Chinese Internationalization Case Study

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3.3 Internationalization process of Chinese firms From the late 1980s, the Chinese government has not simply put much of its effort into exporting ‘Made-in-China’ products so as to earn foreign currency and encouraging foreign inward capital. In actual sense, it has actively prompted its manufacturers to invest overseas, and has purposefully and strategically organized Chinese transnational activities (Wang 2002: 187). So far, there has been little research into the internationalization of Chinese firms. Some studies into this area is that of Zhan (1993). With regards to the author, major key reasons for the internationalization of Chinese firms are access to foreign markets and stability in the supply of resources. The latter is certainly…show more content…
Child and Lu (1996) attribute China’s rapid economic development to the transformation from a centrally planned economy to a market system and the paving of the economy through the ‘Open Door Policy’. Since the Open Door Policy was installed during the late 1970s, for foreign markets China has become a highly attractive market. There has also been tremendous growth in foreign trade. In 1997, China’s foreign trade reached US$325.1billion, which was 14.8 times higher than 1978, ranking China tenth in the world (Reuvid and Li 2000). Post-WTO the Chinese government has put across a number of reforms. There are three fundamental reform processes that the China’s central government has adopted and is likely to continue: marketization, decentralization and privatization (North 1990). First, marketization has led to huge competition through the development of private enterprises and foreign firms accessing the Chinese market. Secondly, decentralization relates too much of previous central government roles and responsibilities being transferred to provincial government. Lastly, privatization drives to the stress on the increasing privatization of formerly state owned…show more content…
At the 15th National Congress of the CCP in 1997, Zhu Rongji Announced a new strategy of SOE reform, which was called ‘grasping the big and Letting go the small’. Grasping the big meant developing large enterprise groups, precisely internationally. While ‘letting go the small’ meant the government off Loaded SMEs to operate based on market forces. To merge enterprises government officials used political and administrative approach, this created large monopolistic companies that often had fully control of the supply chain. Although large, these conglomerates didn’t have strong competitiveness and lacked market focus. Large assets such as manufacturing plants, property and equipment were assembled by the state. Large SOEs such as oil companies SinoPec and Petro China have created joint ventures with Western companies. This is in order to gain technological expertise, financial input and much needed marketing support. Yet, these large State enterprises still lack the marketing orientation of their Western counterparts. For example, while the likes of BP enjoys profits of £13.4 billion for the first half of 2008, Petro China faces the prospect of losing about $18bn on its refining business if the price of crude oil stays at its present level. The reason for this is that Chinese refiners have been unable to pass soaring oil prices on to consumers simply because the government imposes price
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