The China Venture

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specialising in bonds have been set up, such as the Shanghai Securities Financial Company. Other securities houses are in the process of establishing specialist departments to run their bond business, rather than just dealing with it in a general securities department. Both, paperless and physical bonds, are traded on the SSE. Foreign invested enterprises are not allowed to issue securities on their corporate debt. One reason behind this ban is control of monetary expansion. Another reason is that the MOF sees no reason to allow competitors into a market it almost monopolises and thus jeopardise the effectiveness of its budget deficit financing vehicle. 2.3.2.3 Foreign exchange market Since foreign banks are not allowed to conduct RMB business (or only to a limited numbers of businesses), the only financial market which is of direct relevance to them is the foreign exchange market. Throughout the reform era, the PRC authorities have experimented extensively with the structure of this market. Via complex rules, the authorities have allocated funds through quotas, regulated plural, dual or unified exchange rates and monitored retention rates and foreign exchange balancing. The overall objectives of the foreign exchange market reform have been to give incentives for export, control the exchange rate and thereby promote macroeconomic stability. Further, in recent years, current account convertibility has been a goal in the foreign exchange reforms, partially due to WTO requirements. After the period of se veral foreign exchange centres serving with different exchange rates of RMB in China, the Foreign Exchange Centre in Shanghai now takes the function of providing a unified nation-wide spot foreign exchange rate of the RMB, through which a preparatory step is made for the full convertibility of RMB. 2.3.2.4 Interbank money market The interbank market is synonymous with the money and debt markets in the Chinese terminology. Operators on this market include banks and other financial institutions. Before 1979, the allocation of credit was vertical from the State Council to bank branches through the PBOC. The only thing a bank branch with surplus funds could do was to try to hold onto 50 Semkow et al., 1995, p. 42-58. 38
them, while a branch with a shortage of funds could in no way get in contact with another branch. 51 The reforms in 1979 put limits on the credit banks could extend and made their lending capacity conditional on their deposit-raising abilities. In 1983, an unofficial interbank market was created on an experimental basis by a regional branch of the ABC. This horizontal interface between branches marked a change from the previous, vertical system. The experiment proved such a success that branches of other banks were included in the system. As a result of early moves to liberalise the financial sector, sporadic interbank trading between branches of specialised banks emerged in 1985. The reason was the increasing need for local interbank markets which came from the shortage of credit through a restrictive monetary policy implemented by the PBOC in 1985. In November 1995, the PBOC announced its intentions to link the banks and the most important regional money markets electronically. But still, the interest rates are tightly controlled, which makes the money market not very effective. By the end of 1987, interbank markets existed in nearly all regions. But the lack of proper regulatory framework and of supervision by monetary authorities allowed the creation of „finance companies“ and development of unauthorised activities, such as short-term borrowing and long-term lending. As the PBOC declared that no authorities would intervene in any way, interbank activities of various kind sprang up in most large cities across the country. In 1989, these finance companies were abolished by the PBOC and in 1990, standardised operating principles of interbank markets came into effect. The interbank activities were centralised in some well-defined market places in Shanghai, Wuhan, Beijing/Tianjin, Shenyang, Xi’an and Chongqing. In Shanghai, the market took a more structured form in August 1986 with the establishment of the „Shanghai Money Market“, organised by the ICBC. The ICBC often accounts for more than three quarters of all interbank activities in China, although in principle, any financial institution may operate on this market after approval by the PBOC. Still, the interbank market is quite segmented while the extent of segmentation depends on the stature of the region or centre concerned. It is organised in three layers: markets, centres and networks. The market itself is organised locally by financial institutions and sponsored by local branches of the PBOC. Links between these three layers are poor due to the underdeveloped telecommunications, the inadequacy of organisation by 51 See Dipchand et. Al, 1994; Girardin, 1997 and Xia, 1995. 39
Page 1 and 2: The China Venture: Business Environ
Page 3 and 4: Table of Contents List of Figures .
Page 5 and 6: 3.2.3.2 Special Funds for Setting U
Page 7 and 8: 3.4.1.1 National Culture ..........
Page 9 and 10: List of Tables TABLE 2-1: THE AREAS
Page 11 and 12: GBP Pounds Sterling GDB Guangdong D
Page 13 and 14: 1. Introduction: The China Venture
Page 15 and 16: After a short discussion with the p
Page 17 and 18: co-operate with other firms, especi
Page 19 and 20: The Chinese operating legal system
Page 21 and 22: First of all, Britain’s predomina
Page 23 and 24: democratic centralism, all governme
Page 25 and 26: The courts are the state organs exe
Page 27 and 28: more than three hundred intermedia
Page 29 and 30: 2.2.8 Company Law China’s first n
Page 31 and 32: Things seem have to become a lot cl
Page 33 and 34: 2.3.1.1 Financial sector developmen
Page 35 and 36: securities, trading, initial public
Page 37 and 38: underdeveloped compared with market
Page 39 and 40: established in January 1996 by 59 p
Page 41 and 42: Chinese Banks Foreign Banks Financi
Page 43 and 44: system formulation has been put on
Page 45 and 46: The separation of production and co
Page 47 and 48: swap centres (see also above). From
Page 49: investors with little experience an
Page 53 and 54: Loans, public offerings of shares,
Page 55 and 56: is often to acquire foreign capital
Page 57 and 58: 2.3.3.2 Debt financing As getting t
Page 59 and 60: the approval of special authorities
Page 61 and 62: control compared to national enterp
Page 63 and 64: usiness in China and related issues
Page 65 and 66: 3. Pre-Entry Strategic Consideratio
Page 67 and 68: While the testing for the general r
Page 69 and 70: of relevant contacts to suppliers a
Page 71 and 72: partner companies with free servici
Page 73 and 74: strengths which his own company lac
Page 75 and 76: Central Committee of the Communist
Page 77 and 78: environment for foreign investment
Page 79 and 80: legal and regulatory environment of
Page 81 and 82: 3.2.4.3 Legal Framework for Foreign
Page 83 and 84: • China’s entry into membership
Page 85 and 86: • stipulates that advanced techno
Page 87 and 88: Government approval. Foreign invest
Page 89 and 90: Co-operative Joint Venture Status P
Page 91 and 92: Reflecting on these points the foll
Page 93 and 94: Success Factors concerning Products
Page 95 and 96: Success Factors concerning Company
Page 97 and 98: high-technology are eligible for th
Page 99 and 100: Available Distribution Channels A m
Page 101 and 102:
Available Distribution Channels Mar
Page 103 and 104:
Page 105 and 106:
Illustrative Case Studies The follo
Page 107 and 108:
Page 109 and 110:
Which Aspects should SME's Focus on
Page 111 and 112:
Strategy No. 1: Have Cash A comfort
Page 113 and 114:
expenses have a detrimental effect
Page 115 and 116:
As a conclusion, network oriented m
Page 117 and 118:
3.2.13 Case Study: Swisstec, Lyss 3
Page 119 and 120:
factor which makes the foreign firm
Page 121 and 122:
developed within the SME, its impac
Page 123 and 124:
3.3.1.3 The Role of Technology Mana
Page 125 and 126:
Indirect export and direct export a
Page 127 and 128:
maintenance or the use of establish
Page 129 and 130:
Government Central Exploiting Sales
Page 131 and 132:
in the most advanced provinces and
Page 133 and 134:
network through which the products
Page 135 and 136:
Siemens or Motorola, they may have
Page 137 and 138:
Chinese partners. He also began to
Page 139 and 140:
orders. However, a country may also
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Germany/Switzerland China democrati
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3.4.2.4 Conversation at the first m
Page 145 and 146:
only after a certain time and even
Page 147 and 148:
3.4.3 Experiences of European Compa
Page 149 and 150:
ones who atte nded a course. They s
Page 151 and 152:
Another Chinese tactic is, as menti
Page 153 and 154:
4. Post-Entry Strategic Considerati
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and the other one in China. The com
Page 157 and 158:
experience in operating production
Page 159 and 160:
In these two cases, the companies m
Page 161 and 162:
5. References Aharoni, Y. (1966): T
Page 163 and 164:
Dony, A. G. (1998): Market Entry St
Page 165 and 166:
Islam, I. / Chowdhury, A. (1997): A
Page 167 and 168:
Madura, J. (1993): International Fi
Page 169 and 170:
Semkow, B. W. (ed.) (1995): China F
Page 171 and 172:
6. Appendix 6.1 Fact Sheet People
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