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  /  DxPx Blog   /  Partnership Models with Chinese Companies

Partnership Models with Chinese Companies

Once closed for tactical reasons, entrepreneurial partnerships are now increasingly emerging due to digitalization and globalization and the interdependencies they create. The objectives may still be the same: Upgrading intentions, competitive advantages, entry acquisition or synergy exploitation, to name a few. Here, China, today more than ever, holds immense potential for achieving its own goals within the Asia-Pacific region. With growing domestic consumer demand due to increased prosperity, China has opened the market to small and medium-sized enterprises. The framework conditions for this can be found in the Small and Medium-Sized Enterprises (SME) Policy Index [1].

China's market is considered an exception: difficult to access and internally complex. Its enormous and above all sustainable growth and factors such as China's investment in industry and trade or its domestic demand are nevertheless attracting many companies. Internationally accepted operational strategies and partnership models, however, quickly run nowhere – China's relations are geared towards continuity. One has to be aware of the cost-benefit analysis, which does not show positive figures until two to three years after market entry at the earliest. Amortization is only achieved after four to five years. Cooperation partnerships are certainly possible and desired on the part of China, but the business transaction here is transferred to the Chinese partner, while the investment strategy remains indirect. It is direct in nature, on the other hand, when loose cooperation becomes a local joint venture (JV). China gives preference to mutual participation because capital and knowledge form its anchor points with regard to international partnerships and the long-term transformation of its own economic growth. High-tech companies willing to export have the greatest market opportunities.

JVs are the gatekeepers for SMEs, whose resources and foreign market know-how are usually limited.

With regard to China, they allow entry into a foreign world that is massively regulated by the government and heavily bureaucratized on the administrative level. It is therefore essential to have external support in finding the right location for the company and in finding suitable business partners whose strength can then be used. Those with a high level of interpersonal and inter-organizational network competence can use export marketing to make the leap into China. Today, in the field of mechanical engineering, every second investor from Germany comes from an SME – a growth rate of more than 100% over the last ten years. This is due to the flexible corporate structure of SMEs, which sets them apart from large corporations. Their dynamic structures allow them to adapt to the individual space within the country, which varies greatly from region to region.

Despite their advantages, however, the JVs are regarded as capable of expansion. Too much control on the part of China, market restrictions in various distribution fields, while the diagnostic sector remains unaffected, or legal restrictions, e.g. for intellectual property, are only some of the negative aspects of this new network. They are also the reason why no long-term prognosis with regard to economic and political consequences can yet be made. However, the chances of SMEs in the Dx sector to outpace mechanical engineering are excellent against the background of the established health care system and the inherent affinity for technology in their occupational field, because China has been and will remain in a state of constant change.

[1] OECD. Global Relations. Small and Medium-Sized Enterprises (SME) Policy Index. Located under: http://www.oecd.org/global-relations/smallandmedium-sizedenterprisessmepolicyindex.htm