Table Of ContentINTERNATIONAL INVESTMENT STRATEGIES IN THE
PEOPLE’S REPUBLIC OF CHINA
International Investment Strategies
in the People's Republic of China
YADONGLUO
University of Hawaii
First published 1998 by Ashgate Publishing
Reissued 2018 by Routledge
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Copyright© Yadong Luo 1998
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ISBN 13: 978-1-138-36307-6 (hbk)
ISBN 13: 978-0-429-43177-7 ( ebk)
Contents
List of Figures ix
List of Tables x
Preface xii
Chapter 1 Foreign Direct Investment in China:
Patterns and Features 1
1.1 Foreign Direct Investment: Worldwide Overview 1
1.2 FDI in China: Patterns, Situations, and Features 5
1.3 Review of FDI in China Over the Past Seventeen
Years (1979-1996) 22
1.4 What is Happening Now? 24
1.5 Strategic Outlook 26
Chapter 2 International Investment Environment in China 30
2.1 Emerging Market Economy 30
2.2 Market Demand 36
2.3 Cost and Revenue-Related Environment 39
2.4 Taxation Issues 40
2.5 Legal Environment 45
2.6 International Investment Strategies and Environment 51
Chapter 3 Industry Selection Strategy in China 56
3.1 Introduction 56
3.2 Industrial Structure in China 57
3.3 Industrial Policies Toward FDI in China 64
3.4 Industry Profiles and Opportunities 68
3.5 Critical Structural Attributes in China 77
3.6 Empirical Analysis 84
3.7 Implications for International Executives 86
v
Chapter 4 Timing of Investment in China 91
4.1 Introduction 91
4.2 Conceptual Issues 93
4.3 Economic Effects of Timing of Investment 96
4.4 A Framework of Timimg Strategy Formulation 100
4.5 Survey Results from China 104
4.6 Implications and Guidance for Foreign Investors 108
Chapter 5 Project and Location Selection in China 116
5.1 Conceptual Foundations 116
5.2 Governmental Policies on Project and Location Selection 123
5.3 Finding a Home: Some Advice 127
5.4 Choosing the Right Project: Some Advice 132
Chapter 6 Partner Selection in China 136
6.1 Conceptual Foundations 136
6.2 Strategic Attributes of Local Partners in China 141
6.3 Organizational Attributes of Local Partners in China 145
6.4 Financial Attributes of Local Partners in China 149
6.5 Empirical Evidence 154
6.6 Implicationa for International Executives 155
6.7 Sources for Identifying Chinese Partners 158
6.8 Conclusion 159
Chapter 7 Network Cultivation in China 163
7.1 Understanding Concept and Importance of Guanxi 163
7.2 Grasping Principles of Guanxi 165
7.3 Comprehending Philosophies of Guanxi 166
7.4 Appraising Economic Rationale of Guanxi 168
7.5 Appraising the Difference between Guanxi and
Western Networking 170
7.6 Integrating Organizational Dynamics with Guanxi 172
7.7 Aligning Foreign Investment Decisions with Guanxi 179
7.8 Constructing Own Guanxi Network 181
7.9 Searching Right People 183
7.10 Linking Guanxi with Performance 185
vi
Chapter 8 Entry Mode Selection and Sharing Arrangements
in China 189
8.1 Introduction 189
8.2 Entry Mode 1: Equity Joint Ventures 190
8.3 Entry Mode 2: Wholly Foreign-Owned Enterprises 193
8.4 Entry Mode 3: Contractual Joint Ventures 195
8.5 Entry Mode 4: Umbrella Companies 197
8.6 Entry Mode 5: Acquiring Existing Firms 200
8.7 Entry Mode 6: Representative Offices 202
8.8 Entry Mode 7: Other Options 204
8.9 Some Advice to International Executives 207
8.10 Financial Comparison Between EJVs and WFOEs 211
8.11 Sharing Arrangement in China 216
Appendices
1 Sample Contract for International Joint Venture Formation 220
2 List of China’s Foreign Investment Laws and Regulations 239
3 The Law of the People’s Republic of China on Sino-Foreign
Equity Joint Ventures 244
4 The Law of the People’s Republic of China on Sino-Foreign
Cooperative Joint Ventures 250
5 Law of the People’s Republic of China on Enterprises
Operated Exclusively with Foreign Capital 258
6 Provisions of the State Council of the People’s Republic
of China for the Encouragement of Foreign Investment 264
7 Income Tax Law of the People’s Republic of China for
Foreign-In vested Enterprises 270
8 Notice of the State Council on Regulations of Value-Added,
Excise, Business, and other Taxes Applicable to Foreign-
Invested Enterprises 280
vii
9 Supplementary Provisions of the Ministry of ForeignTrade and
Economic Cooperations Concerning the Implementing Rules
on Confirmation and Examination of Export-Oriented and
Technologically-Advanced Foreign-Invested Enterprises 283
10 Patent Law of the People’s Republic of China 288
11 Implementation Rules for International Copyright Treaties 306
About the Author 311
VIII
List of Figures
2.1 International Investment Strategies: Two Categories 52
4.1 Timing of FDI - Risk-Return Model 100
4.2 Timing of FDI - Strategy Formulation Model 102
6.1 Partner Attributes and UV Success 138
IX
