Managing Multinational Operations - Essay Example

From this perspective, China now stands as an investment heaven for foreign investors due to several factors, such as cheap labor, incentives for multinational companies, and relaxation in tax policies that have been few factors from the list. Experts have indicated that as China was successful in surpassing the success rate of USA in terms of FDI in the year 2002, there is a huge possibility that it may become the largest economy by the year 2020 that now seems quite possible (Ching, 2008). After becoming member of the WTO, there has been greater liberty in the sectors of industry and services, and decrease in customs duty has been another major factor of establishment of new foreign firms in China.

In particular, studies have indicated that multinational companies especially in the sectors of “distribution, logistics, financial services, and telecommunications” (PricewaterhouseCoopers, 2008) have benefited significantly from such liberalization. Besides, analysis has shown that there has been introduction of various policies by the Chinese government to give privilege to foreign investors and multinational companies, in order to promote foreign investment in the country and that will be fruitful for any multinational firm that will be entering in China to establish business.

A major step has been the implementation of socialist market economy in China that has created an encouraging environment for new investments. Moreover, it is very imperative for a country to be constant in its tax policies and regulations that has been the case of China, consequently, resulting in positive arena for multinational firms to operate in the country. However, while planning to establish business in China, one should have an understanding that few strategies enjoy greater relaxation and liberalization, such as the businesses that “bring in advanced technology, management expertise and high-caliber talent” (PricewaterhouseCoopers, 2008).

Thus, if Acme is planning to penetrate in the Chinese market, it will have to make efforts to focus on the quality while ensuring advance technologies in its different processes and procedures. Furthermore, Chinese government promotes multinational firms and foreign investors that facilitate the process of “ecological construction, environmental protection, and conservation, and the more efficient use of resources and energy” (PricewaterhouseCoopers, 2008). Besides such opportunities for multinational firms, there still exist few hurdles; however, the Chinese government has been endeavoring to deal with the issues to promote more firms in the Chinese market.

For instance, firms that bring in foreign investment in China enjoy liberalization and relaxation in the processes of “foreign exchange balancing, and raw materials sourcing” (PricewaterhouseCoopers, 2008) that allow the firms to run the business more effectively in the country. Additionally, in the past, firms had this limitation of using local market for materials; however, now, they enjoy the relaxation of giving priority to either local market or the international market while buying raw materials and fuels.

On the other hand, there are few restrictions for multinational firms and foreign investors in the process of acquiring approval on capital contributions and participation in some particular sectors of the Chinese marke