on relationships between individuals instead of institutions (Vanhonacker 2004: 49) . This particular attitude stands in contrast to the western way of conducting business. While recognizing the importance of interpersonal relationships, they do not regard it as a prerequisite for the success of a businesses deal. The causality is differently placed in western environments. Relationships often follow deals, while in China relationships must be present in the first place. In the west, it is custom to separate professional and personal contacts, while in China this distinction is not present. The result of this is that in sino-western negotiations there may be tensions. Indeed, it is possible that agents send by western companies will be engaged in extensive pre- negotiating activities which are designed to establish the needed personal basis. This they might find excessive and unproductive, and the continuous inquiry after personal issues might be perceived as a nuisance. Thus relationships might become tense. This may become even more of a problem when their Chinese counterparts become annoyed at the fact that their time and efforts are not valued enough. This may lead to hard negotiations. Within the Chinese culture, relationships are categorized as either warm friendship or impersonal. Friendship is regarded as a privilege which is to be attained. Outsiders, on the other hand, are held at arms lengths which are governed by a set of ethical rules. Initially, Chinese negotiators are likely to send positive and inviting signals such as addressing their counterparts as old friends. If these signals are not reciprocated it is likely that the Chinese party will resort to hard negotiation tactics with a win lose approach. In fact, the emphasis on interpersonal relationships and ren zhi, which means the rule by people, is logically connected to the disregard of legal systems which is part of Confucianism. Indeed, within this philosophical framework, it is proposed the existence of law does not resolve problems. Instead, this approach suggests that behavior can be shaped by an internal set of moral codes and laws. An example for this would be li, which describes etiquette and ways of behavior. Confucianism suggests that a sense of shame can be installed within people, which is a useful tool to guide social relations (Solomon 1999).#p#分頁標題#e#

 

Within inter cultural negotiations it is likely that Chinese agents will chose those agents that are more open to the Chinese and forge relationships with them. They are likely to then use their new friends as interlocutors for information. If these fail to fulfill the business needs, the western friend will feel a sense of guilt and a need to make it up. Nowadays, China has developed a sophisticated, modern and institutionalized legal system. However, society sill relies on public denouncement of unethical behavior and wrongdoing, which is designed to protect the individual (Fang 1999: 111). Law within Chinese culture is associated with tyranny, lack of trust, coercion and trouble. This means that it is still regarded as a less effective means to influence behavior than traditional methods. For business negotiations, this means that legal frameworks are less important to understand than the traditional codes of conduct. Traditionally, business deals are sealed with a handshake, an oral commitment or just a nod of the head (Lucian 1992: 24). This means that lawyers are seldom involved within the process of crafting a business agreement. They tend to only get involved at later stages of the negotiation process when the contracts are about to be signed. This practice stands in contrast with the western approach of consulting lawyers from the beginning to the end of a business negotiation. This particular quality of Chinese business culture often leads to even business disputes being resolved with the help of a third party mediator or another agreement which is reached without the involvement of lawyers. This means that it is often the case that final contracts will feature a clause that stipulates that possible business disputes will be settled without the consultation of lawyers.

 

Hierarchies play an important part in the conduction of business within Chinese culture. This, as well as hierarchy and interdependence are also due to Confucianism. In fact, the failure to honor the five Confucian interpersonal relationships which include the relationships between father and son, husband and wife, ruler and people being ruled, elder and younger siblings and seniors and juniors may be harmful to interpersonal relationships in general, and might damage mutual trust. In group situations in particular, Chinese negotiators are more likely to regard hierarchies than their western counterparts. This is reflected in the way that decisions are taken, in the order in which individuals speak and how the greetings are done. By not being aware of certain hierarchies, western managers might greet junior members first, which would cause the senior member to lose face. Similarly, whereas western managers might perceive it to express the closeness of the relationship, addressing senior members of a Chinese team by name, without their formal title, in front of the entire group, would be considered highly impolite (ibid: 1180.

 

Still, while understanding the difficulties of the Chinese way of doing business, it is important to keep a focus on the potential opportunities that may arise from operating in this market. There are a number of factors that are the reason why it is important for companies to enter this particular market. Some of these reasons are the Chinese need for western technologies, the size of the market as well as marketing driven reasons such as the desire to maintain an international presence, a lack of opportunities within the home market, the rate of growth witnessed in the Chinese market – with a particular focus upon the newly emerging middle classes within that country which means an additional buying power. China is therefore a good place for potential business growth and new opportunities. Some companies are also pushed into the Chinese market due to the fact that they already have existing ties with the market such as customer relationships, or suppliers that move to China. Another key attraction of the Chinese market is the fact that it allows companies to reduce their operational costs. Some companies may also be prompted to move to China simply for its popularity as a country. Governmental operations such as departments and government funded bodies are also increasingly entering China for it is becoming ever more important in international politics, especially with regard to international economics and its growth and market potential (Menzies et al 2008).#p#分頁標題#e#

 

However, it is the institutions are the "rules of the game", which means that both the formal legal rules and the informal social norms that are responsible for individual behavior and various social interactions are determined hereby (North 1990). This means that it is important to analyze not only political and legal bodies, but take other important bodies also into account when examining the Chinese market and forces that may be limiting to the success of foreign companies entering the Chinese market. Simmons noted that it is beyond doubt that institutions are important, which means that it is essential to determine how precisely it is that they matter. Especially for small businesses, institutional constrains are problematic (Simmons 1998). In order to be considered a small business, a company needs to meet certain criteria. Firstly, it needs to have a gross operating revenue of less than $10 million a year. Secondly, its assets are to be less than $5 million at the end of the year and thirdly there need to be fewer than 50 employees at the end of the year (Commission of the European Communities 1996). Companies that can be characterized in this way are likely to have a bigger problem with institutional constraints than their larger counterparts (Mankiw 2006). This is due to the fixed costs of developing a business become a much bigger burden on small companies than on large companies with a more operating capital. Fixed costs need to be paid regardless of whether the company is large or small, and thus a small company is likely to struggle with this financial task much more than a large company. Unlike variable costs, which are in proportion to the amount of units that are produced, Fixed costs are independent of the quantity of production. This means that a small company will have to devote a relatively large proportion of its capital on fixed costs compared to a larger corporation. This simple model is but a model for it ignores the fact that cost structures may be different in large and small companies, however, its basic point stands: the higher the production volume the smaller the proportion of total capital that has to be devoted on fixed costs. This means that the numerous fixed costs are a barrier to entry for small businesses. These costs may include market entry costs or costs of gathering information. In addition to this, fixed costs are shaped by institutional frameworks. Small and medium companies (SMEs) face a set of separate problems such as the difficulty of sourcing external financing, higher transaction costs, constraints on their liquidity. Together, these factors mean that SMEs are more vulnerable than larger companies (Chow and Fung 2000).

 

With respect to China, it is to note that overall foreign investments have been continuously on the rise for the last couple of decades. Since the beginning of the open door policy, the total of foreign direct investment in China has surpassed the $700 billion (New York Time, 12.4.2007). With glottalization, worldwide competition has also risen which means that companies are searching for new production sites with preferably low production costs and the opportunities that a new market brings. The utilized foreign direct investment in China grew from $59.3 billion to $95.3 billion in 2008. However, the number of new projects and ventures saw its peak in 2005 and has since been on the decline (PRC ministry of Commerce, 2009). This is an indicator for the fact that foreign investment was not without its problems. For now it is not clear what the actual impact of FDI invested by small foreign businesses is with respect to the decreasing number of projects. Keeping this in mind, it is not surprising that in September 2009 the State Council announced measures to further promote Small and Medium-Sized Enterprise (SME) Development (World Bank 2009). This particular move may be motivated by the fact that the government is trying to remove some of the problems that foreign companies are faced with in the attempt of creating a business in China. As early as 2006, the consultant company Ernst & Young published a survey that indicates how German medium-sized businesses estimated their opportunities and risks within the Chinese market: indeed, the majority of companies viewed their prospects in China positively. However, as much as 78 percent still pointed to the lack of legal security and the insufficient reliability of the legal framework which meant that the investments in China were ultimately viewed as medium to high risk. It is also problematic to enforce contracts, which is also time consuming as well as expensive. In addition to this, patent infringements were pointed out and the fact that property rights were not sufficiently protected. Combined, these issues are points were companies entering China need to be cautious. A total of 62 percent of the surveyed maintained that corruption also created a big problem for entering the Chinese market (Ernest and Young 2006). These issues which are present in the Chinese market now lead to the fact that many companies are rethinking their investments into China and are now more cautious of the risks (Alan Gutterman 21.12.2008). This means that a shift has happened, which is in accordance with the game theory, that after a first great push into the new markets, now players are adjusting their strategies to survive in this difficult market. The risks that are correlated with this market are widely known. This means that even consulting firms are now cautioning their clients that are contemplating a move to China.#p#分頁標題#e#

 

The burden of costs for small foreign businesses, that has been mentioned earlier, is in fact due to the the Chinese institutional framework, which is governed by informal constraints, formal rules, inefficient bureaucracy, information asymmetries and uncertainties (Schmalensee 1981). However, the individual constraints affect large and small businesses in different ways. Barrier to the entry of businesses can be the costs that a new entrant is facing when embarking on a new market. China has the advantage to being able to offer smaller production costs for labor intensive production methods while simultaneously providing a very large market itself. While the Chinese themselves are still lacking purchasing powers for foreign products, the rise of the new middle classes means that it is also potentially becoming a new market for more expensive products. However, the cheap production also means that foreign firms can relocate their production there and then export their products to the country of origin. The production cost factor is one of the main reasons why many large firms already have relocated their production to China. It is now a great business risk not to establish a Chinese branch of production, which is only possible with a Chinese partner on board. However, the need for a local partner increases the fixed costs. Before entering the market, it is essential to collect information and draw up a business plan. A company will need to analyze the economic prospects and only then is it viable to establish a business in that particular market (North 1991). These steps all require an investment in terms of time and money. These steps are to be regarded as fixed costs and need to be undertaken. In the case of a large company, it is likely that they will be able to afford to consult with a specialist that will be able to help them establish these steps while a small company will often have to rely on only itself, thus making it difficult to plan the proceedings properly. Small companies will often rely on easily accessible information and will thus frequently not be aware of the real risks involved (Hudson et al. 1007).

 

Another part of institutional constraints are formal rules which are important determinants of the efficiency of economic performance. They are responsible for the seriousness of risks caused by the lack of certainty about the effective and fair implementation of legal rules. However, risks are not only caused by the incomplete nature of information but also from the uncertainty of whether agreements are going to be enforced. As explained before, there is much less of a tradition of formal rules in China than in the US for example. This means that the actual enforcement of agreements often relies on personal relationships and a positive relationship with the government which creates a lack of consistency. In China, powers are not divided, but instead centralized. The PR of China has no provision for checks and balances which creates problems when one is forced to rely on the legal enforcement of contracts. In fact, the creation of a strong and reliable legal system is made more problematic due to the long standing tradition of hierarchies in Chinese society, which can be regarded as an informal constraint. Within this system, as noted above, it is required to settle disputes through relationships and without the participation of legal agents. This showcases the continuing need for personal relationships to successfully conduct business in China. According to North, formal rules are designed to provide justice, the protection of property rights, protection generally and the reduction of internal order. The overriding goal hereby is to eradicated problems inherent in cooperations and to reduce transaction costs, which is done through the transfer of power to institutional bodies such as courts for example. This is also the reason why it is the state that usually takes the role of a third party in business negotiations and makes sure that contracts are enforced. However, this view is complicated by the act that states frequently pursue their own interests. In such cases it is vital that there are laws which protect the individual companies against the state itself. If such a system is missing, particularly small firms have an additional burden in terms of transaction costs, creating another barrier for entry. A particularly Chinese problem is the fact that the country is a one party state, which is another obstacle for a functioning legal system. Still, the actual act of enforcing contracts means costs which are doe to the price of expensive law suits. In case that the chances of winning a case are considered low then the aggrieved party restraints from an impeachment.#p#分頁標題#e#

 

In addition to this, the need to have a local cooperation partner to do business in China is an additional barrier to entry. This particular requirement is an additional factor that drives up the fixed costs. This also means that the only way a company is to set up in China is to form a Joint Venture which is another barrier, especially for small businesses. The actual process of finding a suitable Chinese business partner is also increasing the fixed costs. However, even once a company is able to go out to China, it is important to keep property rights in the focus. Dan’l Pierce, chief executive of Access Analytics International which provides software solutions in Asia, mentioned that he would never offer his services in mainland China, because he is afraid that those business partners could copy, sell or use his software even though it is licensed and legally protected. This problem has been noticed by the Chinese government and efforts have been made to tackle the issue. However, this is proving very difficult in the absence of a working legal system of checks and balances. In effect that means that there is always a risk involved in going to China since the protection of property rights in not certain and guaranteed (2008).

 

However, formal rules need to be backed by informal rules to be inefficient in terms of overcoming any informal limitations of human interaction. Informal rules need to be such that the costs of enforcement, measurement, supervision and monitoring can decrease. The difference between the marketplace China and the west is that both, formal and informal rules are well developed in the west, while they are severely underdeveloped in China (North 1991). This point is also observed by north who notes that transaction costs are generally larger in developing countries than elsewhere. It is possible, for example, that even in the absence of a legal framework, a company could offer compensation or replacement when the legal enforcement of contracts is uncertain. However in the case of China, supplier have a poor track record of business morale. There are cases where Chinese suppliers have refused to replace shipments altogether. This backs the impression that China's business environment is bound by many more formal and informal constraints than western countries. This circumstance adds more barriers for entry which again are particularly difficult to overcome for small companies. The difference between formal and informal constraints is that formal constraints can change rapidly, while informal constraints only change over a longer period of time since it is in the heads and mentalities of the people involved. For example, in 2007, the Chinese government decided to implement new changes to the law that were designed to protect private property (Hudson et al 1997). However, informal constraints, such as the overall business culture can only change gradually and thus this change in law might take a while to become entirely effective. In addition to this, the Chinese government attempted to promote the creation of a universal civil code. Such attempts will remain futile until changes have occurred within the actual Chinese value system and have penetrated the social consciousness in total. For now, major changes still need to occur. However, as noted above, there are signs that the new generation of managers, which is much more exposed to the West, is already starting to take some of the changes on board. Generally, the new private property right constitutes one of the main and distinct legal changes within the legal framework of China. However, even before it was passed, there were already laws in existence that were designed to protect the interests of businesses. However, many of these laws are not gripping since a large part of the Chinese way of conducting business is based on informal agreements which are underpinning its agreement. This circumstance is adding stress on companies that want to enter the Chinese market. Especially small firms find it difficult to comply with the underlying norms and rules, which are closely correlated with cultural values and tradition that dates back thousands of years. This means that other than the lack of competitive advantages such as economies of scale, small companies are also disadvantaged by their lack of understanding of distinctly Chinese ways of negotiation. In fact the cooperation with local business men and governments may avoid certain entry problems. However, these activities may also prove costly since bribery or the gathering of information are expensive activities (Leung 1995).#p#分頁標題#e#

 

Generally, the Chinese business environment is very much characterized by corruption. The exchange of expensive gifts is not considered bribery however. This difference in definitions means that to a western negotiating partner it may seem that bribery is essential to the way business is conducted in China. In addition to this, this practice is an additional cost to businesses trying to establish themselves in that country. Especially small businesses often do not profit from such practices. This is because their margin prospects are not great enough to engage in such business practices while staying profitable. It is obvious that there are big differences correlating business culture, language and the value system in different countries. In addition to written legal rules, there are many unwritten rules underpinning each business practice. These often prove the more important part of the sets of rules. Business practices in the US, for example, are very different from practices expected in China. As noted before, business practices and values are developed through a long process in which history plays a major role in addition to the usual process of trial and error. Examples for this may be seen in the value of an agreement – a positive answer in the German business world is worth more than the same answer in a Japanese environment. It is often part of Japanese practice to change an agreement if it is not written down and signed. In China too, contractual agreements and their specifications are not written down as meticulous as one is used to it in a western environment. Partially, this is doe to the fact that in a highly developed market such as the US specifications concerning details such as packaging are important to contractually specify, which is not the case in China in. Here again, it becomes important that legal rules are underpinned by informal rules, for otherwise legal norms will have little bearing on actual business practices (Moe 1990).

 

Indeed, most foreign businesses are used to their own particular business culture and are thus ill equipped to understand the way business works in China. Upon examination, it becomes evident that there are great differences between Asian countries concerning their respective legal systems, language gaps, business cultures and other problematic issues. In fact, previous experiences have a great deal of influence over new business decision made by a western company. In this context it is essential for potential new entrants to China to be familiar with the particular ways in which business works in China. The establishment of a good relationship with local partners and officials is crucial to overcoming obstacles and ultimately success. Generally, a move to China has a particular set of costs which need to be kept in mind. These include the costs for gathering information in advance, the signing of contracts and other transaction costs. All together it is evident that transaction costs are high for foreign new entrants. This means that many firms will opt to act through their local representatives to do some of the work needed before the actual move can happen. It is indeed part of the common practice to rely on a an agent who is required to provide for a smooth communication between different parties. However, this practice is often impossible for small companies since they are no in the position to afford such as local agent and are thus subject to a greater business risk. Another part of the costs is the fact that interpreters need to be paid, and contributions to the bureaucracy made in the form of bribery for example. Indeed, the tiresome and long winded bureaucratic process in China may be overcome with the help of bribery; however, this practice increases costs even further adding another strain on the budget of particularly small new entrants. Indeed, the bureaucratic organs of China are not especially known for their efficiency and differ greatly from their counterparts in other countries which also leads to an increase in transaction costs. These costs are largely created by asymmetries in information, which also add levels of uncertainty. These asymmetries are also related to the lack of a sufficiently reliable legal framework. This is due to the potential loss of unenforceable property rights which in turn means that companies must be prepared to take this potential loss. Within a system that featured as relatively high number of successful contract enforcements, on the other hand, transaction costs would be accordingly significantly lower. According to this logic, asymmetries in information cause higher transaction costs which then in turn are responsible for an increased level of uncertainty which again increase transaction costs as well as opportunity costs (ibid).#p#分頁標題#e#

 

However, even giants such as Google are subject to major constraints in China. The problems with the Chinese government resulted in the move to Hongkong just recently in order to escape the stern rules on censorship. However, its technical and sales department is still to remain in China. This move is due to a disputer which has been going on for months. Google decided to stop the censorship which the Chinese government was not willing to accept lightly. Google is hoping that the Chinese government is going to accept this move, even though it I clear that it could just block all of Google' s offerings. Indeed, Google has been warned that the abandonment of censorship is in fact against Chinese laws. Politically important issues such as Tibet or the bloody stop to the student protests should be filtered out. China is known for its strict censorship of the Internet. Many foreign sites such as facebook and the video portal youtube are not accessible for Chinese users. Still Google is hoping for a compromise, which part of this is to leave certain departments within the country. However, should the protest be too great, growth figures for Google China might be in jeopardy. It is important for Google to maintain its hold over the Chinese market, since it would otherwise exclude the giant from one of the most important markets of the future. Currently, it has a market share of 35 percent. China already has 380 million people online which are a great target group for online advertising which is Google's main source for revenue. Should Google be forced from the market, it is likely that its market share would be swallowed by Baidu, China's number one search engine with a market share of 60 percent. However, Microsoft also stated that its search engine Bing would also be a good contender for taking up googled market share. This example showcases the fact that it is not only the small ventures that might find obstacle to entering the Chinese market. Even giants such as Google are faced with a multitude of constrains that might even jeopardize its operations within that market (TAZ 23.3.2010).