Behind the Open Door: Foreign Enterprises in the Chinese Marketplace
By Daniel H. Rosen
Institute for International Economics, 1999, 313 pp.
In recent years, China has absorbed more foreign direct investment than any country except the United States. Yet stories of frustrated foreign investors abound, and few have made a serious profit on their Chinese ventures. These two volumes are helpful to anyone interested in investing or in studying investment in China. Feng Li and Jing Li are good on the recent history of current policy and its continuing weaknesses, such as internal transportation and institutional transparency. They also include useful discussions of the Chinese concept of law, considerably different from its Western counterpart, and they underscore the importance of personal relationships in business, or guanxi. Rosen's book, based on detailed interviews with nearly a hundred foreign businesspeople in China, complements their work nicely. He finds that the writ of central government is weak in many localities, a fact that seems a blessing at first, as it permits and facilitates practical deals between local officials and firms. Once established, however, the very relationships that made an initial launch possible impede further progress as local objectives conflict with Western corporate aims and management principles. Books become dated in a rapidly changing environment, but both of these works usefully assess the current Chinese scene, expressing cautious optimistism over the prospects for continued economic reform and foreign direct investment in China.