China’s modern economic growth has been progressing on a scale that is unparalleled in the history of any nation, sustaining a growth rate of about 10% per year for the past 25 years. This is even more remarkable considering that the world is at a stage of transformation and globalization. In such times, countries with higher levels of technological development and human capital are naturally positioned to take advantage of the new growth opportunities. Although at the start of China’s reform era the nation was underdeveloped relative to the powerful nations of the world, it has been able to close the gap significantly over the recent years. One reason cited behind this progress has been that China was open to integration with the world economy and has taken advantage of foreign direct investment to accelerate its growth. I wish to analyze the dynamic of this FDI relationship and discuss the extent to which the Chinese parties in this relationship have actually accrued the benefits that they expect to receive. In particular, a large part of the expected benefit is to come from the transfer of best management practices by the foreign multinational corporations to Chinese firms, thereby developing the human capital of China. I will look to the recruiting practices of MNC’s in China to assess this level of benefit. Additionally, these recruiting practices may also prove to be an indicator that gauges the extent to which the Chinese-side business development has caught up to developed world standards set by the most economically dominant nations.
Driving forces in the MNC-local party relationship
As China has entered into the reform era and taken up the path to marketization and opening its economy, relationships have been forming between multinational corporations and Chinese firms. Behind the formation of these relationships are many driving forces coming from both sides of the world, forces that are rather nuanced and complicated. The relationships with MNC’s represent perhaps the most important form of foreign-direct investment in China. Central and provincial/municipal governments clearly recognize the benefit of getting MNC’s to work with local companies, seeing opportunities to rapidly develop and improve the condition of Chinese companies just through exposing them to world-class management practices and technology. By piggybacking on the experience of cutting-edge western firms, China can quickly move through the fast track of technological development. This expertise will be necessary as the government seeks to manage the sheer breakneck pace by which the economy is growing, and the pressure is further underpinned by the political restlessness and social fragility of the nation’s large population.
The MNC’s have their own reasons and incentives for reciprocating the attention given to them. China has invested a lot of resources into its universities and education systems, and the direct result of this has been that...