The China Venture

This evaluation does not rate SMEs’ bargaining power; it rather shows the importance of the
relation for SMEs’ operations. Not all of the identified relations are real bargaining relations.
The SME may be in such a weak position, that it is forced into compliance with the given
environment and existing rules. This is particularly true for all relations with the central
government and financial institutions. In terms of bargaining power a single SME is a
lightweight against these “partners” and most likely has to comply with the rules.
This section will shed some light onto four of the more promising and interesting bargaining
situations, i.e. relations where SMEs are expected to have at least some bargaining power: 1)
SME – local Chinese authorities, 2) SME – Chinese joint venture partner, 3) SME – trading
house/distributor and 4) SME – technology recipient. First, the interests of both bargaining
partners are briefly summarised for each of the given situations. Second, conflicting interests
are identified. In a third step an estimation is given about the relative bargain ing strength of
the SME. To come up with a reasonable estimate it is imperative to understand the sources of
bargaining power.
3.3.3.1 Bargaining Situation I: SME – Local Chinese Authorities
High-Tech SME Local Chinese Authorities
• Efficient authorities, fast approval procedures
• Adequate infrastructure
• Free choice of legal vehicle
• Protection of technology, e.g. long license periods
• No export quota
• Free repatriation of profit
• Attracting high-tech companies into the province
• Ensure absorption of high tech � joint ventures
preferred
• Personal benefits such as gifts and international
travel
• Comply with central government’s rules
• Tax collection
TABLE 3-14: Interests, objectives and expectations between High-Tech SMEs and
Chinese Authorities
As local authorities are empowered to approve investment projects below 30 million US$,
they are in charge of most applications made by SMEs. To speed up approval procedures in
the special economic zones, there are tight review deadlines for the approving authorities. If
they cannot come up with an decision in time, the application is automatically considered
approved. Growing competition among local government in their attempt to lure FDI into
their province lead to this streamlined approval process (Foreign Investment Administration,
1995). However, issuing the required business license still may take many months.
Local governments, especially in the coastal provinces have realised that high tech companies
have special requirements in terms of physical infrastructure. Beside the industrial parks
which usually provide a good infrastructure, specialised “high-tech parks” are currently set up
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