Simple rules for a complex relationship

Abstract

For Chinese companies, internationalisation is the most practical way to buy Western know-how. The wish lists of the companies range from patents and technologies to management, process, system and strategic expertise. However, entering the markets of industrial countries also requires internationally known brands and global production and distribution networks. And here, most Chinese companies are only beginning to get organised. Many acquisitions and partnerships thus primarily serve as a strategy to gain brand rights as well as useful sales, marketing and service structure. Chinese companies are also eager to move into the European Union (EU) markets, as they are less cutthroat. It’s harder to turn a profit in China for a number of reasons, including a lack of protection for intellectual property, which means knock-off products are created quickly and profits are hard to maintain. As customers are so price sensitive, and margins are so razor thin, Chinese companies often lack the resources to make sustained investments in research and development. Top Chinese companies derive their impetus for overseas expansion from internal corporate dynamics (need for raw materials, supply improvements, acquire complementary technology, etc.).