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The Rise of the Dragon: Is your company planning to enter China

The Chinese Economy has continued to display consistent growth figures since the last decade. Today’s article aims at focussing on China in brief.  It covers the growth in Economy of China, followed by how the Chinese Government imposed trade barriers and how it helped the domestic companies. Later, we will look at, the growth in the number of Chinese brands entering the Fortune 500 Lists. Followed by, a very interesting study, of the mismanagement of Chinese leaders in the WTO acceding. And finally, we will look at some recommendations for management and brand managers looking forward to enter China.

China’s economy grew at its fastest pace for six years in 2003, adding 9.1% to gross domestic product. The country is increasingly turning out to be the centre focus of thousands of companies worldwide. Both, the MNC and National domestic firms from different countries, are beginning to eye on cashing into the rapidly growing Chinese markets.

Why China is where it is today, an institutional view

The Chinese Government, prior to WTO membership, aware of the potential of their home country, had imposed strict entry barriers for international companies entering China. Some of these barriers were extremely inelastic or non-flexible. The government, for example, imposed that every company entering China could only do so through a Joint Venture with a local Chinese firm. These kinds of barriers allowed two core advantages,

1.    Protection of Domestic industries: The government feared that the entry of foreign multi-nationals would prove dangerous to its domestic companies. The National companies would not be able to sustain the competition of the stronger International companies.

2.    Giving the Chinese economy a Growth Incentive: Many of the local firms benefited largely due to these entry barriers. The firms grew due to the Joint Venture impositions.

As a result, China got an excellent growth and had acquired sufficient advantage pre-WTO, to further expand its growth horizons. Before acquiring the WTO membership, China already had 10 Chinese companies being listed in the Fortune 500 List of companies. As on 2007 is had 24 companies listed. http://money.cnn.com/magazines/fortune/global500/2007/countries/China.html

The careless non-consulted WTO membership decision

Chinese leaders, though inefficiently carried on with the WTO membership without adequate consultations and talks with the parties that would have been directly affected by China’s World Trade Organisation entry. Also the Chinese script, of the final agreement, was only produced after the actual formal acceding. To add up to the inefficiency, the Chinese leaders soon stepped down from their positions within a couple of years, which caused the new leaders to deal with the unfamiliar WTO obligations.

Our recommendations if you are entering China,

–    Customized branding strategies aimed at both the national level and the individual locality.

–   Choosing the right Joint Venture. The Government is known for recommending some of the ailing Chinese companies as potential candidates for Joint Venture.

–    Assessment and Mitigation of the market risks involved.

–    Taking a closer look on the changing market environments and trends.

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