The China Venture

Indirect export and direct export are two possible vehicles to build up sales in China. While
indirect export does not permit influence on the marketing and distribution channels because
of intermediaries involved, direct export gives at least some control on marketing and
distribution. It relies on the followin g principal vehicles: the foreign agent/distributor channel
and the branch/subsidiary channel (Root, 1982). In China the latter is limited to a mere
representative function; by Chinese law, representative offices are not allowed to conduct any
business activities such as concluding commercial contracts.
Finding a well established trading house in China is a difficult task, especially for SMEs.
Large trading houses with a good geographical coverage in China prefer to work with big
companies who boast high sales volumes. Problems increase when the SME wants the trading
house to market and sell high tech products that require sophisticated service and
maintenance. SMEs most likely have to rely on smaller companies which do not cover all
Chinese provinces and ha ve less resources to provide technical maintenance and after sales
service.
Market Opportunities: “Going China” as a Strategic Long Term Decision
More resources are required when China engagement is seen as long term strategic decision,
i.e. the Chinese market is considered a strategic target market for the company. Beside
pr oduction facilities in the country, marketing and sales activities are essential for a long term
foothold. SMEs who follow this path may want to set up a representative office first, but as
these are not allowed to conduct any business, this cannot be more than an initial step. All
joint venture forms and the wholly owned foreign enterprise (WOFE) are possible vehicles for
long term presence.
3.3.2.2 Objective 2: Exploiting Existing Know-How and Proprietary Technology
Many SMEs are not able to commit substantial financial and human resources to a China
engagement. However, besides the sales approach described above, high-tech companies have
the opportunity to exploit their existing know -how in the Chinese market – often referred to as
“pure technology transfer”.
Tangible items of “pure technology” include technical blueprints, manuals, patent rights on
products and processes or documented process knowledge, just to give a few examples.
Intangible elements are implicit knowledge and experience which are embedded in the people
who handle or develop the technology. To ensure successful technology transfer, these
“knowledge carriers” should be involved in the transfer process.
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