Difference between Chinas economic management style and the Western style - Essay Example

?To what extent is China’s economic management style unique and different from the Western style? How do you explain these unique features? Introduction China is unquestionably among the world’s largest and fastest growing economies (Watson, 1994, p. 48). Since opening its markets to the rest of the world in 1979, China’s economic growth has experienced a persistent upward trajectory (Tsui & Lau, 2002, p. 1). The transition from a planned economy to a market economy has been particularly smooth with significant opportunities for entrepreneurship and expansion both at home and abroad (Long & Han, 2008, p. 52). The market-oriented economy is vastly similar to Western economies, yet China’s economic management style differs because of the remnants of the post-Maoist market socialism (Krau, 1996, p. 96). In the meantime, the Chinese government maintains strong control (Krua, 1996, p. 96). The purpose of this research study is to determine the extent to which this mixture of capitalism and socialism in China’s economy differs from the economic management style of the West. It will be demonstrated that what makes China’s economic management style unique and different from the West is the remnants of past socialist influences, persistent government control and the adoption of a market-oriented economy. China’s Past From the outset, it is worth noting that the most obvious difference between China’s economic management style and that of Western countries is China’s persistent adherence to five year economic plans regardless of leadership changes. The first five year plan from 1953-1957 was influenced by the Soviet Marist style Communism and emphasized industrial growth. At the time, the ideal economic plan for Communism was to develop industry and the economy via “heavy industry, fuels, electric power, iron, and steel, machinery manufacturing, and chemicals” (Galloway, 2011, p. 1). This economic plan identified a goal for Chinese output to be doubled in each of these categories (Galloway, 2011). Another significant difference in China’s economic management style that is unique and quite different from Western economic management styles is not only the level of control that the state had in enterprises, but the level of ownership. In China, during the first Five Year Economic Plan, the government owned 75% of all of China’s production and private enterprises owned the remaining 25%. During the first Five Year Plan, China was determined to further erode the percentage of private ownership. Rather than immediately turn these private ventures into state properties, the government decided to first form partnerships between private firms and state-owned firms (Galloway, 2011). As China moved forward in the 20th century, it looked for a “cultural formula” that would help it embrace modernity (Lu, 2004, p. 201). China was struggling with what is often referred to as a “cultural revolution” in which much of the blame for China’s “backwardness” was placed on “Confucianism, the foundation of traditional Chinese culture” (Lu, 2004, p. 201). There were scholars advocating for more “Western democratic” ideology (Lu, 2004, p. 201). These scholars’ arguments would find currency in Mao’s belief that in order to embrace a proletarian culture that focused on the masses and not the elite, the old culture had to be left behind (Lu, 2004, p. 201). In the meantime, adherents to China’s traditional culture were entirely resistant to abandoning old values and norms. As Lu (2004) notes: China has been wrestling with the dilemma of modernity versus traditionality and Westernization versus national identity. Given that China now embodies a seemingly contradictory combination of authoritarian government and market economy, the path to culture reconstruction seems even more uncertain and unsettling (p. 201). Mao’s concept of a looking after the masses included state-owned enterprises and a centrally planned market. According to Kshetri (2009), under Mao’s centralized market plan, Chinese firms were stifled in “market orientation” because production was geared toward a national plan (p. 20). In other words, Mao’s China was driven by a “self-reliance development policy” (Liou, 1998, p. 41). Under the self-reliance economic policy, the emphasis was on China relied on its own resources rather than those from abroad (Liou, 1998). This decidedly closed economic policy began to show flaws as China’s Asian neighbours and in particular, Japan outperformed China in terms of economic growth. If China wanted to remain an important role-player in the region and wanted to become an important emerging global market, reforms were necessary. With Mao’s death in 1976 and Deng Xiaoping taking office, economic reform would take a decisive shift (LeBel, 1999, p. 46). The political and economic reforms that began in 1978, took a “dual track approach” in which “economic agents” were able to “participate in the market” but were required to satisfy social commitments (Kshetri, 2009, p. 20). In fact, even today, a number of Chinese continue to require private that companies fulfill social commitments (Kshetri, 2009, p. 21). Nevertheless, Deng’s economic development plan for China involved two specific phases. The first phase would focus on the coastal areas and the second phase would move toward China’s “interior” (Lai, 2002, p. 433). The coastal area received attention for most of the decade of the 1980s and the 1990s. When the government established the plan and stated its goals in 1982, it was decided that agricultural and industrial production in the coastal area would quadruple and the standard of living throughout China would reach a “comparatively well-off level” (Lai, 2002, p. 433). These plans were articulated in China’s Sixth and Seventh Five-Year Plans. In the meantime, promises were made to the interior areas that development was just a matter of time (Lai, 2002). There was an obvious developmental gap between China’s coastal and interior regions and the government promised to narrow the gap via its Eighth Five-Year Plan from 1991-1995. The plan involved the division of labour and development. Coastal cities and areas were requested to partner with au “underdeveloped” area or city (Lai, 2002, p. 435). However, with Deng encouraging coastal development projects to move forward, the developmental gap suffered a longer postponement. By 1994 and into 1995, attention was once again directed toward developmental gaps. The developmental gap was particularly glaring with the coastal region enjoying access to foreign markets and inflows of foreign direct investment (FDIs) (Lai, 2002, p. 436). The ensuring revenue sharing between regions and economic partnerships did not appear to be reducing the developmental gap. Therefore in 1999, the Chinese government announced its “develop the West” programme (Chung, Lai, & Joo, 2009, p. 109). The programme involved transformation of the “economic foundations and infrastructure in underdeveloped regions” (Chung, et. al., 2009, p. 110). In 2002, the central government became more involved in developing the interior. The focus turned to the Northeast region which was high in unemployment and poverty was punctuated by social instability. Thus China launched the “revive the northeast” programme (Chung, et. al., 2009, p. 112). Still, Lai (2007) informs that as China developed the Northeast and the West and having developed the coastal areas, the rest of China benefited from the trickle-down effect. According to Lai (2007), “market forces unleashed by economic reform have facilitate factor mobility” (p. 112). For example, migrant workers from China’s underdeveloped regions would find work in the coastal region. In the meantime, the supply of energy, agricultural products and raw material increased in China’s underdeveloped regions in response to growing demands in the coastal region (Lai, 2007). However, China is a large country and despite the latter regional development programmes for China’s interior regions, gaps between regional development will not be erased altogether (Lai, 2007). China’s economic management style was therefore rooted in government spending for infrastructure development. Thus China’s economic management style is quite different from Western economic management strategies. In Western countries economic management is typically orchestrated through lowering or increasing tax burdens on the public and controlling government spending (Hanneman, 1984). The Western rationale for economic management through taxation is that where taxes are lowered, individuals are more inclined to work harder since the net pay is substantially larger than a heavily taxed income. Meanwhile the government is constrained in how it can spend money since revenue is reduced by lowered income taxes. The wealthy is also less inclined to invest abroad and therefore the economy is stimulated and growth naturally follows (Hanneman, 1984). In China however, the government spends in developing infrastructure and therefore demonstrates that taxation is not used to prevent excessive government spending. In fact, taxation is not the same across China and wealthier citizens pay more taxes than the economically disadvantaged (Mingru, 2012). China also provides for low taxes and has used taxed exemptions and reduction to encourage exports (Mingru, 2012). China therefore uses its tax regulatory policies for supporting infrastructure and economic development. Western countries use taxation to encourage economic growth and to discourage government spending. The reality is, China has injected significant revenue into infrastructure development aimed at economic reforms. Each year since 1998 China’s has invested “heavily” in electricity, transportation, gas, telecommunications, sanitation and water (Liu, n.d., p. 2). Expenditures in this regard increased from US$39 billion for the year 1994 to US$88 billion for the year 1998 and US$123 billion for the year 2003 Liu, n.d.). However, these expenditures corresponded with economic reforms and economic growth and development which also increased the demand for infrastructure development (Liu, n.d.). According to Hersch (2012), China’s economic management style is different from Western economic management styles in that the government maintains an invasive control over the country’s economy. The Chinese government controls practically all of China’s financial systems and a majority of the “economy’s productive assets” (Hersch, 2012, p. 1). A majority of these controls are under the auspices of local governments and central government support of state-owned enterprises is no different from government support to private firms (Hersch, 2012). The role of government nonetheless is unique in that state-owned enterprises and government control over economic activities and financial systems rarely happens in Western economic management styles. For the most part, governments in Western states leave decisions about private property to property owners. The Open Door Policy and Going Global China’s Open Door Policy At this point China’s economic and political reforms were in its infancy. Its open door policy, was predicated on the belief that foreign capital was important for the importation of technology and “know-how’ relative to improving China’s economy (Hayter & Han, 1998, p. 1). One important development however, is that many of these foreign investors are either Chinese companies abroad or foreign companies with Chinese partners (Hayter & Han, 1998, p. 1). Nonetheless, when China opened its market to external markets it was “perhaps the most visible of its reform of the 1980s” (Lee, 1994, p. 215). According to Lee (1994), once China implemented its open door policy, its international trade increased exponentially. In the process, China attracted “tens of billions of dollars of foreign direct investment” (Lee, 1994, p. 215). In fact, foreign trade grew at a far more rapid pace than the “domestic economy” Lee, 1994, p. 215). This is especially interesting since China’s open door policy included the creation of special economic zones on the coast and near the Yangtze River. These zones provide preferential tax and “administrative treatment to foreign firms” that are located within the zones. Moreover, under the open door policy a 100% owned foreign firm was at liberty to enter the special economic zone and to set up shop there (Yayashi, 2003). Tian (1996) argues that: The open-door policy signifies that China has moved away from passive towards active participation in the global economy (p. 74). For the most part, with the initiation of the open door policy, China’s policy-makers were occupied with the correct way to deal with foreign businesses in China. However, after more than three decades of sustained and “unprecedented economic growth”, China is occupied with flows out of China and policy makers are “actively encouraging firms to operate abroad” (Boisot & Meyer, 2008, p. 350). China even set up the China Investment Corporation (CIS) to help Chinese businesses with the internationalization process. With these developments, China currently receives the lion’s share of global foreign direct investment inflows and at the same time invests heavily abroad (Boisot & Meyer, 2008). China’s Going Global Policy Following the announcement of China’s Going Global policy, China’s outward flows from foreign direct investments increased exponentially. In 1996, China was the 7th largest developing country donor of outward foreign direct investment flows. Ten years later China was the 3rd largest developing country donor of outward foreign direct investment flows. The evidence suggest that following the announcement of China’s going global policy, China did indeed follow throw. By 2003, China’s outflows of foreign direct investment were in 142 countries (Kolstad & Wiig, 2009). Internationalization theories suggest that firms become global by taking gradual steps to get there. It is assumed that firms will first learn about the exigencies of foreign markets and will take a gradual approach to branching out. It is also assumed that investing abroad is more expensive than investing at home. Therefore firms will only invest abroad if there is a compensatory benefit (Boisot & Meyer, 2008). With the intense competition in China’s market, it is anticipated that China’s firms will attempt to become internationalized as early as possible and will not take the gradual approach (Boisot & Meyer, 2008). In fact, in 2000, when the Chinese government announced its Go Global policy, Chinese businesses were encouraged to enter the world stage by virtue of the “internationalization process” (Bellabona, Spigarelli, Marche, & Fabriano, 2007, p. 93). This was a remarkable turnaround. During the initial stages of China’s economic reform from 1979-1990, China encouraged the growth of private enterprise within the “general rubric of the socialist market economy reform process” (Wenbin & Wilkes, 2011, p. 11). What this meant was that most of china’s private companies would continue to function inside of China’s planned economic system while business activities were subjected to governmental regulatory restraints. The Chinese government was still ambivalent toward investing abroad and therefore only some of the state-owned enterprises were able to invest abroad (Wenbin & Wilkes, 2011). According to chow (2004), China’s economic management style is gradual and begins with “experimentation” as evidenced by the approach to state-owned enterprises (p. 130). The reformation of China’s state-owned enterprises was a gradual and experimental process. First, state-owned enterprises were accorded some degree of: ..autonomy in production, marketing and investment decisions rather than simply carrying out the decisions under a system of central planning (Chow, 2004, p. 130). The first of these experiments started at the end of 1978 with six state-owned enterprises in Sichuan Province. By 1980, 6,600 state-owned enterprises were permitted to make similar decisions. The second step involved permitting state-owned enterprises to keep their own profits after paying taxes rather than to treat these companies’ earnings as a source of government revenue. The next step involved a responsibility system in which the state-owned enterprise was allowed to retain profits after paying a designated sum to its controlling enterprise (Ghow, 2004). By 1987, the contract responsibility system was introduced to state-owned enterprises. Under this new system, state-owned enterprises could keep all profits remaining after discharging tax obligations and could share those profits with staff and for investments. However, there were a number of practical problems with these seemingly encouraging changes. To begin with, taxes were not fixed and it appears that the higher a state-owned enterprises’ profits, the higher the tax obligations. The same problem was evident in the situation in which state-owned enterprises paid a fixed amount to a controlling enterprise and retained the profits. It also appears that the greater the profit, the larger the sum payable to the controlling enterprise. Moreover, profits could not really be shared with staff members since wages were fixed and as a result, staff members came away with goods such as television and other appliances in lieu of cash increments. Another important problem was that management was of poor quality, since they had been trained under a government owned corporation and were not familiar with the exigencies of free enterprise (Chow, 2004). It was not until 1990 that the important reforms were made in reforming state-owned enterprises. By 1997 plans were well underway for the government to surrender its stake in and control of small and medium sized enterprises. In this regard, shares were issued so that staff members could purchase these small and medium sized state-owned enterprises. The larger state-owned enterprises were transformed into share holding enterprises although the government comprised the majority shareholders. However, as Chow (2004) points out, these changes could not mask the problems that would flow from poorly trained management. Strategic Asset Seeking Behaviour The poor management within China’s enterprises lends some credibility to claims that China’s going global initiative and the subsequent foray into investing abroad is characterized by strategic asset-seeking behaviour as opposed to strategic market seeking behaviour that usually characterizes the incentive to invest abroad by Western companies (Worm, 2008). In this regard, strategic asset seeking behaviour is characterized by market selection on the basis of a need to “acquire new knowledge and expertise in areas” that are “obviously lacking” (Worm, 2008, p. 151). Strategic asset seeking can be described as the internationalization of a business as a means of establishing or retaining a competitive advantage. This will typically happen by acquiring or merging with another company (Buckley, Clegg, Cross, Voss, Rhodes, & Zheng, 2008). Companies that are strategic asset seekers are usually transnational firms out to implement a strategy internationally or regionally or those who are just entering the global market and want to gain a competitive advantage (Dunning & Lundan, 2008). Dunning and Lundan (2008) argue that strategic asset seeking is not concerned with the exploitation of opportunities and conditions overseas, although exploitation may be an incidental gain. The main purpose of strategic asset-seeking is for acquiring a firm’s international “portfolio of physical assets and human competences” which is seen as a significant means of keeping or improving the firm’s advantages or for weakening the advantages of their rivals (Dunning & Lundan, 2008, p. 73). Dunning and Lundan (2008) also argue that strategic asset seeking is usually a symptom that there are imperfections in the market at home. If we take this argument at face value, it is conceivable that economic management styles of China and the West are not different, or unique at least in this regard since they all appear to have firms that become internationalized because of imperfections at home. However, what distinguishes China’s economic management style from that of the West, is that it is assumed that China’s firms become internationalized for purposes associated with strategic asset seeking. After all it is strategic asset seekers that are motivated by imperfections at home. A demonstratively unique and distinguishing aspect of Chinese economic management style is the contention that Chinese firms invest abroad by either acquisitions and/or mergers as a means of addressing a competitive disadvantage. Western firms usually invest abroad as a means of exploiting a competitive advantage. China’s internationalization is occurring at several different levels. The first and most obvious level is at the export level, but this does not necessarily include maintaining a physical presence overseas. On the second level, China’s internationalization takes the form of “sub-contracting production for foreign companies” and “other forms of partnerships” with foreign companies (Child & Rodriguez, 2005, p. 382). At the third level, internationalization occurs with Chinese firms physically expanding by being physically present overseas. By 2004, 7470 Chinese companies had a physical presence in more than 160 countries (Child & Rodriguez, 2005). In attempting to understand the trends in the internationalization of Chinese companies, Child & Rodriguez (2005) argue that after more than 20 years of economic reforms, China’s large companies are still suffering from a lack of an ability to compete with other large companies in the global market. The main impediments are a lack of research and development, difficulties with marketing abilities, poorly developed brands and continuing restraints by government regulations. Yet, unlike Western states, when a private Chinese corporation seeks to expand to international markets it would receive support and subsidies from the government (Child & Rodriguez, 2005). China’s Go Global Policy was specifically implemented as a government initiative to encourage Chinese firms to enter the global market and to maintain a physical and abstract presences as viable forces and international players (Ding, Akoorie & Pavlovich, 2009). China’s firms have increasingly invested in garment manufacturing in least developed states. Meanwhile, Lenovo acquired IBM PC and China’s state-owned enterprises including Sinopec and PetroChina invested in oil in developing markets including Kazakhstan, Sudan, Yemen and Indonesia (Ding, et. al., 2009). A large number of Chinese firms investing abroad in one way or another are state-owned enterprises (Kling & Weitzel, 2011). A study by Fan, Huang, Oberholzer-Gee, Smith and Zhao (2007) demonstrates how economic management styles in China are unique and different from other economic management styles of mature economies in terms of internationalization patterns. The study covered the time period from 2001-2005. The data was comprised of information from the stock markets in Brazil, France, Germany, Italy, Japan, India, the UK, the US and China. The results of the study determined that emerging markets do not diversify more than the firms from more mature markets. For the countries studied, the results indicated that most of the participating countries diversified less after the passage of time. China, on the other hand did not follow these trends and instead, continued to diversify in an upward direction. Thus Chinese firms were more diversified than any of the other countries studied and China’s state-owned enterprises were more diversified than any other of China’s firms (Hans, et. al., 2007). China has also demonstrated a unique trend in its persistent and active attempts to acquire foreign companies. For instance in just over 6 years going into the year 2005, China’s firms tried to acquire as much as 171 foreign firms. These attempted acquisitions involved 28 billion Euros in offers. Fourteen of the attempted acquisitions were denied or removed while 129 were executed (Schuller & Turner, 2005). Zhang and Ebbers (2010) provide even more insight. According to Zhang and Ebbers (2010), date from 1982 to 2009 filed by Thomson Financial Merger and Acquisition reveals that China’s businesses attempted the acquisition and/or merger with 1,324 foreign businesses, but only succeeded with respect to 679 of those businesses. The actual and attempted acquisitions and/or mergers have drawn the attention of researchers and have therefore demonstrated that the internationalization of Chinese firms is unique and thus separates China’s economic management style from that of the West. According to Rugman and Li (2007), firms tend to gain success only after they have the requisite knowledge also known as “firm-specific advantage” (p. 333). China’s businesses are usually lacking in firm-specific advantages. Therefore based on China’s cheap labour market and its natural resources, China’s attempt to create economies of scale. Therefore when China’s firms branch off into foreign markets they are attempting to acquire knowledge and are not transferring knowledge as is commonly associated with Western economic management styles (Rugman & Li 2005). According to Deng (2007), China’s firms are moving into the global market as a means of gaining a stronghold in more developed economies as a means of not only having access to resources, but also as a means of obtaining “capabilities” (p. 71). Yong and Hong (2012) tested the hypothesis that the main reasons firms from emerging economies expand to developed economies is to acquire technological capabilities. The study involved collecting and analyzing data relative to the Indian and Chinese enterprises in Europe. The period covered by the study were between 1981-2010. The results of the study revealed that just over 44% of China’s companies’ presence in Europe is related to “creations”, just over 49% are related to acquisitions, 2.9% are related to joint ventures and 3.6% are involved in extensions (Yong & Hong, 2012, p. 571). Yong and Hong’s (2012) study also found that the size of the European markets in which China’s firms invest is not particularly remarkable. Moreover, 97% of China’s investments in Europe, occurred between the years 2000 and 2010 at a time where there were no significant or noteworthy projects taking place in Europe (Yong & Hong, 2012). Sutherland (2009) conducted a study in which the possibility that China’s companies become internationalized as a method for acquiring strategic assets. Data for the study was collected from the national data and data from foreign direct investment flows as a means of identifying the origins and location of outflows of foreign direct investment. The results of the study revealed that a majority of the strategic asset seeking techniques were related to China’s manufacturers. It was also determined that most of the internationalization took because of China’s increasing trade and its decidedly weakening of natural resourcesMoreover, according to Sutherland 2009): Strategic-asset-seeking OFDI when it does take place...is orchestrated to a large extent through large state controlled business groups, as is much other OFDI (p. 11). Sutherland (2009) argues that the suggestion that China’s businesses become internationalized on the basis of strategic asset seeking is incorrect. According to Sutherland (2009) a majority of the studies narrow in on specific cases that are not representative of the patterns of China’s business’ internationalisation. However, this is a mischaracterization of the studies conducted and subsequently reported in the literature. For example Yong and Hong’s (2012) study involved call major Chinese companies in Europe and covered a period over long period. Thus, the study is highly represented of firms in China and their tendencies toward internationalization of China’s businesses. At the end of the day, China’s firms are for the most part compelled to branch off into global markets or to become internationalized for several reasons, some of which are related to conditions in the markets at home. Going global or becoming Internationalized is facilitative of the need to acquire technology and know-how as a means of becoming competitive in the market at home. In one study Rui and Yip (2008) conducted an analysis for determining the strategic intent perspective on Chinese firms acquisitions. The results of the study demonstrated that Chinese firms engage in transborder acquisitions for the purpose of achieving goals including the acquisition of “capabilities” for offsetting their competitive disadvantages” and for: ….leveraging their unique ownership advantages, while making use of institutional incentives and minimizing institutional constraints (Rui & Yip, 2008, p. 213). Joint ventures, mergers and acquisitions are more decisively explained by strategic asset seeking. According to Luo (1997), in partnering with foreign firms is particularly prevalent among firms from emerging economies. This is necessitated by the changing nature of the emerging state’s economy which is usually compromised by growing demands juxtaposed against previous political ideology highlighted by state interference. Many of these economies confront a number of on-going challenges including weak market conditions, structural revisions, weak property protection rights, and uncertainties relative to institutional structures. Partnerships with foreign firms in mature markets can help these firms “boost market expansion, obtain insightful information, mitigate operational risks, and provide country-specific knowledge” (Luo, 1997, p. 648). With respect to China, a close examination of partner selection in joint ventures and mergers and acquisitions, clearly demonstrates that Chinese firms are subscribing to the idea of strategic asset seeking. According to Luo (1997) Chinese firms will typically target international partners or assets that have established reputations, popular brands and significant experience in select industries. It can therefore be argued that when a Chinese firm is seeking mergers or partnerships or acquisitions of foreign business, the Chinese firm is attempting to enhance capabilities. Ramasamy, Yeung and Laforet (2012) studied publically listed Chinese businesses covering the period from 2006-2008. A Poisson Count data regression model was used. Research findings indicated that the type of ownership determined why China’s firms become internationalized. The results of the study also demonstrated that China’s state-owned enterprises typically expanded in countries where natural resources was abundant and political conditions are less than ideal. On the other hand, China’s private firms appeared to be seeking advantageous markets with a main interest in technology with commercial viability (Ramasamy, et.al., 2012). Thus far, a common theme emerges highlighting the unique economic management styles of China and distinguishes it from Western states’ economic management styles. Ownership however, ascertains or predicts the type of assets these strategic asset seekers are interested in. State-owned enterprises are obviously concerned with access to raw materials and are arguably, drawn toward asset exploitation behaviour than asset seeking behaviour. Although raw material is obviously an asset and could be looked at as a rational asset for firms to acquire, China’s state-owned enterprises appear to deliberately target raw material from politically weak states is an indication that these firms are seeking to exploit as opposed gain an advantage via the assets. It can also be argued that when private firms seek attractive markets, they are attempting to gain a foothold in developed economies with a view to acquiring capabilities, talent, skills and know-how. Lu, Liu and Wang (2011) used the results of a survey in conducting a study for evaluating the impact of the business’ resources, factors relative to the industry, and state policies. The results of the study revealed that state policies and incentives supportive of internationalization have an important role to play engaging in market seeking and asset seeking. The study also revealed that in circumstances in which technology was an issue for the firm, as well as research and development, strategic asset seeking is the most likely outcome (Lu, et. al.., 2011). Dong and Glaister’s (2006) study involved a survey distributed among Chinese partners in 203 Chinese international agreements. According to the participants gaining and keeping market positions together with the need to expand globally and sharing technology were the highest ranked factors (Dong & Glaister, 2006). Therefore both market seeking and asset seeking strategies are significant to Chinese firms in deciding to partner with foreign firms. The study also revealed that foreign firms were motivated to partner with Chinese firms for the purpose of learning about the exigencies of china’s market (Dong & Glaister, 2006). It can therefore be argued that Chinese and Western firms are consider partnership on the basis of reciprocity in terms of exchanging know how. In other words, Chinese firms seek to form partnerships and obtain mergers with foreign partners for the purpose of strategically forming alliances and as such are strategic asset seekers. As Todeva and Knoke (2005) inform, any strategic alliance that is collaborative, will more effectively accomplish the goals of the business. As we have seen, Chinese firms unlike, Western firms are not attempting to compete with other firms and this speaks to the unique economic management style of Chinese policy-makers and further distinguishes it from Western management styles. 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