the world. The gross domestic product (GDP) increased on average 8.4% between 1984 and 2005 (EIU 2006). This is faster than the US and Japan grew during their early stages of economic development, and China’s rapid growth is projected to continue through the next decade and beyond (Xinhua 2005). Besides rapid economic growth, China also means an enormous market size. 1.3bn inhabitants or one-fifth of the world’s entire population live in China. They are not only considered a low cost labour force, but also an attractive customer base (Zeng/Williamson 2004; McGregor 2005; French 2006). No global corporation therefore dares strategise without taking the country into consideration (Grant 2006). As a result, China has attracted hundreds of world’s largest companies and investors, and has obtained immense amounts of foreign direct investments (FDI). In 2004, contractual value of foreign fund was US$153.5bn, up by 33.38% compared to 2003, and actual utilised foreign fund value was US$60.6bn (MOFCOM 2006c).
But, not only foreign companies have been attracted by the large Chinese market place, also domestic Chinese companies have benefited from the Chinese open door policy and increased market-economy environments since 1978 (Chai 1997, 2000; Zhang 2003). They have achieved leading positions in the domestic markets and have become the world’s second largest exporter after the USA with an export volume of US$593bn in 2004 (EIU 2006). However, at least since China joined the World Trade Organisation (WTO) in the end of 2001 the competition with foreign companies has increased dramatically. Chinese companies are forced to organ- ise their businesses according to more free-market principles in order to survive. They are also encouraged by the Chinese government to enter foreign, international markets to strengthen their positions in the home market, and to access new, profitable markets and strategic assets. Karl P. Sauvant, Director of the investment division of the United Nations Conference on Trade and Development (UNCTAD) even said that “Chinese enterprises are on the threshold of becoming major foreign direct investors in Asia and beyond” (UNCTAD 2003: 2). Fig. 1-1 shows the development of China’s outward FDI (stock) according to UNCTAD reports. In 2004 China accumulated US$38.8bn and is forecasted by Bain to have a stock of more than US$81bn outward investments by 2015.
KeywordsForeign Direct Investment Chinese Company Brand Management Case Narrative Referential System
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