Foreword


It is my great pleasure to learn that the fourth edition of the book Doing Business with China is going to be published soon. I hereby extend my warm congratulations! At the same, I hope that the readers will be able to deepen their understanding about China through the book, and increase their confidence in their trade and investment with China.

The 16th National Congress of the Communist Party concluded not long ago has put forward the grand vision of future objectives, such as 'full engagement in the building of a well-off society' and 'striving to quadruple the 2000 GDP by year 2020'. As a major component of China's national economy, foreign trade will play an important role in achieving the goals of building a well-off society, quadrupling GDP and reaching the level of a mid-developed country. According to the goal of quadrupled GDP, China's total import and export value will hopefully reach US$2 trillion by year 2020, which is equivalent to the total trade of today's world largest trading country. This goal is grand, although gaining it will require arduous efforts. However, I believe that with unremitting effort it is achievable.

In 2002, China saw an increase of 21.8 per cent year on year in its total trade value, registering a new high of US$620.79 billion, which is likely to advance China's ranking in the world from 6th to 5th. Meanwhile, China's absorption of foreign investment in 2002 has reached a total of US$82.77 billion in contract value and US$52.74 billion in actually utilized value, up 19.62 per cent and 12.51 per cent respectively from 2001.

The year 2002 was the first year of China's accession to the WTO and, within the year, China has witnessed a relatively stable and predictable international trade environment, which has facilitated the rapid growth of China's foreign trade and economic cooperation while at the same time offering development opportunities for the international community. In response to China's accession to the WTO, China has rectified, amended and legislated a large number of laws and regulations, which have further driven the perfection process of China's socialist market economy. Joining the WTO has enhanced the recognition by government departments, particularly those government officials who are in the departments of economic management and administration, and Chinese entrepreneurs of the need to participate in international competition and expanded their understanding of international rules. China's accession to the WTO has not only had important implications on China's further opening up and active participation in the economic globalization process in the year 2002, but will also continue to play an important role in that regard for a considerable period of time in the future. Upon China's entry into the WTO, China has lowered tariffs, further opened up the market for goods and gradually opened the service sectors, all of which will have important facilitating effects on the development of the national economy and foreign trade.

On 10 December 2002, the WTO completed its review of China's trade policy. China's serious and responsible attitude and its work in carrying out its commitments have won just and objective appraisal and affirmation from most of the WTO members. At the same time, as a new member of the WTO, China has also been actively involved in the new-round of multilateral trade negotiations, in which China has interacted with other WTO members in a concerted effort to pursue a balanced interest between developing and developed members in the multilateral trade system. Thereby, China has played a constructive role in the multilateral trade system.

China's opening up has entered a new era after its WTO accession. The positive effect on China's economic development is being further demonstrated. In order to adapt to the new circumstances in the development of economic globalization, China will walk in the world with an even more active posture and continue to further an all-round, multi-tiered and wider range of opening up. All those efforts will continue to provide even greater room and more and better opportunities for foreign investments and various other forms of economic and technological cooperation.

Shi Guangsheng
Minister, Ministry of Foreign Trade and Economic Cooperation

Pascal Lamy, EU Trade Commissioner

To say that China figured prominently on our trade and economic agenda in the last few years would be an understatement.

The deepening of our bilateral trade and economic relations “ both imports and exports have more than doubled in just the last five years “ has been reflected in the dramatic increase in the bilateral contacts at all levels between the European Commission and the Chinese authorities. This is not only due to the fact that increased trade flows also mean a more complex relationship (including more trade disputes, inevitably), but also to the recognition that China immediately became a key player within the multilateral trading system, and in particular in the context of the Doha Development Agenda, the new round of multilateral trade negotiations launched in 2001.

So China, quite frankly, now sits at the top table in terms of world trade, a position which comes with responsibilities, as well as rights. The signs are positive that China is ready to take up both aspects of this role, and thereby play a key role in the new global economic order.

In particular, China's accession to the WTO on 11 December 2001 has opened up a new period of dramatic changes, both for China and her trading partners including the EU and the multilateral trading system. The accession came indeed as a crowning point of the policy of opening launched in the 1970s by China based on the conviction of the Chinese leadership that accession to the WTO would benefit the Chinese economy enormously and would underpin the reform process towards a market economy. The EU has always been a staunch supporter of this accession, since the emergence of a stable and prosperous China, moreover a China that is well integrated into the international trading system, is without any doubt in our own interests.

Of course, now it is for China to ensure that the substantial commitments made in the context of the accession negotiations are implemented on the ground, not least because China is now the fourth largest trader in the world (counting the EU as one entity). One year after China's accession, it is fair to say that China has made impressive efforts to meet her WTO obligations, especially in the legislative areas. Hundreds of laws and regulations have been updated. The legal framework is not yet fully WTO compatible in each and every aspect, but given the starting point one year ago, achieving the current level is already a remarkable performance. The EU, as I think all trade partners of China, acknowledges that the Chinese leadership is eager to demonstrate that China will abide by her WTO obligations.

However, there is no time for complacency and much remains to be done. First of all, many of China's commitments are due to enter into force over a transitional period, which means that the benefits will only flow through over the years to come. Second, in some areas, we have witnessed the establishment of non-trade barriers which are in part neutralizing the liberalization brought by WTO accession. Third, if it is not always easy to respect the letter of WTO obligation (eg the reduction of some tariff lines), it is even more difficult to ensure that the core principles of WTO “ among which the rule of law, the transparency and the predictability “ are fully integrated into the daily task of the administrative and judiciary system.

So the EU has developed, in liaison with the Chinese authorities, a number of technical assistance projects, the main objective of which is to help the Chinese administration in charge of implementing China's WTO obligations. Current projects total 22 million euros, and the design of a new 15 million euro project is being finalized. This is, thus, the largest technical assistance programme supporting China's integration into the international trading system.

The European Commission, in liaison with EU Member States and EU stakeholders, and in particular the European Chamber of Commerce in China, has closely monitored the implementation by China of her WTO commitments during the past twelve months. Implementation issues have been raised, particularly in the framework of the Transitional Review Mechanism, the mechanism foreseen within WTO to review China's accession on an annual basis. The results of this exercise offer a good snapshot of Chinese WTO implementation.

In this context, while 2002 had a special character with China's first steps within the WTO, 2003 will be crucial since the months to come will see the confirmation of China's involvement within the multilateral trading system. The new leaders , who will be at the helm from next March onwards, have in this respect a formidable task ahead.

And while the Chinese new leadership is not expected to implement dramatic changes in terms of economic and trade policy, the EU is eager to maintain and develop the same multi-layered , multi- faceted relationship with the new generation of leaders that we have had with the current generation.

So in this context, the fourth edition of Doing Business with China , by presenting the different points of view of the various players and their insight into the dramatic changes going on in China, will serve as a most valuable tool.

Robert A Kapp, President, United States-China Business Council

'Doing Business with China' is a hallowed term , rich with the flavour of those early years of China's commercial re-engagement with the global economy following its decision to ' open to the outside world' in 1978.

In the 1970s and early eighties, 'Doing Business with China' was the title of a thousand seminars , most of which informed their participants that Beijing was in the north and Guangzhou in the south; that the Yangtze and other major rivers flowed from west to east; that the Chinese economy was experimenting with various departures from the Maoist-Stalinist planning system of the first decades of communist rule; and other elementary observations that still, in those days of broad foreign unfamiliarity with the PRC, constituted business-useful information.

With the passage of years, 'Doing Business with China' lost much of its electrifying appeal . By the 1990s, major firms in the developed economies “ particularly multinationals “ were engaging with China in increasingly significant and complex ways. Following the downturn in international confidence caused by the traumatic events of the spring and summer of 1989 and their aftermath, global business interest in China bounded ahead in the mid-1990s, reassured by then- leader Deng Xiaoping's evident commitment to preserve the overall policy direction known as 'Reform and Opening'. Foreign direct investment in China soared throughout that decade and companies gradually added to their store of on-the-ground experience. Meanwhile, China presented itself to the world, through its products and its people. Tens of thousands of able and motivated Chinese went abroad for study, research, and practical training. The exoticism of China declined in international business circles as it became more and more integrated into the global business plans of large companies worldwide. 'Doing Business with China,' in the older sense of the term, became the label for more and more humble exercises aimed at passers-by in the business world and at those whose lack of initiative or resources had kept them on the sidelines of China's growing international commercial engagement.

Now, it can well be argued, 'Doing Business with China' is in for a new life, of which this massive compendium of information and analysis is a perfect illustration. This publication is most welcome, and will be important to wide audiences for years to come.

Let me explain what I mean by 'a new life' for the notion of 'Doing Business with China'.

First of all, with China's entry into the World Trade Organization, we are very likely to see a quantum increase in the number of businesses both Chinese and non-Chinese that set out to find and maximize their opportunities in Sino-foreign trade and investment. Under the WTO, 'trading rights' “ the right to import and export directly “ are being provided to thousands upon thousands of Chinese firms, many of them private and non-governmental, who could not do international business before. We are seeing a huge increase in the number of Chinese companies and individuals hoping to break into international markets in any of a myriad of ways. One aspect of the new 'Doing Business with China' is that the 'China' with whom people outside of the PRC can 'do business' is changing before our eyes.

Second, as China normalizes its trade and economic relations with the world under the reassuring umbrella of WTO-defined standards of behaviour, legions of foreign firms that until recently had refrained from contemplating direct business relations with China are deciding that there is no time like the present, and taking their own steps to familiarize themselves with the business environment in the PRC. We see, certainly in the United States at any rate, a powerful wave of interest among smaller firms, for example, in finding opportunities to grow their businesses with, or in, China.

Large or small, American companies' heightened interest in China in recent years has been linked to increased corporate investment within China, as it improves its investment climate and proves to be both a growing domestic market and a solid producer of goods for global absorption. While many remain to be fully realized over a period of years, China's extensive WTO commitments define a range of truly historic transformations of its economic and commercial environment, and represent a fundamental commitment at the highest levels of China's political leadership to harmonizing China's trade and economic policies with those of the global trading system.

This process of law and policy change under the WTO is clearly leading to heightened international business interest in setting up operations on the ground in China and in establishing the chains of supply, finance, marketing and service that characterize modern global business. That, in turn , has led many multinationals to encourage their own international vendors and suppliers to come to China in the wake of the mega-firms' decisions to operate there. These new entrants into the Chinese business environment at the start of the 21st century also need to know how to 'Do Business with China', and are a factor in the revitalization of this old and familiar phrase.

Even in companies with decades of experience with China, 'Doing Business with China' will resonate anew. For one thing, those companies that have built extensive business operations in China, or who have established solid and vital trading relationships with PRC counterparts, now pump a constant and growing flow of staff members through the China mill. Most company personnel now working on China have strong foundations of technical and business experience within their firms, but China represents a 'normal' assignment, a little different from other international postings or, for that matter, from appointments to any number of corporate positions at home.

It is not necessary now “ and in fact, it never really was “ to have a PhD in Chinese studies and linguistic fluency to function effectively in business with China. But it is necessary for business people to know what China is, and what its economic and political and social milieux consists of, and how they are distinct from, say, comparable milieux in France or South Africa or Korea or India. For these corporate professionals, then, a comprehensive and wide- ranging volume like this will provide a convenient companion, as they bring their corporate experience and business skills to bear on the normal business tasks they seek to accomplish in China.

Finally, the new incarnation of the idea of 'Doing Business with China' embodied in this massive and comprehensive book brings home the point that we at the United States-China Business Council have known for three decades: one can never know all there is to know about business with the PRC, because the PRC itself is so massive, so complex, and constantly evolving. The company that concludes it has reached a level of understanding of China so strong that it needs to reach no further is a company in peril. Intelligent companies know better, and adopt a posture with regard to China that is both humble and intellectually curious ; they build on what they know from experience, and what they learn from other firms' experiences through the medium of business associations like the organization I serve. They continually ask themselves whether their current approaches both to long-range goals and immediate operational challenges are the best choices in the contemporary environment. They weigh perceived opportunities and perceived risks. They ponder the current policy and regulatory systems of China, the legal uncertainties attendant upon China operations, the chances of success of one business model versus another.

All of this requires information, both at the baseline and in real time. The week's news of policy shifts, new laws and regulations, changes of political personnel, trade negotiations, and so forth is important, and the best entrants into the burgeoning field of China business information (such as the magazine, The China Business Review , published by my Council) provide business readers and planners with material they need each day, week, and month.

But real-time information cannot stand alone. Baseline information, brought up to date periodically to reflect the changed Chinese business environment, is equally important. That is where Doing Business with China “ the book, as opposed to the phrase “ will serve well.

Let me close this Foreword with a note of caution. There is no single, universal interpretation of any of the topics covered in this wide-ranging volume. While Chinese and non-Chinese perspectives on the Chinese business environment have often converged over the past two and one-half decades, they frequently differ .

Moreover, if China ever saw these subjects with a single mind, those days are long past and it is possible in today's China to find multiple views and interpretations of all the core topics of interest to international business. Thus, the essays contained in this fine volume must not be seen as the only descriptions and analyses available, but as baseline guides, to be tested and refined by individual readers as they move through their own experiences and consult with a multiplicity of advisers and colleagues.

Second, at the US-China Business Council we are very aware that China's immense business relations with the world take place within the context of both Chinese domestic politics and of international political relations. China's international commercial behaviour is inextricably linked to the state of China's economy, its society, and its politics, on the one hand, and to China's broader political relations with key trading partners such as the United States, the European Union, Japan, and Taiwan. Doing Business with China does not plumb these topics, which are the domain of legions of China scholars and analysts worldwide. But China, like other countries , has politics; it makes its laws and regulations, and carries them out in a complex environment of personal relationships, densely ramified institutions, evolving and increasingly complex legal structures, difficult social issues, shifting central-local authority relationships, and multifaceted relations among bureaucracies. The obscurity of Chinese political behaviour at times makes business decision-making more speculative than business people would wish.

Much of this more politically -inflected reality is normally left undiscussed by Chinese writers, perhaps for a couple of principal reasons. First, writing for public consumption about the political manoeuvrings and power relationships undergirding China's changing international business environment might not be good for one's own political health; such observations can involve closely guarded bureaucratic or even personal interests which are better left beyond the reach of prying eyes. Second, the play of political, personal, and interest- group forces on the making of the Chinese business environment is itself subject to widely varying interpretations. There is no one single definitive description suitable for use in a Baedeker Guide to business with China, and readers seeking unitary guidance through the political thickets surrounding the Chinese economic and commercial environment would be on a fool's errand.

So it is no tragedy that Doing Business with China has not delved deeply into these realms. But it is worth remembering, as one courses through the dozens of valuable entries in this compendium, that in practice, 'on the ground,' the texture of operational realities will continue to challenge the curiosity of business people in every field, in every province , in every city.

To conclude, I welcome this massive volume, its familiar title endowed with new life in a new era of Sino-global business, and expect that it will serve as a baseline resource for business people worldwide for years to come.

Robert A Kapp has been president of the United States-China Business Council since 1994. Founded in 1973, the Council (www.uschina.org) is the principal organization of American companies engaged in trade and investment with China, serving several hundred corporate members from its headquarters in Washington and field offices in Beijing and Shanghai. The Council also publishes the authoritative China Business Review (www.chinabusinessreview.com).

Dr Kapp was educated at Swarthmore and Yale, receiving his PhD in modern Chinese history from Yale in 1970. He taught on the faculties of Rice University (Houston) and the University of Washington (Seattle) between 1970 and 1980, serving as editor of The Journal of Asian Studies from 1978 to 1980. From 1980 to 1994 he led two trade associations in Washington State. On behalf of the US-China Business Council, Dr Kapp is active in the field of US-China relations, and writes regularly on US-China issues.




Doing Business with China
Doing Business with China
ISBN: 1905050089
EAN: 2147483647
Year: 2003
Pages: 648
Authors: Lord Brittan

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