China enjoys rapid growth of economy and international presence. This is mainly because of economic reforms they have undertaken in recent past. In fact, the government reduced its role in economy to allow for increased private and market participation.
The outcome has been exceptional as it continues to record rapid annual expansion of at least 10%. This has propelled it towards toppling United States as the world’s largest economy. Moreover, it ranks second in the world in terms of imports. China is also considered as the largest exporter globally.
However, it is quite difficult to understand how they have arrived at this with a communist government. As much as the government reduced its participation in economy, it still has complete control over business activities. For instance, foreign companies are allowed to invest and manufacture their produce in China at the expense of their technology and managerial skills. This paper will explore whether companies should go along with China’s business terms or refuse transfer of technology and effectively lose sales (Kuhns, 2011, p. 1).
It is quite important to note that companies such as Boeing, among others experience massive expansions due to their presence in Asian market, especially, China. On the other hand, this comes at a cost, since they have to transfer their technology to Chinese companies.
Transfer of technology is usually good, especially if it is reciprocated. However, in this case, technology is transferred in order to make profit. China offers cheap labor and market for these companies, this helps in improving company sales and profitability (Chapman & Duncan, 2011, p. 1).
On the other hand, Chinese governments expect transfer of technology in order to improve its own technological and industrial infrastructure. This puts these companies in dilemma as they look to make profit as well as protect ownership of technology. This is mainly because technological transfer has several ramifications. For instance, acquired technologies are sometimes used to make counterfeit products, which are marketed to the same consumers (Munger, 2011, p. 1).
Consequently, these companies still lose out, and incur heavy cutbacks in sales. On the contrary, considering the ramifications involved, one would opt to stop technology transfer, however, since the very survival of these companies depend on profitability and sales volumes, they have no otherwise but to go along with China’s terms.
These companies need to survive in an increasingly volatile market. This increases their risks. Moreover, China still finds ways of acquiring the same technology even if they refuse technological transfer (Bulford, 2011, p. 1). For instance they send out scholars with aims of acquiring new skills and technologies.
They also have technological transfer centers which improves their industrial productivity. In essence, even if they refuse to transfer technology, in one way or another, the Chinese companies will still acquire it. Therefore, in order to continue with sales and profitability, it is only wise that they transfer technology. Moreover, their products are usually considered genuine and of higher quality than the counter products. This gives then an edge over others (Rein, 2010, p.1).
China has continued to record rapid growth over the years. This is mainly because of increasing exports that currently ranks them first in the world. Moreover, they rank second after United States in imports. However, it is important to note that their method of governance is still impeding further growth.
Their communist government is accused of corruption and intimidating to foreign presence. No wonder they expect technological transfer as a result of foreign presence. However, China presents a wide market for these goods as well as cheap labor in their productivity. Ultimately, Chinese firms usually acquire these technologies; therefore the companies would still gain by going along with China’s terms. Nonetheless, they should press for ways of addressing these issues (Indigo Development, 2009, p. 1).
Bulford, T. (2011). The dark side of investing in China. moneyweek.com. Retrieved October 28, 2011, from: http://www.moneyweek.com/investment-advice/penny-shares/dark-side-of-investing-in-china-10008
Chapman, J., & Duncan, H. (2011). Invest in China at your peril, David Cameron tells business as he risks diplomatic row. Daily mail. Retrieved October 28, 2011, from: http://www.dailymail.co.uk/news/article-1351603/David-Cameron-warns-businesses-investing-China.html
Indigo Development. (2009). China’s Circular Economy Initiative: China seeks to develop a “Circular Economy” (CE). indigodev.com. Retrieved October 28, 2011, from: http://indigodev.com/Circular1.html
Kuhns, J. (2011). Investing in China: Market. marketwatch.com. Retrieved October 28, 2011, from: http://www.marketwatch.com/story/investing-in-china-2011-02-01
Munger, C. (2011). The Perils of Investing in China. Seeking alpha. Retrieved October 28, 2011, from: http://seekingalpha.com/article/246141-the-perils-of-investing-in-china
Rein, S. (2010). Leadership: How To Invest In China. forbes.com. Retrieved October 28, 2011, from: http://www.forbes.com/2010/07/20/china-investing-personal-finance-leadership-managing-rein.html