Feasibilities And Strategic Choices
Of Transnational Operation for Chinese Hotels

Dujiang Ph.D. President of China Tourism University

I. The realistic feasibilities for Chinese hotels to operate abroad
This is mainly discussed in terms of theory, economy, market, industry, experience and government policies.
1. Theoretic basis for Chinese hotels to engage in transnational operation
Both Louis Wells' theory on small-scale technology and John Dunning's stages of development theory provide direct theoretical basis for the transnational operation of tourism enterprises from developing countries.
Wells has summarized the relative advantages of foreign direct investment(FDI) of developing countries. These advantages include the possession of small-scale production technology catering to the need of small markets, that of the advantage of manufacturing national products overseas, and of low-price marketing strategies. Wells abandons the traditional view that a business can only enter the international market by means of a monopoly of technology, and combines the market nature of the developing countries with their competitive superiority of FDI, thereby provides a theoretical basis for economically underdeveloped countries to make FDI.
Moreover, John Dunning's theory concerning the stages of development which proves to be reliable, provides a direct theoretical support for hotels from developing countries to engage in transnational operations, especially in higher forms of transnational operations(Chen Bao-sen, 2000). According to the theory, in the first stage of development, a developing country which remains in a state of very low income has little or no FDI, and local businesses do not have the competitive strengths needed to invest in foreign countries, either. In the second stage, the country's economy may have developed to some extent, but the local businesses have not created sufficient ownership strengths to overcome initial hindrances arising from overseas production, and therefore are unable to invest heavily abroad. Nevertheless, they may engage in limited transnational operations in order to make full use of the resource endowment of neighboring regions, or to make an entry into foreign markets. In the third stage, which accounts for the state of most of the developing countries, the economy of the countries has grown to such an extent that they are able to participate in international division of labor by means of an export-oriented trade. Once ownership strengths with unique local features are created through innovation, such a division of labor will evolve from trade to production. Finally, with further development of their economies, some countries will step into the fourth stage and become net foreign direct investors.