Chinas Industrial Output - Case Study Example

The Extent to which Manufacturing in China can Compete on a Global Scale Currently, China is hosting firms that are internationally expanding. This has been largely attributed to the large amounts of incoming direct foreign investment (DFI). In order to be able to compete at a global level, some Chinese firms are seeking to internationalise their operations as noted by (Rugman and Collinson, 2009). Chinese firms often focus on developing and applying new technologies in the development of products. This has enabled them to compete well at a global scale by creating a competitive position in international markets. As a result of the competitiveness of Chinese firms and products, the country has grown to be among the top exporters of manufactured goods in the world. China’s industrial output has grown at an average rate of 10 percent for the past three decades. China leads in exports and comes second in the amount of imports and contributes approximately eight percent of the world’s manufacturing output. Manufacturing and construction account for 46.8% of its gross domestic product (GDP). Major manufacturing industries include, textiles, automobiles, cement, petroleum, aerospace, machinery, electronics, textiles/apparel, iron and steel among others. The extent to which China’s manufacturing sector can compete on a global scale can be understood analyzing a few of its manufacturing sectors. The manufacturing sector in China has grown in the last 20 years what its western counterparts managed only to achieve in 20 decades. The sector’s growth began with simple imitation gradually adopting innovation and now concentrating on subliming products with characteristics that are in nature Chinese. In every corner of the world today, products of Chinese origin prominently feature. One of the factors that has made China achieve much in the manufacturing sector has been its reliance in low-tech, labor intensive production method. Given its huge population, China has a wide labor base that makes the cost of labor to be quite cheap. As a result, products made in China remain very cheap compared to most of the world’s countries. Yet another reason behind china’s success in the same sector is its reliance on innovation and current orientation to automation. China’s products apart from being cheap are quite competitive in terms of repetitive quality. No wonder its produces 30 percent of TVs and air conditioners, 25 percent of washing machines and 50% of cameras sold worldwide (Pinto nd). In fact, about 40 percent of microwave ovens that find their way into the European market are made by a single Chinese firm. These statistics clearly show how much China’s manufacturing sector is up-to the task in the global scene. Automobile industry China is the third largest manufacturer of automobiles in the world. These automobiles are produced both for local and international markets. China’s automobile manufacturing industry has been able to compete well in the world’s automobile market. This has seen China’s automobile production soar very high over the last 30 years. In 1985, automobiles produced were 443,377. This increased to 1.1 million in 1992, 4.44 million in 2003, 5.71 million in 2005 and 8.88 million in 2007. In 2009, it was the world’s leading automobile manufacturer with a production of 13.83 million units. The competitive position of China’s automobile manufacturing has attracted foreign manufactures to enter into joint-ventures with Chinese companies. According to Chengxin (2009), automobile manufacturing in China records goods sales scales. For example, in 2006, production stood at 7.28 million whereas automobiles sold were 7.22 million. China’s automobile manufacturing companies produces globally competitive products in terms of cost. The good competitive ability of China’s automobile manufacturing enabled it to start exporting vehicle parts from 1999. It has also enabled China to succeed in its export business for automobile and components. Honda Company was built in 2004 specifically for the export market. China’s automobiles have market both in developing and developed countries (Smith, 2007). Steel industry China produces the largest amount of steel in the world. Steel manufacturing has been increasing rapidly over the years. In the early 1990s, steel production could be sustained by iron ore produced in the country. However, imported metals and iron ore soon outpaced this in the early 2000s. Most of the steel come from small-scale producing centres. Anshan in Liaoning is one of the largest among these. Currently, China is the leading nation in the world in steel production. In 2008 it was able to export 59.23 million tonnes of steel and iron (Appelbaum, 2008). Clothing/apparel manufacturing China’s cloth and apparel manufacturing sector has also been able to measure to the global level of competition. Asia is currently the leading producer of and market for apparel. of all Asian countries, China has emerged as the leading producer of apparel (Guillaume et al, 2007). In 2000, it was the world’s leading apparel exporter, with a turnover of $ 39.3 billion (Rugman and Collinson, 2009). Competition from China’s apparel manufacturing has led to a wilting of traditional textile manufacturing firms in Europe and the US. Another eevidence that China’s manufacturing industry competes well globally is with respect to the polyester industries. About 20 years ago, polyester industries in Europe and the US competed in terms of growth and size. China’s polyester has been able to out-compete them the two countries. China’s apparel manufacturing industry consumes almost a third of the cotton produced worldwide; far above what the textile manufacturing in US and Europe produces (Nolan, 2002). Though the counterparts in US and Europe have adopted advanced technology, they have not been able to face out or at least compete with China’s apparel manufacturing sector. China has invested in more plants and equipment. This has heightened competition in the market and China has been able to stand it well. In summary, China’s textile industry is fast growth with more growth being anticipated in the coming years as noted by Sturgeon and Lester (2003). Electronics Industry Electronics manufacturing in China has been able to measure up for the global competition in the market. It has grown with a transforming perspective. This is evident in the manner and quality in which it produces its electronics like the laser printers, entertainment equipment, cameras, mobile phones, and DVDs among others. The country has flooded the world market with its products which are competing well with those from other well known electronic manufacturers like Japan. Conclusion There has been a significant increase in the output of most manufacturing firms in China. China has also recorded great sales in products from its manufacturing industries. These are evidences that Chinese manufacturing firms are well able to compete on a global level to a great extent. This indicates that Chinese companies have been able to capture, maintain and even expand in the global scene. With more internalization, manufacturing firms in China will be able to overcome any competitive disadvantages in the market. At this level of stability, more growth is anticipated for China’s manufacturing in coming years. References Appelbaum, R. (2008). “Giant Transnational Contractors in East Asia: Emergent Trends in Global Supply Chains”. Journal of Competition and Change. (1) pp 69–87. Chengxin, P. (2009). “What is Chinese about Chinese Businesses? Locating the rise of China’s in global production networks”. Journal of Contemporary China. (58) pp 7– 25. Guillaume, G. Lemoine, F. and Unal-Kesenci, D. (2007). “China’s Integration in East Asia: Production Sharing, FDI & High-Tech Trade”. Journal of Economic Change.(1-2) pp 27-63. Nolan, P. (2002) “China and the global business revolution” Cambridge Journal of Economics. (1) pp 119-137. Pinto Jim (nd) Global Manufacturing – The China Challenge. Retrieved 24th February, 2011 http://www.jimpinto.com/writings/chinachallenge.html Rugman, A. and Collinson, S. (2009). International Business (5th ed). Harlow. Pearson Sturgeon, T. and Lester, R. (2003). The New Global Supply-Base: New Challenges for Local Suppliers in East Asia. Retrieved on 24th, February, 2011 http:/web.mit,edu/ipc/publications/pdf/03-006.pdf Smith, C (2007). International Trade and Globalisation, 3rd edition. Stocksfield. Anforme Warwick, M. (2006). Geographies of Globalization. New York. Routledge Zhang, K. (2007). “International Production Networks and Export Performance in Developing Countries: Evidence from China” The Chinese Economy. (6) pp 83–96. Zhao, Z and Zhang, K. (2007). “China’s Industrial Competitiveness in the World” The Chinese Economy. (6) pp 6–23. Read More