Internationalization towards China after its Accession to the WTO. Are There Opportunities for European SMEs? (Mattias Grillet)


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I.  Goal


This thesis will examine whether or not there are opportunities for small or medium-sized enterprises (SMEs) in China after its accession to the WTO.  It is beyond the reach of this research to examine opportunities for each individual SME in every single market sector of the Chinese economy.  The thesis also does not examine the changes China’s accession into the WTO will bring in every single market sector of the country.  Instead, this thesis will be a basic guide for all SMEs wanting to internationalize towards China and will examine how far China’s accession to the WTO is relevant for SMEs internationalizing towards China.

One of the conditions of the Department of Sinology was that the thesis had to consist of a theoretical part and a practical part.  For this reason, general theories are discussed first to specify later more on SMEs and their internationalization towards China.



II.  Abstract


In the first part of this thesis, general theories about internationalization are discussed.  These theories are more general in the sense that they do not focus on internationalization of  small or medium sized enterprises in particular.  Theories specific for internationalization of SMEs do not exist yet. 

In Part Two SMEs are defined, and it is verified in how far the internationalization theories mentioned in Part One can be used to look at the internationalizing process of SMEs.  Furthermore the question of why SMEs should internationalize is answered.

In Part Three we focus on China.  After explaining the method of research, the companies interviewed in this thesis are introduced.  Firm, product, activities in China, incentives for internationalization towards China, and start-up in China are briefly discussed.   Afterwards, it is verified in how far these findings conform with the internationalization theories introduced in Part One.

Part Four starts with the question of why SMEs should internationalize towards China.  Afterwards, the most important facts about the Chinese market that are relevant for SMEs are examined and it is discussed in which way China’s accession to the WTO might influence activities of SMEs in China.  Lastly, a summary is given of institutions that can help SMEs with the process of internationalization.



III.  Sources


When speaking about China, we have to be very careful in selecting sources.  In everything, which is written about China, there are three different kinds of data.


1.  “China: The Next Capitalist Paradise”


The first kind of publications praise China’s tremendous fast growth and potential.  The Chinese government or related institutions or persons have the inclination to only publicize data that gives a good image of their country.  It is always good to consider the – perhaps hidden – goals of the authors writing a book or publication. 

Obviously, the Chinese government, and many Chinese citizens, want to develop their country, and a good way to do that is to attract foreign direct investment.  We must not forget that China is not a democracy and that independent research is a rather rare thing, even if Chinese officials try to prove this wrong.  Consequently, all Chinese data should be taken with a pinch of salt.  For this reason we try to avoid this kind of data, but sometimes it is the only data available.  Macro-economical analysis for instance, can only be based on statistics published by the Chinese authorities.

But also journalists, in search of a good selling story, can take up the propaganda talks of the Chinese government and write a praising article, without having even been to China.  Entrepreneurs, who have already invested a lot in China, often praise the huge opportunities of the Chinese market, to justify their commitments.


2.  “China Is a Zoo”


A second kind of information source about China is publications, which are extremely pessimistic and skeptical about China’s future.  Again, it is advisable to take a look at the authors or institutions publicizing these articles.  Some people are scared by the “yellow danger”; China’s economic boom is perceived as a threat to their own economic interests.  Other people, as mentioned before, want to write a good-selling story: by focusing on a marginal negative –but good selling- phenomenon, they magnify the importance of it, and perhaps even suggest that that certain phenomenon is valid for a continent of 1.2 billion people.

Also Westerners, who lived a long time in China, can come around with ‘colored’ stories:  entrepreneurs who did not succeed or other people who could not handle the cultural differences and came back from China with a lot of frustrations.


3.  “Searching a Balance”


The third kind of sources are somewhere between the previous two.  They are publications that try to look at China from an objective angle; these sources are obviously the best to use.  The problem is that there are not a large amount of such sources, and even if readily available these works often have to base themselves on sources from the previous two categories.  In gathering information about China it is important to consider the above mentioned points. 


4.  Sources Used In This Thesis


In Part One we used general theories about internationalization, firstly because specific theories for internationalization of SMEs do not exist yet, and secondly because these theories are culturally neutral, i.e. they are not specific to any one country.  These culturally neutral theories are a good starting point in finding objective truths about opportunities concerning internationalization –in this case- towards China.

For specific sources about China (Part Three and Part Four), we judge the formal and informal interviews we took from European managers active in China the most trustful source of specific information about opportunities for internationalization towards China, not only because these people are supposed to know what they are doing, but also because their backgrounds are more easily verifiable, which means it is easy to see whether or not they belong to the first two kind of sources mentioned in this introduction.  For this reason, Part Four is mainly based on the recurring topics discussed in the interviews with the European managers active in Shanghai.  Statements that most of the managers agreed with are noted and compared with the findings of articles, books and other specific sources about China, of which inevitably it is much more difficult to verify the motivation of their authors.   But we do try to avoid sources that can be obviously influenced by their own interests, like publications by the Chinese government for instance.


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