22 of 23 people found the following review helpful
- Published on Amazon.com
Since I regularly read journals dealing with international business and manufacturing, I am aware of the trends. However, until I read this book, I had no idea how dramatic the rise in the economic power of the People's Republic of China has been. From the figures in this book, it is clear that the phrase, "The cold war is over and the Chinese have won" is true. Current projections are that in less than two decades, the economy of the P. R. C. will surpass that of the United States. If the economic activity of the Chinese mercantile class living in other Asian nations is factored in, then the timeframe is even shorter.
In area after area, from clothing to toys to furniture, manufacturing is shifting to China. Even the traditional low cost countries such as Mexico, Haiti and Honduras are losing manufacturing jobs to China. The figures on the number of Mexican jobs that have been exported to China are amazing and disturbing. Many of the employment gains that Mexico expected to have due to the NAFTA accords have been lost to China. American jobs being lost to China is not surprising, but the movement of jobs throughout the entire Western Hemisphere indicates a global transfer of economic power.
This rise in economic power will lead to a corresponding increase in political and economic power. Many of those trends are also described, including some of the early responses by those who study U. S. national security. I was also impressed with the prescience of the Chinese leadership in their dealings with leaders in the United States. By adopting a policy of divide and conquer, they have been able to stave off attempts to restrict their activity. Since any attempt by the U. S. government to slow the expansion of P. R. C. involvement in one area will reduce the market opportunities of another group, every attempt to do so is quickly squashed. There is no better example than that on page 173, "With such strong internal support, it is no wonder that China can afford to spend less than desolate Malawi on paid U. S. lobbyists."
Here are some sample statistics. On page 111, "According to ATMI, the U. S. market share of brassieres made in Mexico is projected to fall from 47 percent in 2001 to 6 percent in 2004; China's share is expected to rise from 5 to 67 percent." On page 106, "Between 1996 and 2002, U. S. imports of Chinese household furniture rose more than six fold from $741 million to $4.8 billion." Later in the page, a comparison was made between the prices of a bedroom set made in the U. S. ($22,755) to a comparable one made in China ($7,070).
In the 1980's Japan was considered the great economic threat arising in Asia. That turned out to be false, Japan has been economically stagnant for years. Some people argue that the situation with China will turn out to be similar. However, there are many reasons to believe that this is a false premise. China possesses more people, resources and is much more adept at managing their relationship with the American community. I strongly recommend this book if you are interested in being carried by the wave instead of being buried by it.
13 of 13 people found the following review helpful
Wharton School Book Reports
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Barely thirteen years ago, Michael Crichton chose Japan's growing economic power as the subject of his thriller Rising Sun. What, besides Japan, could scare Americans as much as the raging dinosaurs of Crichton's previous book, Jurassic Park? But the sun failed to rise. Today, when Americans look East, it's China they're usually worrying about.
Will China ultimately become the next Japan, hobbled by internal weaknesses? Not likely, argues Oded Shenkar, author of Wharton School Publishing's latest book, The Chinese Century. Rather, China will leverage its growing advantages to redraw long-standing economic, political, and security arrangements-potentially to the West's great discomfiture.
China's size gives it crucial advantages over other emerging economies, writes Shenkar. Its enormous worker supply lets it keep moving up the technology scale without raising costs. Its huge markets allow it to drive hard bargains on technology transfer. It benefits from regional leadership, and a vibrant and entrepreneurial overseas community.
Local firms like TCL, Haier, and Lenovo-which just purchased IBM's PC business-are beginning to build solid global brands. Meanwhile, America's shift to Wal-Mart style discount retailing has been a perfect match for China's low cost structure and massive production capacity. Even China's physical and regulatory infrastructures are progressing, though China still hasn't cracked down on the massive intellectual property theft that's often substituted for innovation.
In short, when it comes to long-term global impact, Shenkar believes the best analogy isn't Japan (or India or Singapore): it's the U.S.'s emergence as a world economic power a century ago.
There's little encouragement here for American manufacturers. Some will survive by exploring product lines requiring specialized capabilities, or those where labor constitutes a small percentage of cost, or by moving upmarket. But the Chinese are automating and moving upmarket, too. Services may remain an option. In certain product categories, so does customization. But many companies will find themselves outsourcing everything-or simply exiting markets.
What are the broader economic implications of China's ascendancy? Shenkar outlines three conventional scenarios, finding flaws in each. He seems especially skeptical of the hopeful "soft landing" scenario, which posits a gradual decline in trade imbalances as China's costs rise and U.S. productivity accelerates.
While China is now the U.S.'s fastest growing export market, shrinking the trade deficit will require exports to keep rising 25% annually while import growth plummets below 10%. A soft landing assumes China will gradually change exchange rates, open markets, eliminate subsidies, and make a genuine effort to "buy American"-doubtful propositions, in Shenkar's view. It also assumes the U.S. will quickly climb to higher-end production, but "the US will not be the only nation trying to move up the ladder as a way of escaping vicious competition at the bottom... life at the top will get pretty crowded."
The Chinese Century is sobering, especially if you believe that economic power drives geopolitical and military power, too. But if you're determined to base your decisions on reality, it's a must-read.
12 of 12 people found the following review helpful
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Shenkar's book about China's (coming) economic might is easy to read. It is intended for those reader who are new to the subject. For me it was disappointing. It presents few new aspects. It is not really the scholarly work I was looking for. It lacks precision, includes few references and is sometimes wrong. For instance, Japan now runs a trade surplus with China not a large deficit as the book claims. In one figure payments and receipts are erroneously interchanged. The frequent use of "will" demonstrates that this books stands in the tradition of "Japan as No. 1" and "the American challenge" although it claims not to do this. Shenkar does not give hard evidence for many of his assertions and predictions but bases them on examples. For instance, lower exports from the US to China compared the Europe are explained by European bribes and subsidies, but it can be also due to different export structures.
In the last section of chapter 6 Shenkar notices that there are actually companies that do export to China but keeps silent on the reasons for their success. The book is therefore not useful on this account as well. The tables and graphics are not up to date and copied from other publications. They often end in 2001 or even 2000. A much more detailed and up to date overview on China presents the OECD's "China in the World Economy".
As a side note, the book (as well as others) is as much about the US as it is about China. China is seen only in negative colours. For instance, over and over the negative trade balance between the US and China is discussed while other countries' trade balances with China are often quite balanced. What is not mentioned in the book is that most of the developing countries including China and many developed countries are weary as well, about the US dominating their lives and economies with McDonalds, Nike, Microsoft and Starbucks, with Hollywood and US accounting firms. From their perspective, the wave of exports to the US doesn't seem to be such as bad thing but only a fair counter weight.
15 of 16 people found the following review helpful
- Published on Amazon.com
This is a superb book on the burgeoning Chinese economy of the twenty first century and its impact on the global economy in general and the USA in particular. My impression about China being a low cost manufacturing base and a major exporter of cheap labor intensive products stands corrected after reading this book. The most populous country is way ahead in her spirited economic journey and the forecasts of becoming the world's largest economy in PPP terms within the next two decades seems realistic and achievable.
With a brief introduction and prospects of a glorious future, the book gives us a broad historical perspective of the Chinese history and culture. The rich heritage and Confucian principles have withstood the test of time. The country was responsible for important inventions like paper and gunpowder. Unfortunately the powder was not dry when needed against foreign invasions and many inventions remained on paper. This humiliation and the setback during the first few decades of the communist regime set the Middle Kingdom's clock back in terms of economic progress. However the economic reforms launched during the last quarter of the twentieth century is a massive effort to restore the lost glory of the great nation.
The book points out several dichotomies about China. It is a communist country but the share of the government in the economy is very low. It attracts large foreign investments but does not protect intellectual property rights. Highly competitive markets in some segments and huge subsidies in others. High savings rates but weak capital allocations. These aspects coupled with the tight bureaucratic communist party rule over the executive, legislature and judiciary makes it a highly complex place to understand and do business in for outsiders. However for most multinational companies, the Chinese market is too big to be ignored and it is worth understanding and putting up with some problems for a short while.
If piracy is about stealing ideas and using them in ones own products, fake and counterfeit are about imitating branded products and selling them under the same brand name. China is a global leader in this area too. It is no surprise that with a corrupt bureaucracy such practices thrive incurring revenue losses conservatively estimated in excess over $ 20 billion annually to global firms. This appears to be the most challenging area to be tackled. While manufacturers of spurious items make hefty profit margins with no costs on research, the rightful owners of the brands are saddled with warranty costs and loss of reputation for bad products in the market. The book has devoted a chapter to discuss this menace.
Several Industries ranging from toys, electronics and home appliances are discussed extremely well in terms of how China is emerging as a global leader in such items and also how fast the country is moving up the value chain.
However there are major risks associated with China that can spillover and might threaten a regional or global economic meltdown. The Chinese currency is pegged to the dollar and undervalued. The excessive dependence on external trade with one major trading partner adds to the risk. The country is very weak in services especially financial services and this is further amplified by huge bad loans sitting on the books of Chinese banks. The speed of progress and transition of the economic landscape needs extreme care and dexterity under such conditions.
The book's analysis of how the China factor impacts the American or Mexican economies can be extended to many other countries using the same logic and framework.
A must read for managers, economists, MBA students and all those who are interested in the understanding the great economic engine of the century.
11 of 11 people found the following review helpful
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If you have already read Ted C. Fishman's comprehensive tome, "China, Inc.: How the Rise of the Next Superpower Challenges America and the World", then you may feel author Oded Shenkar may not have that much more to offer on the topic of Chinese economic dominance in the new millennium. That was certainly my excuse for delaying my attention to this book. My assumption, however, turns out to be unfounded, as Shenkar's book takes a more incisive look into not only the business dynamics of China but also what price the country seems to be paying to seize a sustainable global competitive advantage in the future. The author, a global business management professor at Ohio State University, pulls few punches in showing how China benefits from its unique positioning without paying comparable attention to ethical concerns around the environment, piracy and other "hot button" topics which understandably compromise our efforts here.
Shenkar points out how many multinational industries and firms, especially US-based ones, have been caught unprepared, failing to realize the threat to their current business model or the sudden acceleration of structural shifts that in the past took decades to consummate. The author doesn't hold severe judgment against the US policymakers, but he focuses quite a bit on the lax controls on intellectual property rights that make it risky for outside companies to do business there, even while China negotiates (and apparently steals, per Shenkar) technology knowledge from the U.S. and elsewhere. It is this blind spot where he puts the US to task, and were it not for the constant turmoil in the Middle East, this would be more likely a front page topic. As it stands, the expedient Chinese economic advances are only starting to send shockwaves stateside.
As Fishman makes clear in his book as well, China is already the dominant manufacturer and exporter in labor-intensive industries thanks to its abundant and inexpensive supply of labor, and it's moving quickly to establish dominance in technology-driven industries. Shenkar lists some startling statistics - China currently builds half of the world's microwave ovens, one-third of the television sets and air conditioners, a quarter of the washers and one-fifth of the refrigerators. These products represent their fastest-growing exports, but the buck doesn't stop with the manufacturing sector. Although China doesn't have a history of supporting entrepreneurial activities or a strong service sector, it's getting heavily involved in a broad range of industries, which allows them a broad net for development given the size of their labor force. The author also accurately points out that China is not a standalone in its development and that other economies are also increasing in dominance and integrating with China's juggernaut approach.
The book's real eye-opener is not so much the degree of piracy occurring in China but the fact that as much as one-third of China's GDP comes from piracy and counterfeiting, including more than 90 percent of the country's software and 95 percent of its video games. The reason pirated products are so wildly popular is that customers love their value proposition. After all, it comes down to a basic economic tenet - products are not worth what the manufacturers say they are worth but what customers are willing to pay for them. Shenkar says that five of six of Yamaha motorcycles in China are indeed fake. Yamaha's parts suppliers apparently sell real Yamaha parts to fake-Yamaha assemblers. No stone appears unturned, as the same counterfeiting goes on for products as diverse as razor blades, cell phones, drugs, chewing gum, and shampoo. Most intriguingly, electronic chips are reverse-engineered and modified to allow third parties to write add-ons, creating fake chip value chains. Fake car parts are unwittingly built into real cars which ironically exposes the real manufacturers to liability. In some cases, the craftsmanship behind the fakes is so good that even the manufacturers can't tell the difference. Outgrowing the usefulness of pirated products within their own boundaries, China, as Shenkar accurately assesses, sees the new frontier for piracy is export.
Even with all the foreboding information, Shenkar is insightful enough to see China's emergence as a great opportunity and offers some strategies and tactics for companies to be successful in this new economy. For example, he asserts that American companies use copy-proof design methods in the creation of their projects. He thinks this is long overdue as multinational companies need to come to terms with the fact that the value (or at least life span) of intellectual property may be less in the future than it has been in the past. Once the unique circumstances of each product and industry are clearly delineated, Shenkar says companies need to seal all the exits by spending more on litigators who can make it painful for pirates to fake products and thus encourage the Chinese companies to steal their ideas elsewhere. Multinationals can also concurrently redesign business processes to make it more difficult to steal. With a certain amount of boldness, Shenkar recommends not doing China joint-ventures, which function as a springboard for stolen ideas, technology, and products. Instead, he recommends focusing on products with shorter life cycles which would leave pirates stuck with warehouses full of outdated products. Price slashing is yet another way to minimize Chinese leverage and make piracy less profitable.
The beneficiary of all this concentrated activity may be the US consumer since it looks like China's piracy epidemic may prove to be the great profit-margin equalizer. Shenkar's book is invaluable in showing how to refocus strategies toward the Chinese economic juggernaut and leverage what they are already doing so well. He convincingly shows how misguided it is for the U.S. government to pressure China to let the value of its currency float upward. Bottom line, a significant increase in the value of the yuan still does not offset the price advantage of China's labor-intensive products. His recommendation to make our own value proposition unique and non-duplicative is the most credible strategy I have heard on the topic. This is strongly recommended reading.