Review: Made in China: a new economic era Author details challenges businesses face trying to compete Dallasnews.com | Katherine Yung| 22 January 2005 http://www.dallasnews.com/sharedcontent/dws/bus/stories/012305dnbusbo ok.7cd58.html Anyone trying to understand what China's rise as an economic power means for U.S. companies would do well to pick up Oded Shenkar's The Chinese Century: The Rising Chinese Economy and Its Impact on the Global Economy, the Balance of Power and Your Job. The Ohio State University business professor and China expert urges readers to get ready for a world in which Chinese businesses and consumers will exert a powerful influence. "For companies, employees, and consumers, the question is no longer if and when China is coming, for it is already here, but how to prepare for the new economy," he writes. Mr. Shenkar makes a compelling case for China's coming world dominance, filling his book with impressive economic statistics. Factories in China already make 70 percent of the world's toys, 60 percent of its bicycles, half its shoes and a third of its luggage. They also churn out half of the world's microwave ovens, a third of its television sets and air conditioners, a quarter of its washers and a fifth of its refrigerators. And that's just for starters, because China is rapidly moving into high-end products like plasma television sets. Another Japan? Only fools would dismiss the importance of China in the world economy � look no further than steel prices to understand its impact. But some people have likened fears about China to the concerns surrounding Japan in the 1970s and 1980s. Mr. Shenkar argues that China won't turn into another Japan, which is still struggling to recover from a decade of economic stagnation. China's massive population and resources give it leverage that Japan never had. It also receives a far greater amount of foreign investment. In addition, China's vast rural labor supply ensures that it will continue to dominate the production of labor-intensive goods even while moving into high-tech, knowledge-based industries. The Chinese Century provides readers with a historical context for understanding modern-day China's attitudes and ambitions, touching on the imperial period and the first three decades of Communist rule. Other than a chapter devoted to the problem of intellectual property protection, the author only briefly mentions China's other weaknesses and challenges, such as its troubled banking system. But he does get to the heart of what most U.S. executives spend their nights worrying about: how they can thrive against Chinese competition. The options Mr. Shenkar lays out are not reassuring, and all of them are being tried today. New models Some companies will be forced to buy Chinese-made parts to remain competitive. Others will need to move their production to China or, in some cases, Mexico or India. Producers can also try automation or other methods of increasing their productivity in order to compete. And finally, in what seems to be the best solution, they can try to go upmarket by creating more technologically advanced products or innovative ones. "Given the scale of its economy and its increased dominance in many product markets, the continuation of China's export drive will bring about commoditization of product markets that have previously relied on brand name and reputation for differentiation," Mr. Shenkar warns. "With China as the cost leader, manufacturers will have to meet or beat the Chinese 'pricing floor' that rests not only on cheap labor and subsidies, but also on massive use of counterfeiting and piracy to circumvent development costs." He says this kind of pressure on U.S. companies and workers could lead to cries for protectionist measures, trade wars and the return of job security to the forefront of labor negotiations. All of these challenges will test the United States in coming years. And Mr. Shenkar urges American businesses and workers to prepare for them. "As a whole, 'business as usual' solutions will no longer work," he writes. "Firms must rethink their entire value chain, which will likely lead to a new business model or to an outright exit." Katherine Yung covers international business for The Dallas Morning News. ------------------------ Yahoo! Groups Sponsor --------------------~--> Has someone you know been affected by illness or disease? Network for Good is THE place to support health awareness efforts! http://us.click.yahoo.com/RzSHvD/UOnJAA/79vVAA/NJYolB/TM --------------------------------------------------------------------~-> �������������������������������������������������������� This is ZESTEconomics. 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