"China-made": the unpopular internationalization
Last Updated(Beijing Time):2004-11-25 17:18
From LG to Mitsubishi, from GE to Toshiba, from Siemens to Electrolux, from Philips to Whirlpool, from Nokia to Motorola, from DELL to IBM, from Disney to Mattel…,China manufactures products of almost all famous brands in the world. More than one hundred types of China-made products in the fields of home appliances and electronic toys account for the largest market share in the world. Thus, some people predict that the term "China-made" will replace "Japan/US-made" and "Europe-made" to become synonymous with the manufacturing sector in the new century.
However, apart from excitement and glory, the Chinese should see the plight of China-made products in the global background.
Plight 1: struggling at the lowest end of the value chain
In fields that it holds superiority, China contributes most products to the world and takes up the largest market share. However, it earns very low profits. Take Barbie doll for example. Data from the US Department of Commerce shows that for a Barbie doll priced at US$9.99, with the cost of raw materials $0.65 being deducted, the product generates an added value of $9.34 when it reaches the end consumer. Chinese enterprises earn merely $0.35, taking up less than 4 percent in the total value added, while American toy manufacturers and retailers earn 23 times more than the Chinese enterprises do. The gap is even wider in terms of net profit.
Mr. William Fung, board chairman of Li & Fung, which is the largest apparel and textile dealer in Asia, introduced his well-known "3-dollar theory", which lively interprets the plight of China-made products from another angle. He said, "On the average, there is a difference of $3 between a factory price of $1 and a retail price of $4. We would rather focus on the $3 than compete for the meager $1 manufacturing cost." Unfortunately, Chinese enterprises are precisely fighting for the $1.
Plight 2: losing superiority in the home market
Thanks to various local advantages, Chinese enterprises should do better in the home market than aboard. However, the fate of Chinese enterprises has not changed because of the local advantages. In the past more than a decade, foreign-founded enterprises have grabbed over one third of GDP of China's manufacturing sector and more than half of imports and exports, with unfaltering growth momentum. According to a 2003 report on a survey conducted by US Chamber of Commerce on 254 American companies, three-fourths of the companies say they make a profit in China, and more than half of them make higher profit in China than the global average.
Plight 3: unpopular internationalization
China brings fine products at a low price to the world. Thus, presumably the globalization of Chinese products should be popular worldwide, just as China welcomes foreign companies and products. However, the fire set on the Chinese shoes shops in Spanish city of Elche recently burned China's wishful thinking. The friendliness on the part of the Chinese Government and the public do not win equal courteous reception for China-made products in the international community. At the same time, the U.S. and Europe launch an endless succession of antidumping lawsuits against Chinese products, with the grounds that China's low-price products pose a threat to relevant industries and staff in these countries.
A threat more formidable than low price comes from fakes that Chinese products are imbued with. According to statistics from the US customs, in 2003, of shoddy products caught at US ports, products from China accounted for 66 percent, far higher than the figure for Hong Kong (5 percent), which ranks second and that for Mexico (4 percent), which ranks third.
The rampant fakes severely impair the international reputation of China-made products. Several years ago, US electronic manufacturers staged a "No China" campaign, clamoring to "keep away from Chinese parts". If this goes unchecked for long, Chinese enterprises may not even keep the smallest share.
Source:CE.cn
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