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Donte Walker

Department of Business and Technology, William Woods University

BUS 585- Intergrated Studies and Business Administration – Fall 2 2022

Dr. Leathers

Socialist market economy is distinct from 'market economy' due to the CPC's continued authority over national policymaking, which allows the country to follow its socialist growth path. Deng Xiaoping and the CPC shifted their attention from culture (Mao) to advancing the material productive forces, resulting in the socialist market economy. The CPC uses a combination of public and private actors to steer the Chinese socialist market economy in the direction it wants to go. In this sense, the state plays a considerably more significant role than it would in a free market economy. As was clear from the start when MNCs began relocating to China in the 1980s and 1990s, the Chinese government is picky about the kind of businesses and industries it allows to operate within its borders (Feng & Li, 2019). When China first opened its doors to the automotive sector, it did so after engaging in thorough negotiations with various international manufacturers and licensing only those projects deemed to be beneficial to China's development. The Chinese were eager to master automobile production because of the historical significance of the automotive sector to the country's economy.

When an international company forms a joint venture with a Chinese partner, the international company will often share its proprietary know-how with the Chinese partner and teach the Chinese partner how to use it. However, there are certain exceptions to this rule. Despite the Chinese partner's contractual and WTO obligations to cease such production, several complaints have been lodged about the Chinese partner's continued production of the same items after a JV has been dissolved. This is despite the fact that the Chinese partner is required to cease such production (Feng & Li, 2019). Since September 2017, the Chinese government has been waging a campaign to improve the country's protection of intellectual property rights (IPR), in which they have pledged to crack down on activities that infringe on intellectual property rights and to increase judicial and administrative safeguards. Despite this, the United States has continued to lodge a complaint against China at the World Trade Organization (WTO) regarding the country's weak protection of intellectual property rights (IPR). Due to the high expense of research and development in the automobile sector, protecting their intellectual property rights is absolutely necessary in order to keep their advantage over their competitors. The industry is currently going through a time in which research and development is more important than it has ever been before since driverless vehicles and NEVs seek to shake things up (Wang, 2022). There is a compelling theoretical case in favor of selecting an entry strategy that takes into account the requirement to protect intellectual property. The development of electric and hybrid vehicles is the focus of one of the research and development facilities that GM maintains in China. This center is a joint venture between GM and SAIC.

The fact that China has the most people of any country in the world makes it a very appealing market for automobile manufacturers. The rise in foreign direct investment (FDI) in China can be attributed to the country's sizable consumer market as well as its robust economic growth, which reached its all-time high of $290 billion in 2013 before falling to $174 billion in 2016 (Foreign direct investment, net inflows (BoP, current US$), no date) (Wang, 2022). Even though the pace is much slower, multinational firms from other countries are continuing to make significant investments in China. China has been the largest market for vehicles globally since 2009, and sales have only climbed since then, so automakers have been increasingly looking to the country to enhance their bottom lines. Since 2009, China has been the largest market for vehicles worldwide.

References

Feng, K., & Li, J. (2019). Challenges in reshaping the sectoral innovation system of the Chinese automobile industry. In  Innovation, Economic Development, and Intellectual Property in India and China (pp. 415-438). Springer, Singapore.

Wang, K. H., Su, C. W., Xiao, Y., & Liu, L. (2022). Is the oil price a barometer of China's automobile market? From a wavelet-based quantile-on-quantile regression perspective.  Energy,  240, 122501.