China's Interest in Establishing Joint
Ventures or Cooperative Partnership with Foreign Companies
Member of IRU
Chinese Affairs Group Beijing XiangLong Asset Management Co. Ltd.
China
is one of the most important countries attracting foreign investment. This
status has drawn the attention of a large number of foreign companies. With
China's development and opening-up, foreign companies are continuously investing
in Chinese markets, establishing joint ventures, enhancing cooperation with
their Chinese partners. With regard to our group only, we count five joint
ventures in logistics, vehicle maintenance, passenger transport by road and
other industries, two of which are Sino-Spanish road passenger transport
companies - Beijing XiangLong-AlSA Passenger Transport Co, ltd and Beijing AlSA
Passenger Transport Service Co. Ltd.
Exchanges with foreign companies show
that when placing their investment, overseas companies are concerned about "labour cost, quality of products and services, conditions of entry into China
market". Their main interest in investing in China is to obtain favourable
conditions of entry, lower production costs and an increase in investment yield.
This is consistent with the findings of economists' research on foreign
investment in China.
The emerging huge potential market and
space for development in the passenger transport by road due to the rapid
building of express road networks has already brought opportunities to develop
those joint venture companies that have entered China's passenger transport
market. Companies that formerly entered this market, though not gaining more
profit, have enlarged both their business scales and their shares in the market.
In our group, for instance, Beijing XiangLong-AlSA Passenger Transport Co. Ltd
had initially a co-funded capital valued of $5,000,000, 2 operating lines and 15
vehicles in service. It has now grown to 15 operating lines and 74 vehicles.
Reviewing the result of the cooperation
between our group and foreign companies, I understand that while establishing
joint ventures or cooperative relations, Chinese companies are concerned about
the credibility, financial capacity and investment motivation of foreign
companies. They are interested in capital, technology, advanced management
experience, change of share ownership resulting from capital injection,
improvement of management, stimulation of operation vigour, new development
opportunities of road passenger transport companies and promotion of its fast
growth.
1. The injection of capital resulting from joint business can help increase
the supply/demand relations, promoting the development of road transport
companies and relevant business.
The fast development of Chinese passenger
transport by road has happened for just more than ten years. The majority of
passenger transport companies are still running at a low level, which can be
seen in the following facts:
Firstly, road passenger transport services are
high in quantity but low in quality, insufficient in comfort and lacking
swiftness, efficiency and quality standards. Secondly, several companies operate
side by side in the same area providing similar services, resulting in brutal
competition. Thirdly, the capital input for improving management and
technological elements of services is insufficient.
On the other hand, almost
all foreign companies with investment power are leaders in passenger transport
by road.
They are experienced in management and
dispose of large capitals. Before entering the Chinese passenger transport
market with great potential, they have made careful studies and thorough
preparations. Once they have chosen their partners, they will invest according
to the joint ventures needs. The input of capital will (1) enhance the hardware
of passenger transport joint ventures, bringing highly comfortable vehicles and
service facilities;(2) improve the existing methods of management and introduce
hi-tech management facilities and supplementary management equipment;(3)
increase competitiveness and promote the reputation of passenger transport joint
ventures.
2. The change of share ownership due to joint ventures will benefit the
structural change of the property rights in Chinese companies, promoting the
transformation of operation concepts and decision-making mechanisms, improving
the companies' competitiveness in road passenger transport market.
Apart from
the two joint ventures with ALSA from Spain, our group has another five
exclusively-funded passenger transport companies in Beijing, possessing 3'860
vehicles in service. Their businesses cover passenger transport, urban public
transport, taxi service, auto rental and travel transport respectively. All of
them are running well but lacking dynamism.
The analysis of the joint
ventures in Chinese market shows that their vitality mainly lies in the fact
that they have proper mechanism suitable for the market, which goes with the
change of share ownership. Owing to the change of share ownership brought by the
structure of property rights, joint ventures with foreign investment will soon
approach the successful companies in operation concepts and management methods,
which will make the operation strategy and methods go with the change of the
market. At the same time, the employees' participation in the operation will fit
into the adjustment of operation strategy, bringing higher service quality,
greater safety and better performance. Meanwhile, the change of mechanism
brought by share and property ownership also has some negative effects. However,
the joint ventures are entities of common interests for all investors, which all
hope it will develop in the right direction to ensure their respective
interests. This is a conviction held and followed by our group while
establishing joint ventures or cooperative partnership with foreign companies.
3. The upgraded management as a result of joint business will help
introducing advanced equipment, technology and management experience, improving
the overall quality of passenger transport companies.
Providing the customers
with high quality travel conditions, highways, luxury vehicles, high level
services and modern management are the basic elements of passenger transport by
road.
To actually achieve high quality
service, in addition to applying modern management concepts and employing better
qualified working staff, Hi-tech means will also need to be employed to connect
all the links, such as ticket selling, vehicle waiting, dispatch and
administrative coordination, vehicle operation, etc. This can only be achieved
by increasing the use of technology in passenger transport. Joint ventures can
easily introduce the successful and proven experience, facilities and equipment
from foreign companies, rapidly increasing the introduction of technology in
passenger transport operations. That is one of the ways to promote the
management quality of passenger transport by road.
To actually achieve modern management,
besides applying modern management models and the adoption of new management
concepts, methods and techniques, it is also essential to create and put in
place integrated ticket selling networks, electronic vehicle waiting information
display, marketing information and passenger inquiry. Meanwhile, GPS is needed
to establish responsive dispatch and administrative coordination systems with
fast information transfer and swift response. All these systems will put the
whole process of passenger transport under the surveillance of business
supervisors. Management and technology of this kind too, can be obtained through
joint ventures.
The upgraded management and increased technology will
necessarily improve the working efficiency, the safety and the reputation of
passenger transport companies, thus helping them achieve the goal of higher
economic benefits through upgraded management.
Our group is willing to explore various
means of cooperation with overseas companies. Drawing together a blueprint of
the future of "large scale and intensive" operations for Chinese passenger
transport by road, we will meet broader and further competition and challenge on
the Chinese passenger transport market following China's accession to
WTO.
