Foreign Ownership

Hong Kong is best known for its non-intervention policies on various areas including foreign ownership. With the accession to WTO, China's regulation on foreign investment in e-Commerce is to be complicated by its restrictive measures governing foreign investment and trade. To combat the situation, some foreign companies use "Guanxi" to build positive relationships with government officials.

China

Sino-foreign Equity joint venture (with up to 49% foreign equity share allowed after China's WTO entry) is the only type of Foreign Direct Investment (FDI) that will be allowed in China. On March 16, 2003, business outside China will be able to register .cn domain names for the first time in history - providing Western e-tailors the opportunity to gain access to the country's vast and rapid growing online population.

Those e-Commerce activities that involved foreign partners and business networks are tightly monitored and controlled by government agencies. For example, the online brokers of securities and commodities in China are prohibited from discounting their commission rate if the service is provided by foreign companies. It is apparently clear that foreign investors face stiffer control while conducting e-business under the Chinese jurisdictions.

There is tremendous implication for foreign investment in the fledging e-Commerce industry of China. To be successful, foreign investors must be pursued with intense managerial commitment. A key strategic element for FDI into China's e-Commerce is to generate short-term profits in order to build the critical mass of benefits. This can be done by employing all their best capabilities, such as Internet-based cutting-edge technologies and Internet-savvy personnel when developing their strategy in the Chinese business environment. Most importantly, it is believed that "Guanxi Networking", a strategy by cultivating and developing good relationships with local alliance and government officials, is key component that can help overcome institutional deficiencies and minimize legal uncertainties embedded in conducting local e-Business. Foreign investors who have developed close ties with leaders are likely to obtain preferential treatment like extra incentive for local supplier to make on-time delivery. It is also believed that government officials have greater power to allocate critical resources and influence legislative decisions that might help protect the interest of foreign investors.