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1、A new environmentA small consumer market05001000150020002500ChinaBrazilAustraliaSouth KoreaItalyUK050100150200Cars,000 units,left axisLife insurance,US$m,right axis1998Source:EIU,Swiss ReA significant consumer market050010001500200025003000ChinaBrazilAustraliaSouth KoreaItalyUK050100150200250Cars,00
2、0 units,left axisLife insurance,US$m,right axis2003Source:EIU,Swiss ReA large industrial marketSource:WTOAn accessible marketMuch better hard infrastructureSophisticated telecoms networkImproved transport networkBoth internal and externalImproved soft infrastructureImproved international connectivit
3、yDomestic economic reformWTO entryMNCs go deeperDifferent FDIIT-relatedMore than 60%of Taiwans IT production is made in ChinaCapital-intensive industriesPetrochemicals,semiconductor Service sectorsFinancial services,retailMore FDISource:EIUMNCs are important to ChinaSource:EIUChina is important to M
4、NCsSource:EIU,Euromonitor,company reports,estimates.MNC attitudes to ChinaReporting lines55%have direct access to the global boardChina is.“critical to global strategy”-50%.“strategically important”-41%CEO visits in last year80%said global CEO had visited at least onceThe question of profitabilityMN
5、Cs are making money in ChinaCar companiesAmcham membersBut they are making more money from ChinaExport baseGlobal sourcing centreAddressing the marketThe competitionGuanxi+Operating in grey areas+Official and unofficial protection+Access to cheap bank capital+Lack of corporate governance=PRICE!MNCs-
6、brand and marketingSource:Nielsen Media ResearchGoing localFinancingBorrowing from domestic banksProductionMoving to cheaper areas inland SalesIncreasing volumes to lower average costsResearch and developmentLower costs and local tastesMergers and acquisitionsBuying out joint venture partnersTraditi
7、onal M&ABasic market access and expansionStealing a march on foreign competitionEliminating local competitionAcquiring new abilitiesNot mainstream yetRegulations,Corporate governance PricePersistent headachesChinas business environmentSource:EIUInfrastructure and distributionOver-burdened physical i
8、nfrastructureTransport congestionElectricity shortagesLack of sophisticationPoor integration of different transport modesRegulations on distributionThe way forwardThe east coast is betterWork around regulationsPiggyback on chain storesRegulation and corruptionRegulationCentral government restriction
9、sLocal government protectionismRed tapeCorruptionSerious problem for foreign businessesThe way forwardWTO openingLobbyingSkills shortagesSource:World BankSerious wage inflationSource:EIU,Hewitt AssociatesIntellectual property theftImproving laws and regulationsInadequate enforcementAn unavoidable costSurvival strategy:self-preservationCorruption causes most concernSource:EIUConclusionsChina is coming of age for MNCsMNCs can build real business in ChinaOperating issues are no longer decisiveThe biggest challenges are strategicThere is a real need to think about China