Title: Are Chinese Companies Taking Over the World
Abstract: (ProQuest Information and Learning: ... denotes non-USASCII text omitted.) I. INTRODUCTION: Go WEST YOUNG MAN Reminiscent of America's drive west in search of valuable resources and economic growth, China is pursuing its own manifest destiny with an aggressive outward economic expansion program. The drive spans across many key sectors and touches on virtually every resource-rich country in the world. The drivers behind the program are few and rather simple: China is looking beyond its borders to sate its enormous domestic demands (focusing primarily on energy, minerals and agriculture) and to develop international markets (including distribution and after-market service channels) for its growing manufacturing sector. Spearheading the campaign are a number of increasingly world-class domestic companies. These companies have long held select advantages to their foreign competitors, including access to cheap labor and benefits bestowed by the state, that have allowed them to grow competitive internationally. And over the last few years, Chinese government policy has actively encouraged the global ambitions of China's corporations and banks. Chinese companies are dominating global exports and a number are starting to purchase significant stakes in foreign assets and reputable foreign companies. Yet despite the vast potential of Chinese companies to compete globally, there exists an equal number of systemic issues which have hampered Chinese growth. Companies are still held back by issues such as bureaucratic red tape and corruption, a lag in management and international experience and a growing distrust by foreign targets. Banks are hindered in their own growth and in fully assisting the global drive by problems such as non-performing loans and internal restructuring. The resolution of these issues will tell us not whether Chinese companies will take over the world, but when. II. CHINESE COMPANIES COME OF AGE The rise of Chinese companies comes during a time of unparalleled growth for the country. China's economy grew by a top-ranking average 9.9 percent between 1993 and 2004.1 It accounts for 4 percent of the world economy and its foreign trade is worth $851 billion, the third largest national total in the world.2 China is predicted to become the world's biggest economy by purchasing-power-parity as early as 2017.3 Fueling China's growth are a number of national champions4 ready to compete with blue-chip multinationals in cost and technology. This select few own vast assets, generate healthy profits and many have successfully listed subsidiaries on New York and other top-tier exchanges. Sixteen of these companies made the 2005 Fortune Global 500, an annual list of the world's leading firms based on revenue, the most of any developing economy.5 Chinese companies benefit from a high level of research and development, a rapidly growing, but still inadequate, infrastructure of roads, ports and telecoms networks (reducing transaction costs and turnaround times) and an educated and low-cost workforce.6 The main order of the day for these companies is to digest a great deal of modern technology and make their way up the steep learning curve of acquiring the management skills necessary to compete domestically and globally. Growing pains notwithstanding, Chinese companies have become soughtafter partners for multinational companies. Chinese partners have used these joint ventures as a platform to develop their own capabilities, cultivate management skills and learn basic international standards. For example, China's semiconductor industry has grown through joint ventures, resulting in the gap between US and Chinese manufacturing technology narrowing from between 7 to 10 years in 1986 to 2 years or less.7 China can now produce chips that are only one generation behind current technology. Ningbo Bird Company, one of the few private success stories, started out as a contract manufacturing supplier for Motorola and now rivals Motorola in the Chinese cellular handset market. …
Publication Year: 2006
Publication Date: 2006-07-01
Language: en
Type: article
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Cited By Count: 19
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