Helios developments is opening soon a new course .
The subject is how to Import from China the safe AND easy way.
Apr 3, 2008
Apr 1, 2008
Joint Ventures in China
Why form Joint Ventures or other forms of cooperation with local companies in China?
By Yael Trau
China is now a key area in the global strategic of multinational companies and other national companies. Companies have been accelerating their investments in China on a large scale, in all economic associated activities, i.e. commerce, infrastructure, finance and so on and so forth.
However, prior to commencing business with companies / suppliers in foreign countries in general and in China in particular, one has to ask him/her self the following questions-
1. Do cultural factors have a significant influence on business conduct in China?
2. Are there other factors of greater influence?
We can principally assume that in a host country where cultural, political and economic arrangements significantly differ from those in the home country, such as China, a foreign company is more likely to cooperate with local firms that may posses unique industry or firm specific skills and advantages that are very costly to obtain by a foreign firm. This assumption by and large applies to both sourcing, manufacturing and importing from China, and to selling to entities in China.
There are many forms of cooperation, such as Joint Venture (JV), Wholly Foreign Owned Enterprise (EFOE), Merger, and Limited agreement. Regardless of the chosen form, the reasons for a foreign firm to cooperate with a local firm in China are:
1. Knowledge of local market. Foreign companies that choose to compete in China need to have a full understanding of the market place. Therefore, they will usually search for a local partner that has access to marketing or distribution systems, and has knowledge of target market’s economy and customs.
2. Status. The status and capabilities of the local collaborator in dealing with local authorities and public relations, and likelihood for governmental (local and central) promotion, are perceived to be vital and therefore rationalize a cooperation formation. This subset would also include status defined in terms of general financial and business soundness and standing.
3. History. The foreign firm will choose a local partner because of favourable past association, such as personal connections, licenses, resources, major customers etc’.
4. Economies of scale. Complementary goals and skills For instance, sales and service experience of one partner, and a strong self financed of the other partner, or existing contracts and ordered overseas in one hand, and strong Chinese suppliers and factories on the other hand.
In conclusion, dissimilarities between cultures, political systems and business arenas, can cause serious problems if they are not understood. It is therefore recommended to create some form of cooperation with a local company, for the purpose of generating important opportunities for growth and development
By Yael Trau
China is now a key area in the global strategic of multinational companies and other national companies. Companies have been accelerating their investments in China on a large scale, in all economic associated activities, i.e. commerce, infrastructure, finance and so on and so forth.
However, prior to commencing business with companies / suppliers in foreign countries in general and in China in particular, one has to ask him/her self the following questions-
1. Do cultural factors have a significant influence on business conduct in China?
2. Are there other factors of greater influence?
We can principally assume that in a host country where cultural, political and economic arrangements significantly differ from those in the home country, such as China, a foreign company is more likely to cooperate with local firms that may posses unique industry or firm specific skills and advantages that are very costly to obtain by a foreign firm. This assumption by and large applies to both sourcing, manufacturing and importing from China, and to selling to entities in China.
There are many forms of cooperation, such as Joint Venture (JV), Wholly Foreign Owned Enterprise (EFOE), Merger, and Limited agreement. Regardless of the chosen form, the reasons for a foreign firm to cooperate with a local firm in China are:
1. Knowledge of local market. Foreign companies that choose to compete in China need to have a full understanding of the market place. Therefore, they will usually search for a local partner that has access to marketing or distribution systems, and has knowledge of target market’s economy and customs.
2. Status. The status and capabilities of the local collaborator in dealing with local authorities and public relations, and likelihood for governmental (local and central) promotion, are perceived to be vital and therefore rationalize a cooperation formation. This subset would also include status defined in terms of general financial and business soundness and standing.
3. History. The foreign firm will choose a local partner because of favourable past association, such as personal connections, licenses, resources, major customers etc’.
4. Economies of scale. Complementary goals and skills For instance, sales and service experience of one partner, and a strong self financed of the other partner, or existing contracts and ordered overseas in one hand, and strong Chinese suppliers and factories on the other hand.
In conclusion, dissimilarities between cultures, political systems and business arenas, can cause serious problems if they are not understood. It is therefore recommended to create some form of cooperation with a local company, for the purpose of generating important opportunities for growth and development
Mar 31, 2008
The economic role of agriculture in China
Yael Trau
The “Chinese economic miracle” seems to have captured everybody’s attention, especially when it comes to production, manufacturing, sourcing, FDI inflow to China etc’. But do we know about the biggest sector in the Chinese labour market – the agricultural sector?
The PRC inherited a ruined country, exhausted from both man made disasters such as warlords, civil wars, occupation, and natural disasters, droughts, famine, and floods.
During the Mao era, the Chinese government carried out a wide ranging land reform in the rural areas. Farmers with little or no land were given land of their own, significantly arousing their enthusiasm for production. Overall in Mao’s period, China’s agriculture developed slowly, with some golden times such as 1953-57 when the yearly gross output increased by 4.5% on average.
Under Mao, the conceptual role of agriculture was imperative. The Chinese farmer was basically the equivalent to the Soviet blue collar proletarian, thus the importance of the farmers in the class struggle was fundamental.
After 1978 and under the reforms, China introduced the household contract responsibility system, linking remuneration to output, and started to dismantle the people’s commune system, eliminating the links between organizations of state power and economic organizations. Contracting land out to farmers altered the distribution form of land and mobilized the farmers’ enthusiasm for production. As a result, for six years following 1978, agricultural output grew more than twice as fast as the average growth rate over the previous twenty five years.
The reforms made the market play a basic role in adjusting supply and demand situation for agricultural products and allocating resources, and aroused the farmers’ creativeness and enthusiasm for production.
On the whole, the reformist thrust of China’s economic policy since 1978 has benefited agriculture, as it has benefited the economy in general. Nevertheless, after 30 years of reforms, the sector is still behind most of the other sectors in the Chinese economy.
The economic and political role of agriculture in contemporary China –
1. Food security. In an extremely large and populated country like China, the concept of food security is fundamentally important. The task of feeding its people has been perhaps the first priority of its rulers throughout history.
2. Political and social stability. The farmers of China are known to have a “rebellious spirit”, which is well documented in the history books. When famine, war, or other extreme conditions took place, the farmers of China, whom use to be the majority of the population, and remain to be the largest group of China’s people, chose to strike. Thus, there is a consensus that there is no stability without the farmers / agriculture, and in order to avoid “da luan” – big chaos, the farmers must be kept quiet and content. At present still, the farmers of China are the largest, yet underrepresented group, which holds the keys to stability in China.
3. Employment tool. The concept of agriculture as an employment tool in China is a bit of a paradox. On the one hand there is a massive scale of labour surplus in the agricultural sector, resulting in underemployment or even unemployment. On the other hand, agriculture remains to be the biggest sector responsible for the employing feeding, and consequently keeping social and political order of around 60% of China’s population.
4. GDP share. The reforms in the early 1980s initially increased the relatively share of the agricultural sector. The share of agricultural output in the total GDP rose from 30% in 1980 to 33% in 1983. Since then, however, the share of agriculture in the total GDP has fallen fairly steadily, and by 2003 it was only 14%. These figures indicate a relatively small share of the agricultural sector, nevertheless a noteworthy one in the overall performance of the Chinese economy.
What are the main obstacles to the agricultural sector in China than?
1. Natural resources and disasters. At the beginning of the 21st century, China has still to face and deal with a number of severe ecological / environmental problems, some are the consequences of human mistakes, and some are simply a result of “mother nature’s” course. The main problems are water supply, i.e. shortage, wastage and quality. In the agricultural context, irrigation is likely to be the most important factor.
2. Education. Chinese policy documents state that national modernization depends on accelerating quantity-quality transition in the countryside, because a large “low quality” rural populace hinders progression from tradition, poverty and agrarianism to modernity and prosperity.
3. Technology. The standard of a country’s agriculture is appraised, first and foremost, by the competence of its farmers. Poorly trained farmers are not capable of applying advanced methods and new technologies. Deng Xiaoping always stressed the prominent of science and technology in the development of agriculture. He said – “The development of agriculture depends first on policy, and second on science. There is no limit to developments in science and technology, nor to the role that they can play….in the end it may be that science will provide a solution to our agricultural problems”.
Accordingly, China is seeking technology transfer in the agricultural sector, formed by joint ventures with international collaborators.
4. Limited investment from government. Between the Second and Fifth five-year plan periods (1958-1962 and 1976-1980), agriculture’s share of capital construction and other relevant forms of investment made available by the state remained a little over 10%. In 1998 agriculture and irrigation accounted, respectively, for less thsn 2% and 3.5% of all state construction investment.
5. Limited inflow of FDI – foreign direct investment. Most sectors in China enjoy an enormous inflow of FDI, which particularly helped in 2 dimensions - technology transfer and capital availability. The lack of an outside funding, accompanied with a reduced local funding contributed to the deterioration of the agricultural sector.
In conclusion, the agricultural sector in China has not yet reached its pick, and my prediction is that more and more foreign investors will discover its enormous potential and act accordingly.
The “Chinese economic miracle” seems to have captured everybody’s attention, especially when it comes to production, manufacturing, sourcing, FDI inflow to China etc’. But do we know about the biggest sector in the Chinese labour market – the agricultural sector?
The PRC inherited a ruined country, exhausted from both man made disasters such as warlords, civil wars, occupation, and natural disasters, droughts, famine, and floods.
During the Mao era, the Chinese government carried out a wide ranging land reform in the rural areas. Farmers with little or no land were given land of their own, significantly arousing their enthusiasm for production. Overall in Mao’s period, China’s agriculture developed slowly, with some golden times such as 1953-57 when the yearly gross output increased by 4.5% on average.
Under Mao, the conceptual role of agriculture was imperative. The Chinese farmer was basically the equivalent to the Soviet blue collar proletarian, thus the importance of the farmers in the class struggle was fundamental.
After 1978 and under the reforms, China introduced the household contract responsibility system, linking remuneration to output, and started to dismantle the people’s commune system, eliminating the links between organizations of state power and economic organizations. Contracting land out to farmers altered the distribution form of land and mobilized the farmers’ enthusiasm for production. As a result, for six years following 1978, agricultural output grew more than twice as fast as the average growth rate over the previous twenty five years.
The reforms made the market play a basic role in adjusting supply and demand situation for agricultural products and allocating resources, and aroused the farmers’ creativeness and enthusiasm for production.
On the whole, the reformist thrust of China’s economic policy since 1978 has benefited agriculture, as it has benefited the economy in general. Nevertheless, after 30 years of reforms, the sector is still behind most of the other sectors in the Chinese economy.
The economic and political role of agriculture in contemporary China –
1. Food security. In an extremely large and populated country like China, the concept of food security is fundamentally important. The task of feeding its people has been perhaps the first priority of its rulers throughout history.
2. Political and social stability. The farmers of China are known to have a “rebellious spirit”, which is well documented in the history books. When famine, war, or other extreme conditions took place, the farmers of China, whom use to be the majority of the population, and remain to be the largest group of China’s people, chose to strike. Thus, there is a consensus that there is no stability without the farmers / agriculture, and in order to avoid “da luan” – big chaos, the farmers must be kept quiet and content. At present still, the farmers of China are the largest, yet underrepresented group, which holds the keys to stability in China.
3. Employment tool. The concept of agriculture as an employment tool in China is a bit of a paradox. On the one hand there is a massive scale of labour surplus in the agricultural sector, resulting in underemployment or even unemployment. On the other hand, agriculture remains to be the biggest sector responsible for the employing feeding, and consequently keeping social and political order of around 60% of China’s population.
4. GDP share. The reforms in the early 1980s initially increased the relatively share of the agricultural sector. The share of agricultural output in the total GDP rose from 30% in 1980 to 33% in 1983. Since then, however, the share of agriculture in the total GDP has fallen fairly steadily, and by 2003 it was only 14%. These figures indicate a relatively small share of the agricultural sector, nevertheless a noteworthy one in the overall performance of the Chinese economy.
What are the main obstacles to the agricultural sector in China than?
1. Natural resources and disasters. At the beginning of the 21st century, China has still to face and deal with a number of severe ecological / environmental problems, some are the consequences of human mistakes, and some are simply a result of “mother nature’s” course. The main problems are water supply, i.e. shortage, wastage and quality. In the agricultural context, irrigation is likely to be the most important factor.
2. Education. Chinese policy documents state that national modernization depends on accelerating quantity-quality transition in the countryside, because a large “low quality” rural populace hinders progression from tradition, poverty and agrarianism to modernity and prosperity.
3. Technology. The standard of a country’s agriculture is appraised, first and foremost, by the competence of its farmers. Poorly trained farmers are not capable of applying advanced methods and new technologies. Deng Xiaoping always stressed the prominent of science and technology in the development of agriculture. He said – “The development of agriculture depends first on policy, and second on science. There is no limit to developments in science and technology, nor to the role that they can play….in the end it may be that science will provide a solution to our agricultural problems”.
Accordingly, China is seeking technology transfer in the agricultural sector, formed by joint ventures with international collaborators.
4. Limited investment from government. Between the Second and Fifth five-year plan periods (1958-1962 and 1976-1980), agriculture’s share of capital construction and other relevant forms of investment made available by the state remained a little over 10%. In 1998 agriculture and irrigation accounted, respectively, for less thsn 2% and 3.5% of all state construction investment.
5. Limited inflow of FDI – foreign direct investment. Most sectors in China enjoy an enormous inflow of FDI, which particularly helped in 2 dimensions - technology transfer and capital availability. The lack of an outside funding, accompanied with a reduced local funding contributed to the deterioration of the agricultural sector.
In conclusion, the agricultural sector in China has not yet reached its pick, and my prediction is that more and more foreign investors will discover its enormous potential and act accordingly.
Mar 30, 2008
China’s economy – facts
China has been one of the world’s fastest growing economies. In real terms, China’s 1978 GDP doubled by 1986, tripled by 1991, quadruped by 1993 and quintupled by 1995. However, the population growth rate dropped to an average of 1.15 a year in 1993-97.
Chinese economy grew to $1.24 trillion in 2002, reaffirming its position of the world’s sixth largest economy. In 2007, it has already become the fourth largest in the world after the US, Japan and Germany, with a nominal GDP of $3.42 (when measured in exchange rate terms).
The country's per capita income is classified as low by world standards; according to the International Monetary Fund in 2006 it was only about $2000.
China’s economic reforms have transformed the country into a major trading power, with average growth of foreign trade of over 15% since 1980, faster than the growth rate of GDP.
In 2001 China has entered the World Trade Organization, which carried with it requirements for further economic liberalization and deregulation.
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China has been the leading foreign direct investment (FDI) recipient of the emerging markers since 1990s. Over half of the world’s top 500 largest firms have entered the country. Labour intensive market is a key factor for FDI inflows in China. FDI generally aims to take advantage of cheaper factor inputs in China, particularly cheaper labour for the export oriented FDI in which production is labour intensive.
Chinese economy grew to $1.24 trillion in 2002, reaffirming its position of the world’s sixth largest economy. In 2007, it has already become the fourth largest in the world after the US, Japan and Germany, with a nominal GDP of $3.42 (when measured in exchange rate terms).
The country's per capita income is classified as low by world standards; according to the International Monetary Fund in 2006 it was only about $2000.
China’s economic reforms have transformed the country into a major trading power, with average growth of foreign trade of over 15% since 1980, faster than the growth rate of GDP.
In 2001 China has entered the World Trade Organization, which carried with it requirements for further economic liberalization and deregulation.
.
China has been the leading foreign direct investment (FDI) recipient of the emerging markers since 1990s. Over half of the world’s top 500 largest firms have entered the country. Labour intensive market is a key factor for FDI inflows in China. FDI generally aims to take advantage of cheaper factor inputs in China, particularly cheaper labour for the export oriented FDI in which production is labour intensive.
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