China

China Business and Economics

China’s rapid ascension as an economic superpower has brought the country greater wealth, but it has also presented challenges that could affect future growth. Environmental pollution, inequalities in regional development, insufficient domestic consumption and insufficient investment in human capital are just some of the problems it faces. Scholars at HKU are seeking to provide insights into these issues, in particular how China is tackling them.

"China is trying to strengthen its economy by establishing institutional infrastructure in laws, regulations and financial capital and consumer markets," said Professor F.M. Song of the School of Economics and Finance and convenor of the China Business and Economics research theme. "The success of these efforts and the options available for further development bear closer scrutiny."

HKU is perfectly positioned to investigate. The Faculty of Business and Economics has a strong track record in China research and has established several research centres on China business and economics. It is also collaborating with the Faculty of Law and the Faculty of Social Sciences to widen the scope of study into China’s economic development.

Management control, corporate governance and performance

The mix of companies in China is unlike that of developed countries. "State Owned Enterprises [SOEs] compete alongside privately owned firms, and what might work in a Western business environment may have different results in China," said Dr X. Zhou of the School of Economics and Finance.

Researchers are looking at two aspects of management in Chinese businesses to gain insights into practices there. One project looks at whether giving employees shares in their company improves corporate performance. The evidence globally is unclear. Data from Chinese firms will be analysed to see if this incentive scheme works there and the results from SOEs and private firms will be compared.

The other project will examine management turnover in Chinese companies. Researchers want to know if the pattern is different between SOEs and private firms, how management change affects performance and, interestingly, what happens to managers when they are replaced. The expectation is that they are not necessarily fired but moved to another important job, and this will be explored.

Competition, strategy and economic institutions

When developing strategies, companies need to consider the environment they operate in. Typically this includes economic institutions, which can provide, or fail to provide, protection and enforcement. But in China, things are different.

"One of the paradoxes of China’s development is that its institutions have been less than ideal, yet business has flourished," said Professor Z. Tao of the School of Business. "This seems to suggest that economic institutions do not really matter." This is the background for research into the impact of economic institutions in China on corporate strategies, specifically diversification and foreign direct investment (FDI).

Earlier studies have suggested firms diversify in emerging markets, possibly to overcome the lack of economic institutions for property rights protection and contract enforcement. HKU researchers will look at how property rights protection in China affects diversification. Their focus will be private enterprises, which are particularly disadvantaged by poor institutional environments in China.

The impact of economic institutions on FDI is less well understood. Researchers hope to provide more insight by looking at where American companies choose to direct their FDI in China, a country with substantial regional variations in property rights protection and contract enforcement. The research will try to shed light on how regional variations in these institutions affect FDI.

A separate area of research will look more broadly at China’s economic institutions. The aim is to investigate how the role of the courts in financial disputes, property rights protection, the regulation of financial institutions and other issues impact on economic growth.

Marketing

Branding is becoming more important in China as companies seek to capture the domestic market. HKU researchers are profiling and tracking 350 major brands and studying their marketing strategies.

"One interesting phenomenon is celebrity branding," said Professor D.K.C. Tse of the School of Business. "Celebrities can raise the profile of a brand so we will look at the role of celebrity endorsement in the China market and the value they might add."

Negative publicity is also a marketing issue. What happens if a product is shown to have a health risk, as seen with the 2008 melamine scare in food products? Researchers will look at consumer reaction to health risks and whether they opt for other brands or other product categories.

The environment

The economic impact of environmental degradation is a growing field of research interest, including at HKU. Our scholars plan to look at how poor air visibility, which is linked to air pollution, affects China’s economic growth. They will use visibility statistics going back to the 1970s and document the impacts across the country as a whole and in different regions.