Latest News:  
Beijing   Cloudy/Overcast    32 / 22 ℃  City Forecast

Home>>China Business

Foreign firms losing way in China’s regulation maze

(Global Times)

08:12, June 21, 2012

China received $9.23 billion in foreign direct investment (FDI) in May, up 0.05 percent year-on-year and the first FDI increase in seven months, the Ministry of Commerce reported, signaling that international entrepreneurs' confidence in China is recovering.

As the world's growth engine in terms of output and consumption, China continues to attract foreign companies despite the current economic downtrend, Ernest Wong, managing director of Netherlands-based TMF Group's Greater China region, a global provider of accounting, corporate secretarial, human resources and payroll outsourcing services, told the Global Times, emphasizing that foreign companies will still encounter great hurdles when they are trying to establish themselves or expand in China.

Entering China in 2005, TMF Group employs more than 400 staff in eight Chinese cities, including a shared service center in Chengdu, Sichuan Province, which opened on June 12 to standardize and coordinate TMF's operations in the country. The company plans to cover 25 cities across the country with a total staff of 1,000 employees by the end of 2014, said Wong.

But, apart from widely-discussed gains in labor and material costs as well as shortages in high-level talent, the biggest challenge for foreign companies in China is the constantly-changing business environment, Wong said.

As China opens its domestic market to the world, authorities are working to attract foreign capital to energize the country's economy while still protecting the core domestic industries which greatly contribute to GDP.

This stream of mixed messages has confused foreign companies, inevitably shifting their focus away from developing their business in China toward surviving in the government-capped market, Nie Riming, a research fellow at the Shanghai Institute of Finance and Law, told the Global Times.

Frequently-changing regulations will not only make it difficult for foreign companies to adapt to the local market's rules, but also discourage them from envisioning long-term development plans in China, Wong said. What's more, enforcement of regulations in China can differ widely by location or by sector.

One of the biggest headaches for foreign companies entering China's market is human resource-related regulations, said Sumeet Chander, head of the Greater China region for Evalueserve, a Switzerland-based outsourcing service provider, adding that foreign executives can hardly be expected to grasp the complex nationwide social welfare system.

As such, foreign companies need insiders, like TMF Group or US-based Automatic Data Processing Inc, to help them navigate a myriad of administrative operations and smoothen time-consuming procedures, said Wong.

Facing such hurdles, foreign companies have to spend time nurturing guanxi networks with both governments and industry insiders.

Close relations with the government helps foreign companies minimize hiccups with higher authorities when trying to obtain certain official approvals; and association with industry insiders helps them get advanced warning of new developments that could affect their businesses, Nie explained.

Admittedly, sustaining an extensive guanxi network helps a business run more smoothly, yet a guanxi-driven market will only hinder companies' incentives to develop via their core businesses, said Wong.

Email|Print|Comments(Editor:厉振羽、张洪宇)

Leave your comment0 comments

  1. Name

  

Selections for you


  1. Yushan Temple Grottos stands on cliff

  2. Organ donation story moves many

  3. Windy and snowy patrolling road in June

  4. Chinese shows his 'Travel Map for Olympics' in France

Most Popular

Opinions

  1. Trade is tool to fix global economy
  2. Skyscraper frenzy brings loan risks to new heights
  3. China to 'maintain 8% growth for over 20 years'
  4. Larger labor force not a panacea for pension woes
  5. "China Containment theory" has no market
  6. Benefits of direct yen-yuan may be few, far between
  7. Keeping up appearances online proves tough job
  8. Why China's export growth rebounds robustly
  9. Don’t hate the trader, hate the securities game
  10. Master intl rules to solve trade disputes

What's happening in China

College president's foreign assistant

  1. Water diversion project picking up pace
  2. Most buildings not energy-efficient
  3. New residency rule shows bias, migrants say
  4. Local stocks follow losses overseas
  5. New plans for power sector

China Features

  1. Left-behind kids have 'dream house'
  2. China's Olympic history: The road to success
  3. Eight systems of Shenzhou-9 manned spacecraft
  4. The thousand-year-old Tibetan paper
  5. Beijing Summit features five new aspects

PD Online Data

  1. Spring Festival
  2. Chinese ethnic odyssey
  3. Yangge in Shaanxi
  4. Gaoqiao in Northern China
  5. The drum dance in Ansai