Abstract
The paper discusses the Chinese policy environment as regards the experiences of foreign firms in China. In particular, the study focuses on the changes in China’s policies toward foreign-invested firms and the companies’ perceptions of protectionism of the Chinese regulatory environment. Theoretically, the paper reflects approaches in international political economy and business studies on the bargaining relations between host states and firms, and institutional perspective on business strategy that focuses on the dynamic interaction between organizations and their institutional environment. Hence, the approach takes into account the formal and informal institutional constraints that firms face in a particular institutional framework. Drawing from international survey data, as well as interviews with China-based Finnish firms, the paper analyzes the different types of formal and informal protectionism that foreign companies face in China. It is found that foreign firms perceive the Chinese policy measures as increasingly protective, strict toward foreigners, and favoring of local companies. This is based on China’s strategy to remove the earlier preferences for inward foreign direct investment and to support, instead, the growth of indigenous companies. At the same time, the Chinese market presents such a potential that attracts foreign firms to increasingly invest in the country. China has a strong position in competing for investments: its aspiration for higher technology, together with its labor resources, gives China an unique advantage in bargaining with foreign firms over investments.
Similar content being viewed by others
Notes
Quote from a business panel discussion, Symposium “Boosting Nordic-Chinese Businesses” organized by Aalto University, CEMAT, at Fudan University Nordic Centre, Shanghai, May 12, 2011.
References
AmCham (2012) China business climate survey report 2012. American Chamber of Commerce in China. http://www.amchamchina.org/businessclimate2012. Accessed 12 Oct 2012
Athukorala P (2007) Multinational enterprises in Asian development. Edward Elgar Publishing, Cornwall
CSY (2007) China statistical yearbook 2007
Dicken P, Malmberg A (2001) Firms in territories: a relational perspective. Econ Geogr 77:345–363
Dicken P, Kelly PF, Olds K, Yeung HW (2001) Chains and networks, territories and scales: towards a relational framework for analyzing the global economy. Global Netw 1:89–112
EUCCC (2012) European Business in China, Business Confidence Survey. European Union Chamber of Commerce in China in partnership with Roland Berger Strategy Consultants. http://www.europeanchamber.com.cn/en/chamber-publications. Accessed 14 Dec 2012
Forbes (5 Feb 2010) Growing bearish. U.S. companies despair of doing normal business in China. http://www.forbes.com/global/2010/0208/companies-united-states-china-business-growing-bearish.html. Accessed 4 Oct 2012
Kauppalehti (20 May 2009). Tavoitteena 40 prosentin omavaraisuus paperikoneissa. The aim is a 40 per cent self-sufficiency in paper machines; in Finnish
Kettunen E (2004) Regionalism and the geography of trade policies in EU-ASEAN trade. Acta Universitatis Oeconomicae Helsingiensis, A-245. Helsinki School of Economics
Kettunen E, Korhonen K, Kosonen R, Karhunen P (2007) The governance of employee relations in emerging markets. Yokohama Bus Rev 27:67–94
Kettunen E, Lintunen J, Lu W, Kosonen R (2008) Suomalaisyritysten strategiat Kiinan muuttuvassa toimintaympäristössä. Finnish firms’ strategies in the changing business environment of China; in Finnish. HSE Publications B-98. http://hsepubl.lib.hse.fi/pdf/hseother/b98.pdf. Accessed 5 Sept 2012
Kobrin SJ (1987) Testing the bargaining hypothesis in the manufacturing sector in developing countries. Int Organ 41:609–638
Kosonen R (2011) Liiketoiminnan turvallisuus Venäjällä ja Kiinassa. Business security in Russia and China; in Finnish. Aalto University publication series. http://hsepubl.lib.hse.fi/pdf/hseother/Aalto_Report_KT_2011_011.pdf. Accessed 10 Dec 2012
Kosonen R, Kettunen E, Penttilä A (2012) Challenges of Finnish and Japanese companies in the emerging economy of China: relations with the local labour force. CEMAT papers 1/2012. Center for Markets in Transition, Aalto University School of Economics. http://cemat.aalto.fi/fi/publications/2012/. Accessed 19 Oct 2012
Kosonen R, Kettunen E, Kotilainen J (2013) Finnish firms in rapidly developing markets. In: Tainio R, Meriläinen S, Mäkinen J (eds) Limits of globalization: borders still matter? Copenhagen Business School Press, Copenhagen
Luo Y (2001) Toward a cooperative view of MNC-host government relations: building blocks and performance implications. J Int Bus Stud 32:401–419
MacKinnon D, Cumbers A (2011) Introduction to economic geography. Globalization, uneven development and place, 2nd edn. Pearson Education Ltd, Prentice Hall, Harlow, England
Malhotra N, Birks D (2006) Marketing research: an applied approach, 2nd European edition. Pearson Education, Harlow
Meyer KE (2004) Perspectives on multinational enterprises in emerging economies. J Int Bus Stud 35:259–276
Michailova S, Worm V (2003) Personal networking in Russia and China: blat and Guanxi. Eur Manag J 21:509–519
North D (1990) Institutions, institutional change and economic performance. Cambridge University Press, Cambridge
Peng MW (2003) Institutional transitions and strategic choices. Acad Manag Rev 28:275–296
Peng MW, Heath PS (1996) The growth of the firm in planned economies in transition: institutions, organizations, and strategic choice. Acad Manag Rev 21:492–528
Peng MW, Khoury TA (2009) Unbundling the institution-based view of international business strategy. In: Rugman AM (ed) The Oxford handbook of international business. Oxford University Press, New York
Peng MW, Wang DYL, Jiang Y (2008) An institutional-based view of international business strategy: a focus on emerging economies. J Int Bus Stud 39:920–936
Qiu Y (2005) Personal networks, institutional involvement, and foreign direct investment flows into China’s interior. Econ Geogr 81:261–281
Stopford J, Strange S, Henley JS (1991) Rival states, rival firms. Competition for world market shares. Cambridge University Press, Cambridge
Stratfor (2010) It’s about to get more expensive for foreigners to do business in China. http://www.businessinsider.com/its-about-to-get-more-expensive-for-foreigners-to-do-business-in-china-2010-12#ixzz18DdZ1WlY. Accessed 10 Sept 2012
UM (2008) Kiinan kauppapoliittinen maaohjelma, kevät 2008. Country program for China’s trade policy, spring 2008; in Finnish. The Finnish Ministry for Foreign Affairs
UM (2012) Maailman markkinat. [World’s markets; in Finnish.] The Finnish Ministry for Foreign Affairs
Whitley R (2005) How national are business systems? The role of states and complementary institutions in standardising systems of economic coordination and control at the national level. In: Morgan G, Whitley R, Moen E (eds) Changing capitalisms? Internationalisation, Institutional Change, and Systems of Economic Organization. Oxford University Press, King’s Lynn
World Bank (2008; 2012) Doing business. Washington: The International Bank for Reconstruction and Development/The World Bank. http://www.doingbusiness.org/reports/global-reports/doing-business. Accessed 12 Oct 2012
Yildiz HE, Fey CF (2012) The liability of foreignness reconsidered: new insights from the alternative research context of transforming economies. Int Bus Rev 21:269–280
Zhang X (2006) Political governance of the firm-government relations: Evidence from foreign firms in China. International Society for New Institutional Economics Conference, Sep 21–24, Boulder, USA. http://www.isnie.org/isnie-2006.html. Accessed 12 Dec 2012
Acknowledgments
The paper results from two research projects; “International Business Integration in Asia” of the Centre for International Business Studies, University of Gothenburg, School of Business, Economics and Law (Sweden), and “China in Turbulence” of the Center for Markets in Transition, Aalto University, School of Business (Helsinki, Finland).
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Kettunen, E. China’s policy environment toward foreign companies: implications to high-tech sectors. AI & Soc 29, 403–413 (2014). https://doi.org/10.1007/s00146-013-0466-y
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s00146-013-0466-y