|Internationalization towards China after its Accession to the WTO. Are There Opportunities for European SMEs? (Mattias Grillet)|
The theories about internationalization treated in Part One provided a useful framework for analyzing opportunities for European SMEs in the Chinese market. Of the eclectic paradigm we remember that enterprises need to have advantages over local firms if they want to do successful international business. The Uppsala model observed and suggested that smaller enterprises internationalize better step by step.
Part Two and Three of this thesis proved these theories can be applied to the SMEs internationalizing towards China. We added some stages to the establishment chain proposed by the Uppsala school, but the main argument of the model did not change: companies should prepare properly before entering a difficult market by internationalizing step by step.
In Part Four we took a closer look at the Chinese market. We put the growth of the Chinese economy in perspective and found that cultural differences between Europe and China made the Chinese market not an easy market for European companies. Furthermore the Chinese market cannot be seen as one big unified market. Of the different regions in China the coast regions are most advisable for SMEs, who want to start in China. The legal system is improving but is still well below Western standards.
China’s accession to the WTO
China’s accession to the WTO is an important milestone in a process of opening up that started well before the formal accession in December 2001. In general, the accession is not any more important for SMEs than it is for MNEs. In the short term, many new regulations will make SMEs’ business more difficult in many sectors of the economy. In the long term, SMEs will profit from the opening up just like MNEs do. SMEs producing high-quality products will do better business as more and more foreign companies move to China. Still, each company should do sufficient research in its specific market sector to check out what the implementation of the WTO agreements means on the ground, since lower import taxes for one or another product can be accompanied with stricter import requirements in one or another region in China.
Opportunities for SMEs in China
Opportunities for SMEs have to be looked for in industrial product markets, preferentially high-technology markets. The chances of success are the highest in niche markets. High technology has high chances of success for two reasons. Firstly, with the Olympic Games in Beijing in 2008 and the World Exposition in Shanghai in 2010, China is expected to invest a lot to upgrade its facilities. Secondly, many American firms are not willing to go through the long procedures put in place by the American government to prevent national-security-sensitive technologies being sold to China. This phenomenon makes its name as the “Wall of America” and effectively discourages many American enterprises from exporting certain kinds of high-technology products to China (Uimonen, 2002). Consequently, European SMEs could do business in these sectors without too fiercer competition from American firms.
Different solutions were suggested for the problem of the limited financial resources that SMEs generally have. To reduce costs, it is advisable to localize personnel as soon as possible. Furthermore, there are many institutions, from trade promoting offices to different kind of funds that support SMEs, who want to internationalize towards China.
In conclusion, there are opportunities for European SMEs in China, particularly in niche markets of industrial products, but in any case the water has to be tested very carefully before jumping in.