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What Foreign Enterprises Have Brought Us?
Nearly 400 of the world's 500 largest multinational corporations (MNC) have already invested in China and set up factories. As China's entrance into the WTO gets nearer, there will be more MNCs who invest in China. These MNCs investing will influence China's influence, tax revenues and state owned enterprise reforms.
Recently, Douglas Woodward of the University of South Carolina, Lin Yifu and Ping Xinqiao of Beijing University and Liu Jisheng of Tsinghua University did a joint study on the affect Coca-Cola had on China's economy.
The study showed that foreign direct investment provided many employment opportunities in China. In 1998, there were 414,000 jobs linked to Coca-Cola's production and retail operations. Coca-Cola directly employed 140,000 people, its independent suppliers employed 350,000 Chinese workers and wholesalers and retailers employed 50,000 Chinese workers.
According to the Ministry of Foreign Trade and Economic Cooperation, there are already more than 160,000 foreign companies that have invested in China. By the end of 1999, these foreign enterprises employed 20 million people, accounting for approximately one-tenth of China's urban workforce.
Foreign direct investment also plays a major role in China's gross output. Coca-Cola has directly contributed 8 billion renminbi and indirectly contributed 22 billion renminbi to the Chinese economy. An additional 30 billion renminbi goes into China��s economy every year due to the multiplier effect. In 1999, foreign enterprises accounted for 20% of the increase in China��s industrial output.
Foreign direct investment also helped China's tax revenue. In 1998, Coca-Cola's producers, businesses and retailers either directly or indirectly contributed 1.6 billion renminbi in tax revenues to the Chinese government. In 1999, foreign enterprises accounted for 16% of China's industrial tax revenues and were the fastest growing source of tax revenue.
Lin Yifu of Beijing University pointed out that the study showed that Coca-Cola's bottling networks in China's 21 provinces and major cities formed joint ventures with inefficient state owned enterprises, bringing in their managerial and retail experience as well as upgraded the Chinese firms' production technology. Coca-Cola's operations have also contributed to local industries such as the glass, plastic, aluminum and sugar industries.
Liu Jisheng of Tsinghua University used Coca-Cola as an example to illustrate the negative effects of MNCs entering China's market. When Coca-Cola first entered China's market, the domestic carbonic acid enterprises were hit hard and some even went out of business.
But, the pros outweigh the cons. Coca-Cola's absolute market share increased along with the production of China's beverages.
Coca-Cola is the world's largest beverages company, selling its products to more than 200 countries and regions around the world. According to Businessweek's newest rankings of the 1000 largest global corporations, Coca-Cola is ranked number 26 with a market value of US$131.9 billion.
Coca-Cola reentered China's market in 1979 and has invested more than US$1.1 billion in China and localized production and bottling operations. Currently, Coca-Cola holds a quarter of China's beverages market and one-third of the carbonic acid market.
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