This report is written from the perspective of European small and medium-sized enterprises considering operation in, or already operating in China. However, it also takes into account the wider context of EU-China relations, as they may influence Chinese company policy.
This brief starts off from this wider horizon, beginning with the observation that senior management is advised to invest time and resources in learning about the country’s complex transformation. The brief indicates the reasons why doing business in China should be carefully thought through, and spells out necessary conditions for success, before ending with some remarks regarding the Commission’s role in helping to foster a favourable climate for EU businesses operating in China.
The brief has been written by Jonathan Story, Emeritus Professor of International Political Economy at INSEAD, on the basis of replies to questionnaires sent to all China Advisory Council members as well as on the book ‘China UnCovered: What you need to know to do business in China’ (FT/Pearson’s, 2010).
The Policy Brief was first produced as a background paper for the China Advisory Council meeting on Thursday, 27 May 2010. The brief was then further developed on the basis of the debate during the China Advisory Council as well as China Advisory Council experts’ replies to a survey on promising growth regions and sectors in China.
China is simultaneously a pressing challenge and a major opportunity for the European Commission. The EU’s image in China is dispersed. The European Commission needs to confederate the different European advisory, corporate and member state presences in the world’s largest emerging economy. The EU model to date has been characterised by 27 national China policies. The united EU foreign direct investment imprint on China is massive while China’s investment imprint on the EU is only nascent. Therefore, the solution is to leverage the EU’s combined economic clout as China’s prime trade partner and inward investor, in order to increase the European Commission’s effectiveness with regard to relations with China. EU China policy must include effective and long term policies regarding the promotion of European single market standards as well as a truly common European external policy.
China’s emergence is now part of the EU political landscape. In European SME policy, which this Policy Brief specifically addresses, China is not an easy negotiating partner. China is a massive, self-regarding entity that tends to look at the EU as a loose combination of not always like-minded member states. Beyond the European Commission’s role of reminding member states that their negotiating position is strengthened when the EU manages to “speak with one voice”, the European Commission should seize the opportunity to use China as an opportunity to foster an ’EU-reflex’ among member states. The European Commission’s slogan should be: ‘Use China to promote the EU as a coherent actor’.
The EU should develop a European chambers of commerce presence across China. These can be national chambers that should have a European and a national hat and would serve as hubs to liaise with all EU investment promotion agencies, other national chambers, trade associations, and SME trade centres. Thereby, the EU can create a China-based EU network that is profiting from national expertise and helps to pool and make available information and advice of direct relevance to SMEs. As one China Advisory Council member put it: “the EU should pool all the information from EU member states and provide an overall European information platform for all SMEs.”
EU SMEs need the best practical guidance they can get to operate in China. This includes advice on China’s economic and political transformation, reliable marketing studies, legal advice and access to people and organisations with know-how on value-chains, human resources, Intellectual Property Rights (IPR) or finance in China and its many different regions and sectors.
About the author
Jonathan Story holds the Marusi Chair of Global Business at The Lally School of Management & Technology, Rensselaer Polytechnic Institute (USA) and is Emeritus Professor of International Political Economy at INSEAD. Prior to joining INSEAD in 1974, he worked in Brussels and Washington, where he obtained his PhD from the Johns Hopkins School of Advanced International Studies. He is author of ‘China Uncovered – What you need to know to do business in China’ and is an acknowledged China expert who contributes to the Wall Street Journal, the Financial Times, and Le Monde.