THE EVOLUTION OF BUSINESS ENTERPRISES IN CHINA

Business dynamics determines the pace of connectivity of and impacts on the relative wealth and influence of the state. Multinational corporations (MNCs) are major transaction agents of the global business process. For the past decade or so, MNCs have figured prominently in China's remarkable transformation as a global business force influencing the course of world economic development.

The history of China's opening to international commerce is brief but dramatic. The tipping point was the fateful step taken by former leader Deng Xiaoping in 1978 to open up China to foreign investment and trade with the initial commissioning of Special Economic Zones (SEZs) for the purpose. Besides foreign capital, the Chinese leader was hoping for his country to absorb foreign business acumen. In the beginning, the foreign business response to Deng's call came mainly via overseas compatriots in Hong Kong, Taiwan and Southeast Asia. Their efforts initially were in property development and small-scale merchandising. Nevertheless it was a symbolic first step in involving the vital overseas Chinese commitment to helping realize Deng's vision. During those fledgling times, only a few global MNCs invested in the contract service and outsourcing business with typical foreign direct investment (FDI) sizes in the million RMB range — with a few exceptions being joint ventures with Chinese state-owned enterprises (SOEs) in a few areas such as the automotive industry. Nevertheless the appearance of such early foreign investors on the scene bolstered the Chinese leadership's new market-driven experiment. With the mainstream world economy set on the course of globalization in the 1990s as symbolized by the advent of the World Trade Organization (WTO), the Chinese government allowed for further access by foreign investment into China by decentralizing decision making for its approval at the provincial level and opening more areas to foreign investment.