The China Venture

Quality of Infrastructure
One major task for the set-up of a new enterprise is finding the appropriate location to install a
manufacturing plant. Although local governments are willing to attract new businesses in
order to increase their tax income, the procedure for obtaining various permits is tedious and
time consuming. Potential Chinese partners could provide a suitable infrastructure with their
existing manufacturing plants to a certain extent. However, buildings and equipment are
generally not at the desired level of technology so that they probably may not be used further
for production without major investment and upgrades.
However, several business parks have been set up by provincial and regional governments or
even by joint-ventures between local and foreign governments (e.g. Singapore-Suzhou
Business Park in Suzhou (Zhejiang)). These business parks provide excellent facilities for
manufacturing plants with all necessary installations for water, electricity and communication.
They also set up accommodation for management and leading personnel within their
premises.
Relationship (Guanxi)
Guanxi is the magic word in Chinese business: without personal relationship to authorities,
customers, business partners etc. virtually no business is possible in China. As it takes time to
build relationships, SME’s generally do not have sufficient guanxi in the start-up phase of
their project to be successful on the Chinese domestic market. Therefore it is advisable to
found a joint venture with a Chinese partner who brings his guanxi into the partnership. Also
the involvement of a local person in the management of the manufacturing plant is extremely
helpful due to that reason.
Market Knowledge
SME’s planning to invest in China most probably already have a certain knowledge of the
local market. However, this knowledge may be restricted to the import of goods only, which
may differ significantly from selling locally produced goods on the market. As with guanxi,
the know -how of a Chinese partner will significantly influence the success of a newly
established enterprise.
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