The view of multinational corporations in China has changed dramatically since the late 1970s, when the nation opened its economy and welcomed foreign direct investment, and global players such as Volkswagen, Coca Cola and 3M began exploring the market. During the 1980s, other MNCs such as Motorola, Philips and NEC were received with open arms. They enjoyed corporate tax rates half those imposed on local companies, and they paid no duties on their capital goods imports. In general, they were revered by government and consumers alike. Even into the 1990s, as China and its people developed a better understanding of MNCs, the foreign companies were the objects of awe and admiration. At that time, Chinese consumers exhibited an almost unconditional preference for MNCs’ products and services.

However, beginning in 2000, when per capita GDP climbed above US$1,000,1 and especially since 2001, when China joined the World Trade Organization, both the Chinese government and consumers have changed their perceptions of MNCs drastically. MNC projects now are scrutinized much more for their fit with national interests. Furthermore, MNCs increasingly are getting local treatment. The coming equalization of the corporate tax rates (to be phased in as of January 1, 2008) between local and foreign companies attests to this. MNCs are now held to the same, if not stricter, standards than local competitors in terms of areas such as employment standards and environmental standards. And they are finding that those standards are enforced much more rigorously.

Chinese consumers also have become more demanding. As a rule, shoppers no longer see much difference between products made by Chinese companies and those made by MNCs. Indeed, their expressed purchase choices often are cast as negative reflections of how much more they had expected of MNCs. In some ways, China’s consumers feel let down. The cachet of the MNC is no longer there; savvy shoppers now emphasize objective details and product quality.

MNCs clearly have made significant contributions to China’s development. In 2004, 28% of China’s industrial output and 19% of its tax revenue was accounted for by MNCs.2 Furthermore, MNCs produced 57% of all exports from China in that year.3 By the end of 2004, 400 of the FORTUNE 500 companies had offices in China. Technology transfer and managerial knowledge are less tangible, but they represent other areas in which MNCs have had an impact, even though a recent government report declared that