The China Venture

Chinese insist on cutting edge technology. If the technology proves to be too advanced for the
Chinese recipient, employees may mishandle the equipment due to lack of sufficient training,
which could badly damage the foreign suppliers reputation.
According to Confucian philosophy copying is a legitimate and clever way of learning; moral
scruples do not exist. For an SME whose major asset is proprietary technology, it is
imperative to control and to protect its technology from unauthorised use, copying and
dissemination. Holding back key components (delivering them as bla ck box) is one defensive
strategy. SMEs involved with rapidly evolving high-technology face probably less risk when
transferring their top end technology to China. Once the Chinese fully master this technology,
a succeeding technology generation has already been developed. Thus the risk of creating a
competitor is minimal.
Although Chinese Patent and Licensing Laws are of Western standard, law enforcement is
still very weak (Kloth 1996). Dissemination of delivered technology is almost beyond control
of a foreign SME; it happens that a process technology license is given for one manufacturing
plant, that fees for this plant are paid regularly but that the technology is used in similar
facilities without gratification and notification of the licensor.
The risk of creating a competitor on the world market is inherent to process and product
technology transfer. Chinese Licensing Laws do not permit any geographical restriction of the
sales area of the products deriving from licensed or bought technology. Minimum sales prices
are forbidden, giving the Chinese way to conquer established markets with dumping price
strategies. However, it seems that only the largest Chinese firms have the experience and
management resources to become a serious competitor on the world market.
As Paul reflected on his China venture, he realised the wisdom of Mr. Zheng in his dealings
with the Chinese partner. Mr. Zheng’s good business relationships with the Chinese partners
involved not only the provision of a foreign market for Chinese goods, but also the essential
help and advice which he gives to them in terms of improvement to the products as well as the
introduction of various appropriate technologies to the Chinese partner. When appropriate,
Mr. Zheng has even helped the Chinese partners source for technology in Europe. Paul began
to realise the reasons for the strengths and depths of Mr. Zheng’s relationships with his
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