China Is One of the World Biggest Exporters - Essay Example

?Introduction: In below three decades, China has developed from having a minor role in world trade to create one of the world’s biggest exporters, aswell as a considerable importer of intermediate inputs, raw materials, and other goods. China has the biggest population in the globe, with above 1.3 billion persons. It is greater than sub-Saharan Africa and Latin America joint. The past turning point in conditions of china’s incorporation with the world financial system was Deng Xiaoping’s coming to power in 1978. The main component in Deng’s market-oriented plan was the formation of export processing Zones in 1979. These were originally set-up on the south china coast near Hong Kong and opposite Taiwan. The 1990s was the actual boom decades in china’s introduction to foreign capital. About 70 percentages of FDI flows to china are in developed businesses. This was a reply to a rising political commitment by the Chinese administration to market-oriented reform, the continued creation of special economic zones and strong domestic development and other shareholder incentives. New worldwide economic slowdown and U.S recession are forcing a lot of U.S companies to re-evaluate their manufacturing policy in order to compete successfully in the market. China has turn into a preferable and logical option. There are a number of methods to doing manufacturing in china. “In china, there are many industrial parks with all the needed infrastructure- electricity, water, telephone, transportation, customer service, shipping service, bank branches, government service and security” (Michael Yih-chung Shen, 2004. P. 118). Presently china has a part of the world trade organization has skilled 23 successive years of development in its gross domestic product. This paper analyses the importance of manufacturing competitiveness in China and its influence on the global market, including aerospace, apparel/clothing, automobiles, and electronic goods. Competitive strength of China in manufacturing field: China’s move to the global centre for manufacturing is based on numerous factors such as the eastward immigration of manufacturing facility, the fact that china is already the world’s number one manufacturer for more than 100 products in terms of quality and its complementary position in terms of financial levels from east to west. The geographical attentiveness of exports and imports in china is highly rough. It is focused in the coastal regions. According to Jintong Lin, Xiongjian Liang and Yan Wan in his book Telecommunications in China: development and prospects says that “The development of china’s telecommunication manufacturing industry is closely linked with the development of china’s telecommunication industry” (Lin, et al, 2001, P. 74). In the late of 2000s china was the second largest nation in the world in terms of purchasing power parity GDP and it was the third biggest trading state. In the primary production, china was the main producer of wheat, rice, cotton, red meat, coal, tobacco and aluminium. In the case of manufactures, china produced about 60% of the world’s bicycles, 70% of the world’s toys, 40% of the world’s mobile phones and 50% of the world’s motorcycles. In addition to being the world’s top producer of LCD screens and TVs, china created above a third of the world’s air conditioners, luggage, computer monitors and microwave ovens. It also creates above 50% of the world’s cameras and shoes, and regarding two-thirds of all DVD players. "The success of home-grown companies rests in equal measure on the vision of their strategic management and the competence of their labourers. While China indeed possesses a vast pool of workers, few of them are able to compete in today’s global economy" (Wyne, 2007). A major feature of china’s competitive benefit as a site of export-oriented manufacturing production is a low-cost, huge and highly creative labour force. According to James Riedel, Jing Jin, Jian Gao in his book How China grows: investment, finance, and reform says that “China’s economic resources were grossly underutilized and misallocated, with 70 to 80 percent of the labor force in the rural sector largely unemployed or underemployed” (Riedel, et al, 2007. P. 2). The mobile phone market of china manufacturer’s state, it are probable to increase market share comparatively fast. But it is similarly likely to lose it as speedily. Brand name and consciousness are significant, but it also essential to make awareness of specific styles and models. It is significant to cover all price points and to create a halo effect by having the most refined model as part of the line.” China’s economy is stepping into a sound development track and increasing steadily but gradually" (China's Economy. 2009). The majority of commodities are sold in the low cost. The bulk of the china market for cell phone will eventually dictate that the tastes of the Chinese customer be factored by main cell phone players. The Chinese customer will be considering an opinion leader, not only in this group but, as the china customer market maintains to grow quickly. “In today’s global environment whoever manufactures products better, cheaper and faster, wins. Every country in the world is competing. In consumer products, China is grabbing a lot of the prizes” (Pinto & Diego, 2006). Some data’s of manufacturing in China today: Repeatedly growing manufacturing prowess. Important cost advantages Good, repetitive feature. Global market-share – 20 percent of refrigerators, 30 percent of air conditioners and televisions, 50 percent of cameras, 25 percent of washing machines. One Chinese company creates 40 percent of all microwave ovens sold in Europe. The town of Wenzhou, Eastern China makes 70 percent of the world's metal cigarette lighters. Wal-mart – Buys about $18 billion from China, giving a direct relation to the US consumer. "The main factor of productivity increase is the system reforms. No matters if it is economic, political, financial reforms or expansion of the capital market all have been important contributors to the Chinese economic growth" (Gang, 2008). According to Charles A. Pigott, Organisation for Economic Co-operation and Development in his book China in the world economy: the domestic policy challenges says that One major focus of china’s industrial reform policy has been to develop large enterprises or enterprise groups that can compete successfully in the global market. These enterprise groups have received government support through a range of measures, including preferred loans from state banks, protection from competition through various tariff and non tariff barriers, and access to international stock markets. “In contrast, economic reforms have liberalised those sectors that are close to final consumption such as consumer electronics, textiles, clothing, and the food industry, which enjoy a high degree of price liberalisation and market competition. In these sectors china most successful mediums sized enterprises are present, as well as TVEs or other non state SMEs. FIEs are mainly concentrated in the export-oriented sectors such as apparel, leather, cultural, educational and sports goods, and electronic and telecommunications equipment” (Pigott, 2002, P.133). Since the entry of china’s manufacturing industry in the global market, various manufacturing sectors in china compete with products on the global market. Various industries in china work on a low income basis, but they have transformed themselves into global competitor by various technological innovations and creativity. Main transformation has to be done is to identify the global market and transition to the level which market demands, this can take the manufacturers to the top level in the global market. "All of China’s economic successes are associated with liberalization and globalization, and each aspect of globalization has brought China further successes” (Overholt, 2005). Developments in various fields: automobile sector: Due to globalization, the auto and auto component sector has grown rapidly in the global market. This has encouraged the producers to generate and penetrate into this market on a wider scale. Identifying the customer’s needs has always been the main strategy by china to compete on the global market. "The economic globalization is tending to strengthen and changing the world’s manufacturing industry deeply. As manufacturing industry plays an important role in China’s economy, it has realistic significance to study and understand the opportunities and a threat of China’s manufacturing industry under the globalization" (Ni Yifang Guo Wen Wu Xiaobo, n.d). There are many factors which makes this sector very important in global market. One of them is the diverse needs of the customers. They are interested in new technologies and their interest towards automobiles has increased on higher margin. Customers are always ready to pay for the latest technologies in the field. “China has an emerging middle class that is spending on cars, clothing and luxury items. But they're not buying American” (Louie, 2006). Another cause for this is the very large size of this industry, the density of the product and the fact that automobiles as income elastic goods has made this section a field of substantial investments in new technologies. The demand for this goods increases on a large scale and does not decrease with the pressure in the market. The technological complexity has always grown in this field. The technology used in the automobile field has improved since the twentieth century. Various introductions like the development of electronic circuits, sensitivity devices, fuel efficiency, modern braking system, engine management and the use of aluminium plastic etc have transformed this filed. These developments have attracted interests from not only the producers but also from the assemblers in various filed. China always has enjoyed top level in the production and assembling of automobiles and automobile components. China is now self sufficient in the production of auto components in large scale. “Technology is all about basic and applied science—science and technology are intimately related. Without sufficient science as a foundation, technology would find it impossible to meaningfully advance. Vice versa, technology can catalyze scientific advances, and promote progress in industries” (Shing-tung yau, n.d). Innovations and creativity are the main strategy of the Chinese manufacturers for the past few decades, with a few changes Chinese products can go through any completion from the European markets in this field. An example for which is the success of the various automobile companies in the world market which uses Chinese components. Chinese products have always attracted customers from different countries across the world. Company always launched new technologies to compete with other products in the market. “In 2002 and 2003, the Chinese automotive industry developed extremely fast. The overall production climbed up by 38.8 % and 36.7 %, and the passenger car production grew up 55.2% and 84.99% in 2002 and 2003 respectively. There was almost no inventory at the end of the two years” (Luo, 2005). Electronics section: In the field of electronic components china is the super power. China is now the world’s number one producer and distributor of electronic devices like displays, computers, mobile phones, air conditioners, microwave Owens etc. China’s aggressive and distinct marketing strategy always earned them top place in the global market. China has always encouraged various electronics companies to start the branches in their country and has provided all the facilities for its growth in the country. China’s policies have always helped the companies to produce various goods with low manufacturing costs. This has policy helped the companies to sell the product at cheaper rates; this can attract many customers on the global market. China always enjoyed high demand for their products. “Since the open-door policy began in 1979, China has boasted one of the fastest growth economies in the world. Electronics has been a Chinese pillar of success and is now the largest industry in China with growth of nearly 20 percent annually, and there is no end in sight. China is now the world's number one producer of TVs, recorders, VCD players, telephones, calculators, refrigerators, and air conditioners” (China's Electronics Industry, 2011). Aerospace technology: China also lead in the field of aerospace technology, they introduced various technologies in this field. High equipments required for aeronautical sector are produced in the country with low cost and high efficiency. They always introduced new technologies in this field for new developments. This made them top manufacturer of aerospace products in the global market. “China’s aerospace industry has advanced at an impressive rate over the past decade - but where it goes from here could have significant implications for the global industry” (Nancarrow, 2011). China also advanced in space craft and nuclear technologies. Country conducted many researches on this field and has emerged successful. “This 12-year science and technology development program provided the basis for the scientific progress that China was to achieve during the period, including the country's first successful nuclear test in 1964” (Science and Technology, 2008). An outlook on Chinese economic development: As China is the world’s most populated country in the world, it has a very big market. Most of the business giants in the world have kept their eye on the Chinese industry and the manufacturers are attracted on the business market by seeing the vast resources available in the country. There were fast economic development in China due to these and many of the products are exported to the various countries in the global world. There was a consistent growth in the economy and many of the foreign investors have the courage to invest in the Chinese market. The global economic crisis has some effects in the Chinese market and many of the US production companies has to find their safe market in a country like China where they can easily build their profits. The Chinese government has initiated a “going global” program and they were tried to increase the economic growth. There was 12% growth in the economy and most of the technologies have transferred their hub to the Chinese soil. Government views: The Chinese government has welcomed the manufacturers of the world. They have adapted the going global strategy and many of the foreign investments boost the Chinese economy. As the most populous country, it has the huge workforce which made the manufacturers getting the appropriate manpower. The productivity in the China has increased due to the strict government rules. “The government of China embarked on a major program of economic reform. In an effort to awaken a dormant economic giant, it encouraged the formation of rural enterprises and private businesses, liberalized foreign trade and investment, relaxed state control over some prices, and invested in industrial production and the education of its workforce” (Zuliu Hu, & Khan, 1997). Many of the developing countries found the China as a serious threat due to its competitive advantages and the manufacturers transfer their works to China. As a result a rapid economic growth has occurred. The low expenditure capital and the high creative labor services made possible them as the biggest export oriented producers in the global world. The trade and industry development has been determined in the manufacturing zones of the country and in metropolitan regions. In these regions, the per capita income is far higher than in the countryside regions and rising more rapidly per year in the urban areas than in the rural neighbourhood. Competitiveness in the Chinese manufacturing industry: “Companies achieve competitiveness through acts of innovation, improvement and change” (Smook, 2005). China has several manufacturing industries from the year 1991 to 2010 and the most important basis of the rigorous competitiveness of Chinese manufacturing segment have largely from the entire yield factor. The labour output has been growing and the capital output has been declining in Chinese market. China is the land of manufacturing about 75% of the world’s computers and DVD players. It has the world’s biggest manufacturers of the electronic goods. They have about half percentage productivity in automobiles, motorcycles and textiles. China has called as the “workshop of the world” by these big manufacturers. The globalization of the developing countries has created novel disputes in the competitiveness. The Chinese made products has the large shares in the international market. “China's crude steel output ranked first in the world in 2009, hitting 568 million tons, or 2.2 times the total of Japan, Russia, the United States and India. The country's shipbuilding industry now ranks third in terms of global competitiveness, while the products of the electronic and information industry occupy the largest share of the global market” (Lan Xinzhen, 2010). China's manufacturing competition has been improved through the promotion of the manufactured goods. In contrast to the declining competitiveness of primary products such as farm produce, fuels and minerals, the competitiveness of man-made commodities has enlarged amazingly than ever before and it has made the decrease in the competitiveness of the fuels and mineral productions. China was the biggest in the primary production of rice, wheat, cotton, tobacco, etc. Chinese apparel industry: Chinese apparel industry is having the most important apparel production competences with their technical advance and optimization of the manufacturing segment. The Chinese apparel and clothing manufacturers have better their skill to participate on the global market. The textile industry has increased rapidly with the globalization and as like other industries, the textile industry also gained a strong market in China. The increased rise of foreign trade and the vast openings to the foreign investors made these apparel industries to become powerful. China is the largest exporter of the apparels in the world. “There are some factors favorable to a continuous improvement in the productivity and international competitiveness of China’s manufacturing industry. Without a question, the first positive factor is China’s abundant and cheap labor supply. For example, the labor costs are around 40 cents/hour in Chine, which is one fourth of Turkey. Therefore, China products are spreading out in the global market very fast” (Cukul, 2008). But the economic crisis has hit the Chinese market also. “A massive shake-out is taking place in the Chinese apparel industry, as firms struggle to remain competitive against a backdrop of rising labour costs, the strengthening of the Yuan, worker shortages and tighter pollution controls” (Chinese apparel industry repositioning for growth, 2009). Factors needed to withstand in the global competition: “In terms of the international division of labor, China is in a weak global position with respect to innovation and the value chain because multinational corporations in developed countries dominate research, marketing and other high-end sectors. The slow development of producer services plus other factors, including rising energy and raw material prices, labour costs, RMB appreciation, intellectual property disputes and the financial crisis, have had an enormous effect on China's export of manufacturing products” (China needs transition to service-oriented manufacturing industry, 2011). The joint ventures have made the Chinese economy to grow. As China joined the WTO, “opened its market up to foreign companies, since when Chinese companies have faced much tougher competition in their home market. This has forced them to pick up the pace of internationalization, and cross-border M&As have soon become a major vehicle for Chinese companies to penetrate foreign markets” (Lenovo , 2009). The globalization has made the profitable growth in China on one side and at the same time, it affected the Chinese agricultural sectors. “With the potential for natural disasters increased by manmade environmental problems, the potential for social unrest also becomes greater. China may also have difficulty moving beyond its unquestioned successes in manufacturing goods for overseas companies and into developing its own product lines. China’s advantage in low manufacturing costs is so overwhelming as to disincentivize investment in innovation” (Dreyer, 2003). To exploit the maximum use of knowledge and technologies available in the global world, it is necessary to “negotiate mutual cooperation agreements with foreign investors that ensure strong transfer of information, skills, and technologies, through training, research, subcontracting operations; and extend such cooperation rapidly to most of the services sectors; and develop further policies and incentives aimed at attracting back to China the considerable pool of the Overseas Chinese talent. (Dahlman & Aubert, 2000). Conclusion: China has the biggest population in the globe, with above 1.3 billion persons. With aggressive and distinct marketing and production strategy of Chinese government, the Chinese products always found a top position in the global market. With competition all over the world china always found its way up front with its technological and innovative policies. With these developments china can always exist as topper in this competitive global market. 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Available at: http://www.imf.org/external/pubs/ft/issues8/index.htm [Accessed 22 April 2011]. Read More