Strategic change in foreign enterprises

As China enters the post-WTO period at the end of this year, foreign-funded enterprises in the country are exploring optimal business models to cash in on the changing market.

In accordance with its commitments on WTO entry, China has agreed to certain market access undertakings in key sectors such as telecommunications, insurance, retailing, banking, trade, distribution and logistics.

In the majority of these sectors, foreign investment and participation is to follow a schedule whereby initial investment caps and business scope and geographic limitations are gradually liberalized over a period of a few years.

ˇ°In the past, foreign companies had to cooperate with local counterparts to enjoy tax cuts and capture a larger market share. As the tariff is gradually eliminated, we will adopt more direct trading and production to secure the market we are already familiar with,ˇ± said Holger Kunz from U.S.-based TUV Rheinland, a global provider of comprehensive product-testing services.

As China opens all those industries by the end of 2006, more foreign enterprises will enter the Chinese market, posing a great challenge for the already existing foreign firms in China. The integration of multinational resources has become a trend.

ˇ°Foreign companies took into account the change in the post-WTO period and included it in the long-term corporate plan. They will focus on their most advantageous business while outsourcing some of the less competitive to other companies,ˇ± said Andrew Stoler, a former vice director general of the WTO.

To keep their China expansion in line with their global strategies, more foreign enterprises choose to establish wholly-owned companies in the country, as they do not have to negotiate with Chinese partners over matters such as the scope of operation, number of workers, percentage of exports and changes in control or ownership of the business.

Analysts believe a more independent foreign investment has become a major vehicle of choice as a more open market environment comes into shape in the post-WTO period.

Source: Shenzhen Daily