Chinese Barriers to Foreign Firms–Good for Innovation?

One Chinese entrepreneur feels that hurdles for foreign companies in the Chinese market may prompt more innovation.

Foreign companies in China increasingly report that they feel less welcome in China, in large part because of regulatory barriers to the massive Chinese market, which is more important for global businesses than ever, and because of increasing competition from Chinese companies whom they believe benefit from those barriers.

But John Deng, chairman of Nasdaq-listed microchip design house Vimicro (VIMC), says the short-term losses of these companies will translate to long-term improvement in high-tech sectors. Vimicro, based in Beijing, is one Chinese company that has become competitive in the global market—it supplies energy-efficient chips to Sony (SNE), Hewlett-Packard (HPQ), Samsung and others—and though he says China should be open for foreign competition and investment, he thinks it’s natural for China to want to set its own technology standards, like third-generation mobile standard TD-SCDMA, and take other measures that will allow local companies to catch up with the rest of the world.

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