« America, the Green Giant |
Blog Home Page
| More guns, less crime »
December 15, 2005
China's exports in perspective
In the past few days many stories in the mainstream media have noted a new study released by the Organization for Economic Cooperation and Development that shows China has surpassed the U.S. as the world's top exporter of high—tech communications and information products such as cell phones, laptop computers and digital cameras.
Once again, the editors at New York Times (and its subsidiary publication the International Herald Tribune) have shown their ignorace of how many multinationals operate in today's competitive global environment.
According to the report, the value of China's combined exports and imports of such goods soared to $329 billion in 2004 from $35 billion in 1996. Over the same period, the value of U.S. information technology trade expanded at a slower rate, to $375 billion from $230 billion.
With its large population of semi—skilled laborers, China's economy has long been dominanted by labor—intensive industries. Now a story by Mr. David Lague in the IHT proclaims:
This passage creates the false impression that many Chinese firms like Lenovo are gaining ground on their American rivals in areas involving the most advanced technology. In this story, Mr. Lague overlooks some critical points:
First, the main reason China has increased its high—tech exports in recent years is that more American companies like Dell are setting up shop in China and exporting finished products to the U.S. In fact, around 60% of China's total exports come from the final assembly factories of foreign—invested firms.
More importantly, much of the critical technology, which creates most of the product's value, is still imported from subsidiaries in developed countries (like Japan and Singapore).
Second, multinational companies from countries such as Japan and Taiwan are doing the same, meaning that the U.S. imports of electronics from these countries are falling while they rising from China.
Third, when Chinese companies, like Lenovo and Haier try to acquire famous brands in the West, this shows their marketing weakness, not their strength. Many Western firms have much more experience in building a brand reputation in a foreign market. Earlier this year, many experts claimed Lenovo was overpaying for IBM's struggling PC division.
In another article in late August, I wrote that China has, as many American firms have painfully realized, many hidden weaknesses as well:
As an American instructor of business management in Beijing and Shanghai for the last five years, I'm becoming increasing convinced that the Chinese economy in the years ahead will not be as strong as many so—called Western journalists like Mr. Lague and his colleagues at the New York Times would like readers to believe.
While it is true many Americans and Europeans face the possibility of layoffs and lower wages caused by intense Chinese competition, we should not underestimate American hidden strengths.
Brian Schwarz 12 15 05