A German lawyer in the far east: Investing and doing business in China

Abstract

Shortly after the end of the Cultural Revolution, some four decades ago, there were no passenger cars in China when Volkswagen AG started its negotiations inthis country. The country was poor and underdeveloped. Today, the GDP of China reached USD 17.6 billion compared to the US’ 17.4 billion USD. Car production in China is now more than 18 million cars per year, more than in the USA. Today, China is still a socialist country and its economic system is called ‘socialist market economy’ but there are about 50 million private companies, 400 million people are belonging to the middle class and there are about 800 super rich having more than 100 million USD on average. In this ‘sino-marxist’ country, there are even 130 multi billionaires in USD. No wonder that under these circumstances, joint ventures and wholly foreign-owned enterprises, especially also in the automotive industry, are welcome. Volkswagen started its negotiations with its Chinese partner, STAC (Shanghai Tractor and Automobile Investment Corporation), BoC (Bank of China) and CNAIC (China National Automotive Industry Corporation) in 1979. These negotiations ended in 1984 by setting up the ‘Shanghai-Volkswagen’ joint venture which started the production of the Santana in 1985. Some years later, in 1988, Volkswagen started the negotiations with FAW (First Automobile Work) in Changchun. These negotiations lasted much shorter and the second VW joint venture, ‘FAWVW’, started with the production of Jetta and Audi 100, 100, 000 cars per year in 1991.In 2004, the ‘Volkswagen Group China’ (VGC), a wholly VW-owned holding company was set up in Beijing in order to coordinate the VWparticipations, the sales and marketing of its joint ventures, the purchasing, personnel and governmental relations as well as finance. Today, VGC has, including its 16 subsidiaries, 95,000 employees, has built 30 million cars at 30 Chinese production sites and sold them by 5,000 dealers (with 330,000 employees). In 2016, VGC has built about 4 million cars.