We can believe that almost all multinational companies are unwilling to establish joint ventures or cooperative enterprises when they decide to enter China. They chose to set up a joint venture for two reasons: first, because of political reasons, they were unfamiliar with and even afraid of the markets in China and China, but at the same time they were deeply attracted by the market with a population of more than one billion. Just as China's reform and opening up is crossing the river by feeling the stones, multinational companies also need a local partner to be familiar with it. As Mr. Chen Rongxiang, Managing Director of Bi Bo Management Consulting Company in Greater China, analyzed, "At that time, there was still a great deviation in foreign understanding of China. In their view, the rule of man in China is very strong, and the China government has many mysteries. Therefore, in the face of everything, they feel that having a partner will definitely improve their safety factor. " Second, one of the important goals of introducing foreign capital in China is to learn from foreign advanced technology and management experience. In this regard, joint ventures are the best way to learn by doing. China's laws, regulations and policy environment also determine that if multinational companies enter China and choose to establish joint ventures, they will get more invisible care and preferential treatment. In fact, foreign companies that have chosen a strong China partner have indeed achieved a lot of success: the cheapest land, special policy care, tax relief such as "two exemptions and three reductions" and flexible handling of customs duties have all been obtained.
However, times have changed. With China's entry into WTO and China's gradual promotion of WTO rules, the idea of China's expansion of multinational giants has gradually become clear.
According to the WTO commitments, China has gradually liberalized the restrictions on foreign-funded enterprises. By amending the Law on Sino-foreign Joint Ventures, the Law on Sino-foreign Cooperative Ventures and the Law on Foreign-funded Enterprises, the previous restrictions on foreign exchange balance, export ratio and localization rate have been gradually liberalized. Foreign investors tend to establish wholly-owned enterprises, or gain the controlling right and the right to speak in joint ventures through capital increase and share expansion, or increase the investment transfer to China and control the business in China. More and more foreign-funded enterprises are more and more inclined to sole proprietorship.
After entering China, ordinary foreign investors like to fully control the joint venture, pay attention to management, personnel and sales, and let their foreign employees sent to China be managers. But in China, this approach often doesn't work. On the one hand, the labor cost of foreign managers sent to joint ventures is extremely high, which is unacceptable to China; On the other hand, the western management style pursued by foreign countries often runs into a wall in China, which also attracts Chinese people to sneer at it. However, whether the contradiction is fierce or not, in the early stage of reform and opening up, the advantages of joint venture still outweigh the disadvantages.
However, with the deepening of the market economy, the domestic investment environment is increasingly in line with international standards, and foreign investors in joint ventures are more and more familiar with the domestic situation, and have been able to solve problems such as policies and laws, government relations, and sales channels. Especially after China's entry into the WTO, there are fewer and fewer government actions to restrict the market by administrative orders. Multinational companies can enter many industries independently without domestic enterprises, and foreign investors have more and more confidence in their wholly-owned enterprises in China. There are fewer and fewer places where China can help multinational companies, and the advantages of joint ventures have been lost. At this time, the tolerance of foreign parties to the conflict between systems and concepts has dropped sharply, and it is inevitable to move from joint venture to sole proprietorship or holding.
On the other hand, in the past, the China government set up many policy barriers to restrict the fields, forms, proportions, scale and business scope of foreign investment in China, so as to protect local industries. In order to enter the China market, multinational capital mostly adopts the strategy of breaking up the whole into parts, and establishes many joint ventures with local companies in China in different regions. Take Siemens as an example. Siemens has established 45 joint ventures and 1 1 wholly-owned enterprises in China, covering almost all fields that Siemens has set foot in. Too many subsidiaries will inevitably lead to repeated investment and waste of resources, and it is difficult to form economies of scale. As Yin Si, president of Siemens China, said, from the perspective of operating cost, if a wholly-owned company can do all the business, then the operating cost of the company is the lowest. The charm of a sole proprietorship lies in its ability to integrate their scattered investment projects in China market, implement unified management to improve operational efficiency and fully realize its globalization strategy.
In addition, more and more multinational companies set up factories in China for the purpose of supplying the global market, not just for internal digestion in China. The products produced in China are continuously shipped to all parts of the world. There are indications that China's position in the world industrial chain is becoming more and more important, and the enterprises established by multinational companies in China are becoming more and more important as the production bases of global suppliers. It is conceivable that if the production is stopped due to some uncontrollable links during the production period, even a small mistake in quality control will directly affect the operation of these multinational companies. Therefore, multinational companies put forward more internationalization requirements for joint ventures in China, and these joint ventures must be able to meet the requirements of multinational companies' global strategy. Most investors in China pay attention to China's domestic market and are not interested in the global strategy of multinational companies. When the global interests represented by multinational corporations conflict with the regional interests represented by China, multinational corporations must give priority to ensuring the realization of their global interests. In this case, it is obviously difficult for joint ventures to meet the higher requirements of multinational companies for China factories. If multinational companies want to strengthen their control over factories in China, they must remove constraints and maintain their right to speak. And the means they choose is-sole proprietorship. Only sole proprietorship can really have the final say.
For a long time, China is undoubtedly an expensive classroom, and multinational companies have to give up some of their business principles temporarily and master survival skills in another "contradictory struggle". They are good at calculating at all costs, making bold detours, being humble and tough when appropriate, avoiding politics and making use of it. On the one hand, they are adapting, on the other hand, they are reshaping China's business culture and rules of the game. Now, when the environment and conditions are gradually available, they choose sole proprietorship without hesitation.
Actively respond to the wave of sole proprietorship
From the perspective of market influence, in the process of gradual sole proprietorship, the foreign party of the joint venture is also integrating its domestic resources in the host country, making the originally scattered forces into fists and enhancing its competitiveness. In some industries, it may even face the situation that one or several foreign-funded enterprises monopolize the market, and the market competition is bound to be more cruel. However, it is hard to say whether some newly established national brands in China can compete with these multinational companies after they become competitors from partners. For example, in communication and electronics industries, multinational companies often use their technological advantages to suppress China enterprises, and frequent intellectual property disputes make it impossible for domestic enterprises to prevent them.
Whether local enterprises in China can survive and develop in this more intense and direct competition in the future will depend on their capital strength, technological innovation ability and marketing ability. For those China enterprises that are now engaged in joint ventures with multinational companies, it is necessary to seize the time to improve their internal strength, enhance their international competitiveness, enhance their market competitiveness, and accumulate strength in human resources, technology and other factors that determine their future success or failure. China enterprises can even plan ahead and avoid being passive.
From the national level, we should attach great importance to the issue of price transfer. Multinational companies generally implement global business strategy, and it is a common phenomenon for multinational companies to use their global networks to transfer prices or profits. It will be more convenient for multinational companies to transfer prices after sole proprietorship. In this regard, the government should take appropriate measures to prevent it as soon as possible. At the same time, after sole proprietorship, multinational companies are more inclined to remit profits, and the scale of investment accumulated by foreign capital is larger. In the future, profit remittance will become an important factor affecting the foreign exchange balance, and the China government should make early preparations.
Of course, the sole proprietorship of multinational corporations has a positive effect on China's economy. Some foreign companies may increase their investment in China when they can fully control their own destiny. After sole proprietorship, technology, management and production are all foreign operations, and multinational companies no longer have to worry about the spillover of core technologies. It is easier for technology to enter China, and foreigners can produce higher-end products with higher added value, which makes the China market integrated with the world market. From this perspective, wholly-owned enterprises will also play a positive role in promoting the development of China market.
On the other hand, fierce confrontation and competition are also conducive to the development of enterprises in China. For example, in the past, many enterprises in China were protected at the policy level, but they became increasingly vulnerable. And the cruel competitive environment may give birth to a group of truly competitive enterprises. For example, in the mobile phone market, local manufacturers in China once broke the situation that foreign brands dominated the world by virtue of excellent design, exquisite marketing techniques and channel and price advantages. The home appliance industry has gradually risen from a staggering start. Now that the eyebrows are pulled out, foreign manufacturers can't help but be scared and hide under the wings of their own government to keep warm.
In addition, the "sole proprietorship transformation" of joint ventures does not mean that multinational companies are ready to go it alone in China. On the contrary, multinational companies will choose their business partners in China according to their own wishes, and multinational companies will establish a "non-binding" cooperative relationship with their business partners in China in a more flexible way. At this time, the partner is not just a simple joint venture, but a new cooperative relationship and an industrial alliance. We found that after foreign investors chose sole proprietorship, they actually created many opportunities for win-win cooperation. The key is whether local enterprises can seize such opportunities. For example, Panasonic has put forward three strategies of "localization", "integration" and "cooperation", and in China, it is carrying out extensive business cooperation with Tsinghua University, Chinese Academy of Sciences, TCL and other institutions and companies. In the field of IT, there are countless strategic alliances and partners at home and abroad. Relying on their own strength, Lenovo, Founder, Digital China and many other well-known domestic enterprises have become the preferred partners of multinational companies in China. Local enterprises should be good at learning, form their own core technologies and cultivate their own brands, which is very important for China enterprises to occupy a place in the future international market competition.
No matter whether it is capital or technical strength, domestic enterprises and multinational companies are not at the same level. Therefore, it is very important for domestic enterprises to implement strategic alliances and jointly carry out research and development in order to continuously break down the technical barriers caused by multinational companies. Because R&D in communication, semiconductor, electronics, medicine and other fields obviously has high investment, high risk and obvious economies of scale, giant multinational companies attach great importance to joint research and development. For example, 200 1 the latest international semiconductor EUV lithography technology is jointly developed by famous multinational companies such as Intel, Motorola, AMD and IBM. In order to break the technical barriers built by multinational companies, domestic related enterprises and research institutes should also implement strategic alliances in the field of basic research, carry out joint technology development, realize knowledge sharing, and still maintain effective competition in applied technology development.
From the perspective of national macro-policy, we should form a competitive market structure through appropriate industrial policies and policies to attract foreign investment, so as to effectively prevent multinational companies from exercising market dominance and reduce the possibility of collusion between multinational companies. By introducing a batch of foreign capital in an all-round way, the pattern of competition or oligopoly competition will be formed, which will make it easier for multinational companies to transfer advanced technology to China, thus narrowing the technological gap between domestic enterprises and multinational companies, thus helping to reduce barriers to entry, promoting the emergence of domestic competitors, forming catfish effect and promoting market competition.
In short, if local enterprises want to surpass the OEM workshops of multinational companies, they must form their own core technologies and brands, and there is no shortcut.
In 2022, the domestic capital market declined, and the valuations of many industries were at historical lows. There is a new atmosphere in the new y