Dell Computer Corp did not seek a local partner when it first entered the Chinese market. Through direct sales via its global production and supply chain, it has found a niche here all the same.

Likewise, Procter & Gamble (P&G) has bid farewell to its local partner, Beijing No.2 Daily Chemical Co., and kept only a one-percent share in its joint venture in the southern city of Guangzhou.

Many foreign investors, having familiarized themselves with China's market situation, can now independently handle government relations, find distribution channels and understand laws and policies, says an expert here.

A string of other foreign companies have found shortcuts to the Chinese market through buy-outs.

Emerson Electric Manufacturing Co., a US giant, spent 750 million dollars taking over the whole electronic wing of Huawei Technologies, a top telecommunications supplier in China.

French telecom giant Alcatel caused a shock in China's telecom market last year by taking control of a major local supplier, Shanghai Bell Co., through a successful buy-out.

Nearly 50 percent of all the foreign investment in China between 1992 and 1999 was used to fund joint ventures, according to figures released by the Ministry of Foreign Trade and Economic

Cooperation (MOFTEC).

The figure had fallen to 30 percent by the end of 2000.

Paul Dipaola, managing director of Bain & Company (China), believed the fall would continue.

Experts have attributed the trend mainly to policy changes.

In the new Industrial Catalogue for Foreign Investment, which took effect in April, the Chinese government loosened limits on the share-holding that overseas investors are allowed in joint ventures and expanded their market access.

Wang Lezhi, a MOFTEC researcher, said the change from joint ventures to sole investments were "natural" because China had reduced tariffs, and cut and even removed many trade barriers following its entry to the World Trade Organization.

"A joint stock operation is no longer the only way for foreign firms to enter the Chinese market, as it was in the early days of China's reform and opening up," he said.

An improved domestic environment and adoption of internationally accepted practices are also believed to have encouraged foreign investors to seek sole ownership in China.

Today, foreign firms can manage and expand their business in China in line with their corporate strategy and carry out sales and marketing activities.

They can also join with local governments, most of which can provide "one-stop" solutions, without having to set up joint ventures with local businesses.

Motorola, for instance, has rapidly developed its business in Tianjin, a port city in north China, thanks to its cooperation with the local business and technology development zone.

On the other hand, differences in corporate cultures, values and management have frustrated some joint venture plans.

Meanwhile, many domestic companies have failed to meet foreign investors' expectations for an ideal partner due to insufficient sales and management expertise.

"Therefore, China's market economy still needs further growth," said Zhu Yanfeng, president of the First Automotive Works Group Corp (FAW).

The boom in local firms has also reduced domestic demand for such partnerships, experts say.

With an annual revenue of 3 billion US dollars, China's Huawei Technologies is strong enough to compete with international IT giants such as Lucent and Cisco.

"Domestic enterprises may not need a partner for joint stock operation, but they do need one for strategic cooperation," said a senior executive of Motorola.

Experts also expect more takeovers and acquisitions, which make up only 5 to 6 percent of foreign investment in China, but more than 90 percent of transnational investment globally.

"Problems in the legal sector, administration, capital market and intermediary services hindered acquisitions and takeovers in the past," said Wang, a MOFTEC research fellow, "Things have started to change for the better."

(Xinhua News Agency June 26, 2002)