The age old policy ofChinadoes encourage transfer of technology from multinationals to home run organizations in oder to develop the same state owned and controlled environment in the automotiveindustry. The policy of China restricts easy entry into the automobile market although it is the largest automobile market in the world. In case, some new company wants to bring down thebarriers to entry then the investment plans of the company must be approved by the agencies allotted by the Chinese government.
In case, a foreign company wants to enter the Chinese automobile market then the only option is to enter a joint venture with a local company in order to enter and reap the benefits of the largest market in the world.China has a domesticated market since even upon entering a joint venture, the foreign company is not allowed to have more than 50% stake in the business. China has advantages that pulls every business towards the market but passing through the corporate governance code of the country is a Herculean task to achieve initially in order to operate within China and reap the benefits of low costs and high production that no other economy in the world can provide. Previously, a new product had to be approved by government agencies in order to be floated in the market but this clause has been removed after China earned the WTO membership in 2001 (Clarke, 2003, pp. 494-507).
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