China has cornered the market on economic growth. It seems that you can't read any business news without realizing the China is quickly becoming the second biggest economy globally. International Monetary Fund projections show that China is poised to steal away the second slot from Japan in 2010. This has large geo-political implications for both countries.
According to a recent Economic Times article the Chinese estimate on growth rate is 9.6% narrowing the gap with Japan. Chinese Gross domestic product (GDP) was pegged at $4.6 Trillion, while the World Bank estimates that Japan's current GDP is $4.9 Trillion. (1)
As China's economy continues to grow at a staggering rate it has had real business consequences for foreign firms trying to enter the domestic economy en masse, "The pace of growth is attracting more investment. Foreign direct investment climbed 32% in November to $7 billion from a year earlier. Luxury carmaker Bayerische Motoren Werke (BMW) said last month that it will build a new factory worth 5 billion yuan in China to tap an auto market set to overtake the US as the world’s largest," (2)
However, the simple fact that China is out producing Japan, does not instantly transform into large scale benefits for the vast Chinese population. It is hard to pin down exact numbers on the amount of Chinese people who live in extreme poverty, but estimates are often in the low hundreds of millions, accounting for a substantial percentage of the total population, perhaps up to 30 percent. In contrast Japan's number of homeless people is currently pegged at 15,000 but could be as high as 30,000 according to some reports, roughly 0.02% of the total population. (The preceding comparison is based on extreme poverty in China vs. homelessness in Japan, as it was the easiest comparison to make because there is virtually no one in Japan living in extreme poverty, the sources are from various outlets.) The fact that China will become the second biggest economy will eventually help these Chinese poor, but it will take considerable time for the country to develop into a first world economic powerhouse. The same is true for India, whose economy is growing by leaps and bounds, but still has a great deal of people in poverty.
China also faces another major stumbling block, the country's industries and businesses are based on building the worlds products. I will test this, and now ask you a direct question; Can you name one internationally successful Chinese Brand?....
Despite visiting China, and spending a considerable amount of time in Asia in the past three years, I was hard pressed to do this myself when first asked the same question this summer by Newsweek. I now can think of roughly one multinational Chinese brand, Tsingtao Beer, developed by German settlers in 1903. (3) Apparently the one Chinese brand I can name was developed by people of a different country. This phenomenon continues today as a large amount of domestically available Chinese goods are nothing more than stolen technology and infringements on foreign held intellectual property. Chinese industry and government has done very little to protect the intellectual property and patents of businesses that are producing in China and making the GDP balloon year after year.
"China's weak protection for intellectual-property rights—the patents and ideas that are the solid core of any brand—makes it risky for companies to invest heavily in innovations that could make them famous worldwide but could easily be stolen by rivals at home. Finally, the recent string of product recalls—including poisonous pet food and faulty tires—has left consumers wary of made-in-China goods," Craig Simons Newsweek (4)
One blatant and laughable infringement was targeted against Canadian mobile manufacturer Research-In-Motion, makers of the highly popular Blackberry. As the Blackberry was gaining interest in China, a Chinese company, Unicom released the "Redberry," on the heals of Blackberry's debut.(5) Both subtle and not so subtle infringements are obvious products of an extensive economic espionage effort orchestrated by the Chinese Ministry of State Security (MSS) and the technological collection bureau. The Chinese agents are well placed globally and target various industries in a growing number of countries. According to a recent book launched from Canada by authors Fabrice de Pierrebourg and Michel Juneau-Katsuya titled Nest of Spies, the Chinese threat works from a broad-based approach, with engineers, travelers and students providing information to central collection in China. That information is then passed on to Chinese Industry. This is another large factor in the internal growth of the domestic economy. If you don't have the technological know-how, any research and development departments and sub-par universities how do you acquire the technology that fuels growth? You could buy it, or as China continues to do, you can steal it from legitimate companies and nations, who educate the reverse engineers that China churns out.
Regarding Multinational Chinese brands, I named Tsingtao beer earlier, but upon second thought I was also vaguely familiar with Geely (a Chinese Auto Company) before recent announcements that the firm was buying Volvo from Ford. My first interaction with Geely was by pure chance. I was handed a blue hat with Geely written across the front of it at the North American International Auto Show in Detroit a few years back. The visor of the hat was massive, and it quickly became a joke. That hat sat in the trunk of my Volkswagen for about a year. Now the name Geely has become famous in the West, in conjunction with moves to purchase Volvo. The Hummer brand was also recently snatched up by a Chinese manufacturing and heavy equipment firm. China might not have any brands of its own but it is sure buying up globally recognized auto brands in a move in the right direction.
However Japanese global giants Honda, Toyota, Nissan, Suzuki, Mazda, Mitsubishi, Subaru, Isuzu, Kawasaki and Yamaha are still making automotive inroads largely due to the fact that the can make decent cars at fair prices. China might be cornering the market on the best price, for vehicles and a whole host of other products, but they are a long way away from offering decent and recognizable products.
Japan might be overtaken by China in 2010 as the second biggest economy based on GDP, but in all the areas that matter, China continues to be a third world country, producing the world's dollar store bargains.
(1)http://economictimes.indiatimes.com/news/international-business/China-on-course-to-overtake-Japan/articleshow/5379542.cms
(2)http://economictimes.indiatimes.com/news/international-business/China-may-become-second-largest-economy-in-2010/articleshow/5382123.cms
(3) http://www.tsingtaobeer.com/brewery/brewery.htm
(4) http://www.newsweek.com/id/207381
(5) http://www.infoworld.com/d/applications/blackberry-meet-chinas-redberry-800
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