Competitiveness in China

[whatsthehaps]

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China is a state controlled by the economic restraints of the Communist government.?Until they allow true entrepreneurial spirit of competition and capitalism to flourish, they will continue to just be the worlds producer and consumer of goods.

207197[/snapback]

China had the most wide open kind of capitalism right now of any other country...

207403[/snapback]

I here ya, Roger. I agree. I spent a week in GZ last Nov. And, their capitalistic drive is truly something. However, I still can't believe GZ will ever match HK in a true capitalistic/free-trade sense.

 

Tell me a brand name of a Chinese product that all of us can identify with (something like; IBM, Dupont, Ford, GE, Microsoft......). Until China pass laws that penalize those who steal and copy trade secrets and proprietary information, most economist state they can never truly become a developer of products, but simply a producer (and consumer) of products.

 

Time will tell.

207470[/snapback]

Foreign businesses will not invest that kind of capital if they feel it won't pay out. And business is booming but significant challenges need to be addressed. By looking around it would be hard to see, everytime I go back it has grown some more.

 

China is now the world's top destination for foreign direct investment. There is no question that living standards have improved for most of China's people, and while its political system is still a “monopoly,” the economy is becoming, for all intents and purposes, a market economy.

 

But major challenges remain and if they aren't met soon, the undeniable improvements that China has enjoyed in recent decades will be at risk. First among these is growing inequality, between urban and rural areas and within urban areas themselves. The growing prospect of mass unemployment could well exacerbate this inequality. A second significant problem is a potential banking crisis, due to the high proportion of bad loans. And a third major challenge is the hard process of reforming China's 300,000 SOEs, an effort that involves 100 million workers and one-third of China's GDP. Each of these difficulties is intimidating in its own right; their resolution is even more daunting because they are deeply intertwined.

 

According to Preston J. Miller Vice President and Monetary Advisor,

“Americans need not fear the Chinese economy. The nation is still plagued with inefficiency, so it is not quite the juggernaut it is made out to be.”

 

Knock-off's are a problem. You can walk into a store and everything may be counterfeit. Marlboro is now producing cigarettes, through a separate Chinese company, because they were ripped off big time. Many others are doing the same.

 

Wal-mart had a beauty of a system, I don't think any other company can match that. They had the right people to set it up, you were not going to pull fast ones with that set up. Now I can easily see how a company like that gets currency out of China, just ship the goods to the US purchased with RMB. They get rich off the Chinese, they get rich off the US. The Chinese workers suffer. How do some of the others get money out of China? McDonalds, KFC?

 

Those with the technology win.

 

Open trade is an important factor in determining the wealth of nations.

 

Prescott's theory is that modern economic growth results from increased productivity due to technological advances. Poor nations can achieve growth by opening their doors to technologies developed in rich nations. However, entrenched interests, such as monopolies, often block technologies that would compete with their business and thus create barriers to growth in poor nations. Open trade is therefore essential to economic development.

 

What you do not want to do is give up your secrets. Never outsource strategic business functions, unless you want the other guy to have them.

 

I am also concerned with a swift and sudden reversal of capital inflows like what happened in the Asian economic crisis of ’97-98. The price of land was going up like crazy. Investors were looking at the huge growth numbers and eventually realized that much of that growth was related to asset prices. They began to panic. It is also hard to keep the economy in check when money is being driven into it like that. Can you say "a reverse flow of capital?" It's also nice to see where this capital went.

 

banks were the primary mechanism by which the funds left Asia, and that these funds did not flow directly to the United States. Rather, they went first to offshore banking centers and then to European banks.

 

There are a lot of assets over in China. If the US were to stop buying and save more or something would cause the US economy to slow rather significantly, China could collapse. The Chinese citizens would have to buy goods to prevent this but right now China saves and the US buys.

 

More articles:

 

Progress and Peril in China's Modern Economy

http://www.minneapolisfed.org/pubs/region/03-12/chang.cfm

 

Foreign Direct Investment in China:

A Spatial Econometric Study

http://research.stlouisfed.org/wp/1999/1999-001.pdf

 

China & WTO

http://surveys.ft.com/chinawto2002/index.html

 

Asia Crisis Postmortem: Where Did the Money Go and Did the United States Benefit?

http://www.newyorkfed.org/research/epr/00v06n3/0009vanw.html

 

Asia’s Trade Performance after the Currency Crisis

http://www.newyorkfed.org/research/epr/00v06n3/0009higg.html

 

The Impact of the Asia Crisis on U.S. Industry: An Almost-Free Lunch?

http://www.newyorkfed.org/research/epr/00v06n3/0009harr.html

 

China's Rich but Troubled Banking Sector

http://www.minneapolisfed.org/pubs/region/03-12/banking.cfm

 

What Ails China?

A long-run perspective on growth and inflation (or deflation) in China

http://www.minneapolisfed.org/pubs/region/03-12/china.cfm

 

Truths About Trade and the Dollar

http://www.minneapolisfed.org/pubs/region/05-12/trade.cfm

 

A Look at China's New Exchange Rate Regime

http://www.frbsf.org/publications/economic.../el2005-23.html

[SheLikesME?]

Well I got 2nd and 3rd orders on our products we designed for them. They entereded into agreements and kept their word.

 

I worked for an innovative company in the US at one time which was merged with a company that only purchased a license to be 2nd source on new designs. Yes this was cheaper than the cost of development and usually they won over 50% of that new market. Put us innovators out of a job for a year or so until the competitors picked us up.

 

Didn't Japan do about the same thing? Copy all until they began to be more efficient in manufacturing and then file their own patents?

[Dan R]

[

[

 

China is a state controlled by the economic restraints of the Communist government.?Until they allow true entrepreneurial spirit of competition and capitalism to flourish, they will continue to just be the worlds producer and consumer of goods.

207197[/snapback]

China had the most wide open kind of capitalism right now of any other country...

207403[/snapback]

I here ya, Roger. I agree. I spent a week in GZ last Nov. And, their capitalistic drive is truly something. However, I still can't believe GZ will ever match HK in a true capitalistic/free-trade sense.

 

Tell me a brand name of a Chinese product that all of us can identify with (something like; IBM, Dupont, Ford, GE, Microsoft......). Until China pass laws that penalize those who steal and copy trade secrets and proprietary information, most economist state they can never truly become a developer of products, but simply a producer (and consumer) of products.

 

Time will tell.

207470[/snapback]

You don't know Haier yet? This appliance company is globalizing rapidly in Europe and the USA. Many American stores now carry their products.

 

The refrigerators, washers and dryers are becoming market leaders in a number of countries.

 

http://www.haier.com/abouthaier/view.asp?newsid=3444

 

http://www.ifm.eng.cam.ac.uk/cim/chimnet/r...imei_haier.html

 

When nearly bankrupt the CEO turned it around by providing the first nation wide customer friendly network in China. Repairmen and deliverymen went to a class to learn how to deal with customers in the home and create the Haier experience. This was so unusual in China that they quickly dominated the market in China.

[rogerluli]

[

[

 

China is a state controlled by the economic restraints of the Communist government.?Until they allow true entrepreneurial spirit of competition and capitalism to flourish, they will continue to just be the worlds producer and consumer of goods.

207197[/snapback]

China had the most wide open kind of capitalism right now of any other country...

207403[/snapback]

I here ya, Roger. I agree. I spent a week in GZ last Nov. And, their capitalistic drive is truly something. However, I still can't believe GZ will ever match HK in a true capitalistic/free-trade sense.

 

Tell me a brand name of a Chinese product that all of us can identify with (something like; IBM, Dupont, Ford, GE, Microsoft......). Until China pass laws that penalize those who steal and copy trade secrets and proprietary information, most economist state they can never truly become a developer of products, but simply a producer (and consumer) of products.

 

Time will tell.

207470[/snapback]

You don't know Haier yet? This appliance company is globalizing rapidly in Europe and the USA. Many American stores now carry their products.

 

The refrigerators, washers and dryers are becoming market leaders in a number of countries.

 

http://www.haier.com/abouthaier/view.asp?newsid=3444

 

http://www.ifm.eng.cam.ac.uk/cim/chimnet/r...imei_haier.html

 

When nearly bankrupt the CEO turned it around by providing the first nation wide customer friendly network in China. Repairmen and deliverymen went to a class to learn how to deal with customers in the home and create the Haier experience. This was so unusual in China that they quickly dominated the market in China.

207538[/snapback]

We have a Haier freezer and window air conditioners. Work great and they were the best value at our local home improvement store in Middle America...

[Dennis143]

OK, I'll take a little survey of my coworkers and ask how many know or heard of Haier. I think I already know their answer. "Hair? "What are you nuts?"

 

Sure, it's a start for China. Product recognition is coming. It ain't there yet, by a long shot. And, I'm not gonna shutter in my boots over the big-bad growing giant called China, as some seem to be so awe struck.

[rogerluli]

OK, I'll take a little survey of my coworkers and ask how many know or heard of Haier.  I think I already know their answer.  "Hair? "What are you nuts?"

 

207566[/snapback]

I did an extensive study at work Dennis...I asked 2 guys...One had never heard of Haier... "eh"...the other had a Haier fridge in his rec room... Therefore half the population has Haier appliances...

[whatsthehaps]

Well I got 2nd and 3rd orders on our products we designed for them.  They entereded into agreements and kept their word.

 

I worked for an innovative company in the US at one time which was merged with a company that only purchased a license to be 2nd source on new designs.  Yes this was cheaper than the cost of development and usually they won over 50% of that new market.  Put us innovators out of a job for a year or so until the competitors picked us up.

 

Didn't Japan do about the same thing?  Copy all until they began to be more efficient in manufacturing and then file their own patents?

207524[/snapback]

I know they knock-off our stuff like crazy. The invention/technology end is what made this country, along with some risk taking. People thought Henry Ford was nuts, "your gonna do what?!" This would be bad to outsource research. To promote this we should have investment tax subsidies in place to encourage businesses to spend more for research. Right now the US debt is sky high, businesses were not spending during the recession, consumers were. You cannot do that forever, you have seen the record levels of bankruptcies. The spending got us through some rough spots though. To make things happen you need business spending, it creates jobs, puts money into the economy. Good for a period of stagflation where the value of the dollar is low and inflation is high.

 

US debt limit nears $9 trillion

http://news.bbc.co.uk/2/hi/business/4827248.stm

 

Japan is a good example of what you were talking about. It basically got started the way Korea and now China did/are. (we helped build it) Japan has some very strange inventions but really good at taking an idea and engineering it to the max. I am carrying this into the quality side more so than the invention for the reasons mentioned previously.

 

They need investment and technology to get going. Generally start out as poorer quality goods. Japanese cars came out and they basically had motorcycle engines in them. America at the time was not interested in what Deming had to say. So off he went. Japan focused on quality. They took market share. Then the American automakers thought to themselves, Americans want cheap cars (also more economical from the 70s oil crisis). Whoops! They really want an economical quality car, not a Horizon, Pinto, Vega, or a Citation or a Chevette, etc. They were in big troubles for a while there.

 

Take a look at the Korean vehicles now, they have come a very long way. Hyundai can make one of those giant cargo ships in a week from scratch, including engines and props.

 

http://english.hhi.co.kr/News/Media.asp?p=...ek=&class=Media

 

It also helps when you have brand new facilities that are streamlined, in the front door with raw materials and out the back with finished goods, and your vendors are next door. Japan was so efficient that even importing most of their raw materials they could compete with price and quality. Toyota is a model company that serves as a case study for many MBA programs.

 

China now has huge investment and many of the newer factories being built there are high-tech. Most aren't and get by with cheap labor. And there are no labor shortages. Significant issues though. The poor need to be brought up to speed so they can contribute and live better lives. Right now though it looks like the rich-poor gap is widening.

 

Why spend your money and time inventing when you can get it from someone else?

 

By the same token:

 

Intellectual property in China

The boot is on the other foot

 

http://www.economist.com/business/displayS...tory_id=6750250

Edited April 18, 2006 by whatsthehaps (see edit history)

[SheLikesME?]

True Haps. After visiting Japan I came back feeling America was so old.

 

Japan steel is not the best steel and maybe nothing else is, however the consistency of everything is so good they can design for it.

 

When I used to inspect steels Japanese lots all looked identical. They were all just a little ways into meeting the specs. American steel was usually super high quality, but it varied and when bad it was really bad. There was never any Japanese steel out of spec.

 

So yes when you have new factories computer controlled to just what you need to meet spec it makes for a very economic efficient business. But boy I miss the handcrafted way in old foundries. That is another issue. Japanese foundaries used way less energy because newer. I am not so sure CHina will install the latest technology in everything they do. But someday they need to pay attention to the polution etc.

 

Bot for me they did not want to copy us. They wanted to buy from us. Oh well, our Govt stopped it, but for some good reasons I guess. I just am sad for management who did not get creative about how to overcome our US policies, legally. There is a way.