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Strategies for Small and Medium-Sized U.S. Businesses Interested in Investing in China: Lessons That Can Be Learned from Taiwanese Companies

Xun Wang Department of Sociology/Anthropology University of Wisconsin -Parkside

David A. Ralston Management Department Michael F. Price College of Business University of Oklahoma

Investing in China has been one of the hottest and most critical issues in the ever-changing business world since the early 1980s. Huge amounts of foreign investment poured into China during this period primarily because of China's huge market, plentiful cheap labor, and rapid economic development (Davies, 1998; Luo, 1998; Shi, 1998; Sun & Tipton, 1998; Wang & Ralston, 1995). From 1980 to 1988, the number of foreign-joint ventures approved in China increased from 348 to 15,955, and the amount of foreign capital

pledged increased from $1.7 million to $28.2 million (Pomfret, 1991). The foreign investment in China totaled $27.5 in 1993 and that amount rose to $37.5 billion by 1995. At present, there are over 318,000 foreign funded companies in China with the total amount of realized foreign investment from 1978 to 1998 totaling $250 billion (Shi, 1998). While the interest in investing in China is worldwide, two major investors are the U.S and Taiwan (Pomfret, 1991; Shi, 1998; Sun & Tipton, 1998; Walker, 1996; Wang & Ralston, 1995;). What is also interesting to note is that while almost all U.S. companies investing in China are large multinational corporat ions, many of the investors from Taiwan are small and medium-sized companies (Business Week , March 29, 1993; Wang and Ralston, 1995; Xu, 1996). U.S. small and medium-sized businesses seem uncertain about investing in China or, more likely, they are uncertain about how to invest in China. Is the Chinese market profitable or just a peril? This is a question that the Washington Post found on

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