European Firms Doing Well

Source: China Daily
Date: 29 June 1999

By Zhang Yan

Joint ventures happy with their performance in China

Most European companies in China are confident and say they will improve their performance significantly within the next three years, according to the result of a recent survey about European investment in China.

Conducted by the Fiducia Co Ltd under the sponsorship of the Delegation of the European Commission in Beijing, the survey looked into the situation of European investment in China and the reasons why some companies are more successful than others.

The outcome showed that 47 per cent of the participants were satisfied with the general performance of their companies, 42 per cent found it lower than expected but still acceptable, and the remaining 11 per cent felt unsatisfied.

The joint venture has turned out to be a more successful form of business than the wholly owned type for European investors in China. Indeed, 59 per cent of the surveyed joint ventures had reached the break-even point, but only 47 per cent of their wholly owned counterparts claimed a similar achievement. The result backs the opinion held by some investment analysts in favour of joint ventures.

"Joint ventures do have their advantages if the two partners can smoothly collaborate and share their strong points," Henry Chow, chairman of IBM China Co Ltd, told China Daily recently.

It is "absolutely viable" for a foreign company to enter the Chinese market through launching a joint venture with a Chinese partner, he said.

According to the survey, most of the European joint-venture companies in China are more or less satisfied with their partners, and 37 per cent would choose to establish a joint venture again even if other legal structures were made possible.

With regard to the differences between successful and unsuccessful companies, the survey revealed that successful companies in China provide the Chinese market with products of the same quality as in Europe.

They also try to use local raw materials and semi-finished products in a bid to reduce costs and achieve competitive prices.

Successful companies have also spent more time visiting China before establishing a business here, conducted more market tests than unsuccessful companies, and followed a step-by-step strategy.

They seem also more realistic than their losing counterparts and make good use of market surveys, especially those concerning potential demand and competition.

The survey also indicated that the products of successful European companies are better adapted to the Chinese market and that their prices are, in general, lower than those found on the international market.