International Marketing in Chinese Enterprises: Some Evidence from the P.R.C

Since economic reform started in 1978, China’s (P.R.C.) foreign trade has increased dramatically and the P.R.C.’s importance as a trading nation increased faster than that of any other country in the world during the 1980s (GATT 1990). The average annual growth in the value of China’s international trade during the 1980s exceeded 12%, over two times faster than average growth in global trade in the 1980s, and by 1991 foreign trade accounted for 37% of GNP as compared to less than 10% in 1978. Rapid growth has continued during the 1990s, and the custom’s authorities in the P.R.C. have projected China’s total foreign trade at $234 billion in 1994, with exports forecast to be some $120 billion, up around 30% over 1993. Sales of exports have thus nearly doubled in value in the period 1990-94 (Statistical Yearbook of China 1994). In the pre-reform era, monolithic national foreign trade corporations (FTCs) were the exclusive channels through which business with the rest of the world was managed. However, the reforms of the 1980s have reduced the role of the national FTCs, and resulted in the development of alternative routes for entering overseas markets. Many of the new Chinese exporters have been financed by foreign direct investment, are joint-venture operations, and focus on transforming raw materials and components into finished goods for sale on world markets. The export success of these firms is typically based on China’s comparative advantage in labour intensive products and ready access to the global networks of foreign partners who are primarily responsible for overseas business (Simon 1987). In these cases, overseas marketing is effectively controlled by foreigners. The situation of wholly owned Chinese foreign trade enterprises is different, with less reliance on foreigners and greater direct Chinese control. These organizations are the focus of this research. Most of the international business literature published in the West discusses opportunities for increased trade with China and approaches to doing business with the Chinese (Cavusgil and Li 1992). Favoured topics have included foreign joint-ventures in China (Teagarden and Von Glinow 1990, Shenkar 1990, Beamish 1993), marketing to the Chinese (Po 1986, Frankenstein and Chao 1988) and technology transfer issues (Lo et al. 1986, Schnepp et al. 1990). Despite the burgeoning literature, it has been noted that “most studies of China’s growing foreign trade sector emphasize its impact on China’s trading partners and the international economy” (Zweig 1991). This paper is thus somewhat out of the mainstream given its focus on overseas marketing in Chinese controlled enterprises. The development of China’s overseas trade policies in the post-war period has set the stage for the internationalization of Chinese enterprises. A brief review of the pre-reform trade system and the foreign trade reform program initiated in 1979 is thus presented. It is then argued that the “central hub” hypothesis and the “ethnocentric” construct provide a relevant theoretical foundation for furthering understanding of international marketing management in Chinese controlled enterprises. This proposition is evaluated in an exploratory study of two Chinese enterprises operating independently in global markets. Prereform Foreign Trade System Although planning activity in the P.R.C. was not generally as centralized as in the Soviet Union, this was not the case for foreign trade where the level and mix of imports and exports was regulated in detail in the national plan. The Ministry of Foreign Trade, established in 1952, was created to manage and control overseas trade and economic relations.