Abstract This study is part of the CHISU project. Since the late 80s, establishing trade relations with Chinese companies has become increasingly important for some Spanish companies. Some of them have settled manufacturing plants in China in order to enter the Chinese market and offer more price-competitive products. Most of these firms are located in the coastal region of east China. In some cases, they have not been able to choose their location.

The paper is a qualitative study by. The study contains the particular experiences of Spanish firms and their evolution in the Chinese market. The data of the research are collected through several interviews with five Spanish companies that agreed to participate in this research.

The study demonstrates that the preferred way to settle manufacturing plants in China is WFOEs, because of the freedom of decision-making on the management. The study provides much detail information on the topics such as the process of settling in China, the necessary investments, common difficulties firms have to deal with, and the relationship with the clients and suppliers. One of the findings breaks the following myth: “what is manufactured in China has lower quality”. The study illustrates that the subsidiaries of the case companies in China are able to manufacture products with superior quality. One of the important findings in this research is there is no relationship between weak IP protection in China and technology transfer to China. The main priority of the case companies is to keep competitiveness when the companies make decision on technology transfer.