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Published by: MIT Sloan School of Management
Published in: "MIT Sloan Management Review", 2007
Length: 10 pages

Abstract

The view of multinational corporations (MNCs) in China has changed dramatically since the late 1970s, when the nation opened its economy and welcomed foreign direct investment, and global players such as Volkswagen, Coca Cola and 3M began exploring the market. During the 1980s, other MNCs such as Motorola, Philips and NEC were received with open arms. They enjoyed corporate tax rates half those imposed on local companies, and they paid no duties on their capital goods imports. In general, they were revered by government and consumers alike. Even into the 1990s, as China and its people developed a better understanding of MNCs, the foreign companies were the objects of awe and admiration. At that time, Chinese consumers exhibited an almost unconditional preference for MNCs'' products and services. However, beginning in 2000, when per capita GDP (gross domestic product) climbed above US$1,000 and especially since 2001, when China joined the World Trade Organization, both the Chinese government and consumers have changed their perceptions of MNCs drastically. MNC projects now are scrutinized much more for their fit with national interests. Furthermore, MNCs increasingly are getting local treatment. The coming equalization of the corporate tax rates (to be phased in as of 1 January 2008) between local and foreign companies attests to this. MNCs are now held to the same, if not stricter, standards than local competitors in terms of areas such as employment standards and environmental standards. And they are finding that those standards are enforced much more rigorously.

About

Abstract

The view of multinational corporations (MNCs) in China has changed dramatically since the late 1970s, when the nation opened its economy and welcomed foreign direct investment, and global players such as Volkswagen, Coca Cola and 3M began exploring the market. During the 1980s, other MNCs such as Motorola, Philips and NEC were received with open arms. They enjoyed corporate tax rates half those imposed on local companies, and they paid no duties on their capital goods imports. In general, they were revered by government and consumers alike. Even into the 1990s, as China and its people developed a better understanding of MNCs, the foreign companies were the objects of awe and admiration. At that time, Chinese consumers exhibited an almost unconditional preference for MNCs'' products and services. However, beginning in 2000, when per capita GDP (gross domestic product) climbed above US$1,000 and especially since 2001, when China joined the World Trade Organization, both the Chinese government and consumers have changed their perceptions of MNCs drastically. MNC projects now are scrutinized much more for their fit with national interests. Furthermore, MNCs increasingly are getting local treatment. The coming equalization of the corporate tax rates (to be phased in as of 1 January 2008) between local and foreign companies attests to this. MNCs are now held to the same, if not stricter, standards than local competitors in terms of areas such as employment standards and environmental standards. And they are finding that those standards are enforced much more rigorously.

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