China: Getting beyond the headlines

China's continued economic growth even in these tough times attracts headlines. But China appears to be taking a disturbingly harder line with foreign business. By examining the deep political and social dynamics—China's “Four Basic Questions”—that propel China's rise, we can begin to understand and come to grips with what underlies this apparently new attitude. Surveys by the World Bank and other international organizations show that China's business environment fundamentals might not be as strong as we think. Still, China's economic momentum will continue despite the many problems the country faces. While foreign businesspeople today may express concern over negative trends in the business environment, they should be realistic. Behind the ups and downs of the Chinese scene, the country is struggling to resolve issues left over from history. Clear thinking about these basic issues is needed to survive—and perhaps prosper—in this environment. © 2011 Wiley Periodicals, Inc.     

China's National Champions: The Evolution of a National Industrial Policy—Or a New Era of Economic Protectionism?

In this article we ask a series of related research questions concerning China's recent industrial policies, particularly the 10th and 11th five‐year economic policy plans. Our questions go to the nature of China's long‐term competitiveness of its national champions, and to what extent Chinese government policies are evolving to domestic protectionism that adversely affects foreign invested enterprises' (FIEs) competitive position in the Chinese economy. We thus evaluate the nature of the five‐year economic policy plans, their adverse impact on FIEs operating in China, and the rise of designated Chinese national champions (in the 11th five‐year economic policy plan) to compete with major FIEs on a global scale. However, we suggest that the role of the Chinese government's recent industrial policy, when compared to Michael Porter's “Diamond of National Competitive Advantage” recommended government policy approaches, may not augur well in the long‐term for China's national champions. © 2013 Wiley Periodicals, Inc.     

The globalization of Chinese enterprises

The question of how and why Chinese firms globalize is one of the most pressing issues for businesses today. China's globalization process is nothing less than remarkable. The twenty‐first century will feature a developing country as the leader of the global economy by 2020, when, by most estimates, China's purchasing power parity (PPP) gross domestic product (GDP) surpasses America's. With China's new role on the world's stage, global economic and political institutions are likely to change. China's foray into Latin America, for example, has changed the traditional role that America has played in its “backyard.” While the Chinese government was given much credit for China's globalization, Chinese private‐ and family‐owned businesses have also propelled China outward. Our research stream and annual China Goes Global conference at Harvard has attempted to frame the questions associated with China's globalization. This special issue is another important step in this direction. © 2012 Wiley Periodicals, Inc.     

Guanxi and its influence on the judgments of Chinese auditors

Over a decade ago China launched a large-scale programme to develop science parks with on site business incubators. A major goal of this project was to redesign the economic architecture by creating institutions that would greatly improve the nation's innovation system. Science parks, following the western model, were considered appropriate institutions. This is because they could harness China's many public research institutes and universities and so help promote both existing indigenous firms and emerging new technology-based private firms. Since its inception, however, the programme has evolved to serve multiple purposes, of which innovation system reform is arguably only one, minor goal. This article investigates the evolution of China's two-pronged strategy to develop science parks and business incubators in pursuit of institutional reform of its innovation system.     

Chinese economic development,the next stage: outward FDI?

China's development path has been widely recognised as being unique, with gradual privatisation and marketisation, massive private capital inflows, and extensive exporting. All this has been achieved without political democratisation. This paper draws attention to a new emerging phenomenon—significant Chinese levels of outward FDI (OFDI)—and takes a first step towards understanding this development at an aggregate level.The question arises, is China's OFDI another unique characteristic of Chinese distinctive economic development path and reform policies, or does it follow an established, universal pattern, specifically Dunning's investment development path (IDP) hypothesis, or rather a refined version of the IDP? In other words, do Chinese OFDI patterns suggest refinements to established theories, or even their refutation?To address these questions, however, exogeneity tests reveal a need to use GMM estimation methods rather than straightforward regressions, since relations between economic development and OFDI are complex and inter-dependent.The GMM results suggest that the level of economic development, proxied by GDP per capita plus refinements, is still the main factor explaining China's rate of OFDI. This is quite consistent with the refined IDP hypothesis and patterns broadly noted elsewhere. Conclusions are drawn for theory, policy and international business.     

Knowledge,Skills, and Abilities for the Market Economy: An Investigation of Student Perceptions Before and After China's WTO Entry

This exploratory study conducted in the People's Republic of China sought to determine the managerial knowledge, skills, and abilities (KSAs) that are perceived as important for the Chinese market economy. Questionnaire responses were collected from 145 business students in 2001 (before China's WTO entry) and 141 business students in 2006 (after China's WTO entry). The identified set of eight managerial knowledge, skills, and abilities included: business area knowledge and skills, communication skills, creativity/adaptability, ethics, leadership, problem solving, teamwork, and work habits. For each time period examined, the mean score for “importance” of each KSA was significantly higher than the mean score for “presence.” The differences between the importance mean and the presence mean for each KSA was denoted as a “gap.” This study revealed that five of the eight KSAs had a significantly smaller gap in 2006 than in 2001. This suggests that the business education system in China is enabling the development of more effective managers for the Chinese market economy.     

我国专业化创业服务体系的研究与思考

创新驱动正成为我国经济高质量发展的关键，创业服务平台作为我国中小微企业创新创业的重要载体，服务模式和服务质量对助力创新经济具有重要意义。通过梳理国内众创空间、大学科技园、科技企业孵化器等多层面的创业服务平台运营现状，分析创业服务体系对科技创新和产业发展的显著作用，提出专业化服务能力建设对于推动战略性新兴产业的快速发展，支撑我国产业创新发展和“双创”升级具有重要价值并提出相应的推进策略。     

Multinational Corporations and the Transforming Operational Environment in China

China and the multinational corporations (MNCs) have had a long period of close relationship. In locating operations in China, MNCs beneficially followed the principle of least‐cost location. However, China's economic and business environment has been undergoing a striking transformation. The Chinese economy is losing some of its beneficial emerging‐market traits. Many foreign business enterprises and MNCs have experienced deep erosion of profits. This article first focuses on the growing importance of China and the Chinese markets for foreign business firms and MNCs. The sheer size of the market naturally draws them in. Next, it dwells on the challenges that have evolved over the years and the budding new business environment, often referred to as “the new normal.” Many MNCs realize the need to adapt to the new operating environment in China. This article proposes a list of adaptive and coping measures for the foreign enterprises and MNCs. © 2015 Wiley Periodicals, Inc.     

Country‐of‐Origin and Social Resistance in Host Countries: The Case of a Chinese Firm

While China's outward direct investments continue to soar, many Chinese firms reportedly face social resistance in host countries during the internationalization process. We explore this phenomenon from a country‐of‐origin (COO) perspective using Fiske and colleagues’ (Fiske, Cuddy, Glick, & Xu, 2002; Fiske, Xu, Cuddy, & Glick, 1999) stereotype content model. Our findings from a recent case in New Zealand show that China's COO emerges as a key variable influencing how local actors view Chinese investors. Specifically, despite China's significant economic and social developments over the past decades, it suffers from a somewhat negative country image in two stereotype dimensions: competence and warmth. This leads to a perception by local actors that Chinese firms are of low quality, which explains the source of resistance in society. To address such a liability of origin, Chinese firms must learn to deal with this form of stereotypical judgment encountered in a host environment. Further contributions and limitations of the study are discussed in the article. © 2016 Wiley Periodicals, Inc.     

How Chinese Children's Commercials Differ from Those of the United States: A Content Analysis

Abstract

A content analysis was conducted of children's television commercials from China and the United States that were recorded over a period of eighteen months. We describe how the content of the two sets of commercials differs and the underlying reasons for the differences, including cultural, economic, and social conditions. The results suggest that, for the most part, Chinese children's commercials reflect China's traditional cultural values and its social and economic development level. However, the analysis was able to detect a shifting in power in Chinese society from the elderly to the young, resulting mainly from its one-child policy implemented during the past two decades. We also found some evidence of Western values creeping into Chinese children's commercials. Limitations are noted, and suggestions are offered for additional research that will corroborate these findings.     

Whither Foreign R&D in China: Some Concluding Thoughts on Chinese Innovation

The purpose of this article is to highlight the impact of a new range of field-work driven scholarly research regarding foreign R&D in China on the field of Chinese innovation studies. The field of China innovation studies is positioned for a major take-off with the opening up and broadening of the field to a new generation of scholars and experts, including the growing participation and contributions of Chinese nationals from the People's Republic of China (PRC). With the continued opening of China to the outside world has come also increased scholarly access which is allowing for research on issues that heretofore was constrained due to the limited availability of information as well as political and national security sensitivities. The field also is benefiting from the increased visibility being given to innovation matters by the Chinese government and the rise in the number of foreign R&D centres that have been established by foreign companies. New ‘internally-focused’ questions related to R&D spending, the cultural and historical setting for innovation, and the institutional structure are being addressed with some promising results. In addition, a whole new series of ‘externally-focused’ questions also are beginning to dominate the research agenda as more and more foreign firms seek to take advantage of China's improved climate for overseas business as well as the growing number of scientists and engineers at the higher end of the Chinese talent pool. The more we seem to find out, however, the more we realize we need to know to truly understand China's technological potential. That said, it is increasingly clear that foreign influence is having an important shaping effect on the nature of the PRC's R&D system, especially with respect to the strategic role played or potentially being played by returned scholars and experts whose more cosmopolitan perspectives serve as a real asset in building bridges between Chinese traditional attitudes and modes of behaviour towards new knowledge creation and the current institutional constraints on China's innovation trajectory since 1949.     

High School Economic Education and Access to Financial Services

This study provides a long-term assessment of economic education by examining an individual's decision to have a bank account. Using the results of a nationwide telephone survey, high school courses in economics and business reduced the probability that an adult was unbanked, ceteris paribus. In addition, adults who demonstrated a higher level of understanding of basic economic concepts were less likely to be unbanked. The results indicated that an individual's understanding of the economic system was as important as formal coursework in explaining access to basic financial services.     

The role of home governments in entry bargaining of multinationals: China's investment in Central Asia's natural resource sector

Over the last two decades, China's participation in Central Asia's energy sector has increased dramatically. This article explores the case study of China's outward foreign direct investment (OFDI) in Central Asia's natural resource sector through the framework of bargaining model. Although the scholarly literature studied extensively FDI determinants and support of the home government on MNE activities abroad, there is little evidence‐based research on the effect of governmental negotiations on OFDI. The existing research on China's OFDI in natural resource sector highlighted the country's complex approach to energy deals, which was facilitated by investment in infrastructure projects and provision of loans. As this study confirmed, support with loans and investment in the development of export pipeline infrastructure was crucial in securing energy deals for Chinese multinationals (CMNEs). More specifically, this article makes an important contribution toward the understanding of China's investment in developing markets with high levels of political risk such as Central Asian region. The presented evidence suggests that there is a positive correlation between home government support and successful entry of CMNEs to natural resource sectors in emerging markets.     

The Business(es) of the Chinese State

The state industrial sector is the Achilles heel of China's otherwise remarkable economic performance over the past two decades. Most other countries in transition from socialism have transformed SOEs into commercial entities through systematic, market‐driven restructuring and privatisation to become more efficient and competitive. In China, a series of innovative, if often administrative, insitutional reforms since 1978 have begun to achieve the Chinese authorities' goal of ‘separating governemtn from business.’ But the Chinese State still maintains ownership of key enterprises, and government agencies carry out shareholder functions typically performed by private owners in a market economy. Although privatisation and restructuring of SOEs is occurring, it mostly pertains to small and medium sized firms. For the principal businesses, by contrast, the creation of large state enterprise groups and holding companies (and experiments in other forms of ‘state asset management’) have become the main form of restructuring. Today, China's SOEs still account for more than one‐quarter of national production, two‐thirds of total assets, more than half of urban employment and almost three‐quarters of investment. While direct budgetary subsidies have declined, explicit and implicit subsidies are still making their way to prop up loss‐making SOEs through the financial system and other routes. At the same time, SOEs are still producing non‐marketable products, resulting in a sizeable inventory overhang. These inefficiencies and distortions represent a drain on the country's resources and thus present a challenge to the Chinese leadership for reform. This paper sheds light on these challenges by analysing the incentives and constraints on China's SOE reform programme. Four critical aspects of the reforms are highlighted and evaluated against the backdrop of international experience: clarification of property rights; establishment of large group/holding companies and other new organisational structures; improved corporate governance incentives; and implementation of international financial accounting and auditing practices. The paper concludes with policy recommendations.     

Belt and road initiative and Chinese firms' outward foreign direct investment

This paper studies the impact of China's “Belt and Road Initiative” (BRI) on Chinese firms' outward foreign direct investment (OFDI). Overall, the BRI positively impacts on Chinese OFDI activities. However, both the direction and the magnitude of this impact depend on the host countries' willingness to participate in the BRI. The BRI promotes more OFDI to developing countries that welcome China's economic engagement and alters the effect of Chinese domestic push factors on its OFDI patterns. In addition, Chinese firms in construction and infrastructure, manufacturing, and trade-related sectors are more responsive to the BRI than firms in other sectors.     

State‐owned Enterprises,Exporting and Productivity in China: A Stochastic Dominance Approach

A popular explanation for China's rapid economic growth in recent years has been the dramatic increase in the number of private domestic‐ and foreign‐owned firms and a decline in the state‐owned sector. However, recent evidence suggests that China's state‐owned enterprises (SOEs) are in fact stronger than ever. In this paper, we examine over 78,000 manufacturing firms between 2002 and 2006 to investigate the relationship between ownership structure and the degree of firm‐level exposure to export markets and firm‐level productivity. Using a conditional stochastic dominance approach, we reveal that although our results largely adhere to prior expectations, the performance of SOEs differs markedly between those that export and those that supply the domestic market only. It appears that China's internationally focused SOEs have become formidable global competitors.     

Does foreign investment liberalisation enhance women's economic status? Micro‐evidence from urban China

This paper analyses the effects of inward foreign direct investment (FDI) on female earnings and women's economic status in households using Chinese Urban Household Survey data from 1997 to 2008. The identification exploits the substantial relaxation of foreign investment regulations immediately after China's accession to the WTO in 2002. The difference‐in‐differences estimation results show that FDI liberalisation has improved women's economic status significantly by increasing female earnings in sectors more exposed to FDI. Further analyses indicate that foreign investment liberalisation facilitates the promotion of female employees in their career ladders and increases their skill premium, which are two important channels through which women enhance their economic independence.     

Just How Low are China's Labour Costs?

This paper provides a new perspective on Chinese international competitiveness in manufacturing using relative unit labour costs. We find that Chinese unit labour costs are about 25–40 per cent of US labour costs. They are also low relative to costs in the EU, Japan, Mexico, Korea and most other newly industrialising countries. However, China's relative unit labour costs indicate a substantially smaller cost advantage than that implied by a comparison of wages alone. China's cost advantage derives from large currency devaluations that preceded the establishment of a de facto peg around 1995, and rapid productivity growth in the period since 1995.     

Can Africa compete with China in manufacturing? The role of relative unit labour costs

This paper examines sub‐Saharan Africa's (SSA ) bilateral trade and cost competitiveness with China. We document an extraordinary imbalance in the structure of bilateral trade in that China overwhelmingly exports manufactured products to SSA and almost exclusively imports primary products in return. Our principal means of assessing the competitiveness of SSA 's manufacturing sector vis‐à‐vis China are measures of relative unit labour costs (RULC ). We find that African RULC s declined over the 2000s as China's wages rose faster than Chinese productivity while the reverse was true for the SSA countries in our sample. Nevertheless, RULC s vis‐à‐vis China remain very high for many SSA countries. High RULC s along with weaknesses in the business climate suggest that most SSA countries are unlikely to be competitive in labour‐intensive manufacturing any time soon.     

Inequality,Inflation, and their Impact on China's Investment Environment in the 1990s and beyond

Inequality, inflation, and unemployment have become increasingly explosive problems in today's China. In conjunction with an analysis of the spatial pattern of inflation, this paper examines the current trend of China's spatial disparities, in terms of economic output, real consumption, and real income, within inter-provincial, inter-regional and urban-rural framework. This paper also investigates the combined effect of the current high rate of inflation and spatial disparity on China's investment and business environment in the 1990s. Findings of this paper suggest that inter-regional inequalities in economic development and income distribution, especially since 1990, have been accelerated/exacerbated by high inflation, which appears to hit the poorer areas disproportionally. Given the reinforcement of disparity and inflation and the current upsurges of rampant localism, the investment and business environment of China in the 1990s, in terms of political and social unrest and economic profitability, will be severely undermined and will, therefore, become increasing uncertain. It is likely that this trend will extend beyond the millenium and last at least until the early 2000s.