22 of 23 people found the following review helpful
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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.
15 of 15 people found the following review helpful
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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.
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.
51 of 62 people found the following review helpful
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The Twentieth was the American Century. Of that there can be little doubt as the US became the dominant social, political, economic and military power in the world. But do current rapid economic advances by China allow us to suppose that the Twenty-First will be "The Chinese Century"? It would appear that Ohio State business Professor Oded Shenkar thinks so.
He is clear about the parallel: "China's rise has more in common with the rise of the United States a century earlier than with the progress of its modern-day predecessors and followers." (Read: Japan and the Asian "tigers": South Korea, Singapore, Taiwan, and Hong Kong.) (p. 1) He adds, "If current trends continue, China will surpass the US to become the world's largest economy (in purchasing-power parity terms) in two decades--possibly sooner." (p. 161)
However, as for China dominating the world in the 21st century the way the US has in the 20th--well, I think we can say the crystal ball remains cloudy, maybe even downright muddy. Consider that prior to the assent of Deng Xiaoping as the Chinese leader, China was floundering under the weight of a Soviet-style economy, and had gone through the disastrous "Great Leap Forward" and the horrific "Cultural Revolution." When Deng Xiaoping goes the way of all leaders, what makes anyone think that his replacement will be any better than a host of Soviet leaders or equal even to Mao Zedong, whose political and military genius did not preclude his having a disastrous effect on China similar to that of Stalin on Russia?
Deng had the genius to free the Chinese economy from the shackles of communism in his famous "one country, two systems" vision. Whether such a hybrid vision can long endure is a very good question, and whether Deng's successors will continue his policies is also problematic. My guess is they will be so focused on gaining and maintaining power that they will allow the country to regress economically. Furthermore, should China somehow throw off the communist mantle entirely, who is to say it will not--as Russia has done--revert to a corrupt, bandit sort of economy?
What this book is mainly about is the way China does business today and how that affects the global marketplace, and in particular what it is doing to the US economy. Some interesting points:
"...between 10 and 30 percent of China's GDP comes from piracy and counterfeiting." (p.86) The question is, how does the rest of the world meet this challenge?
"A key reason behind the remarkably fast penetration of Chinese products into the US market is a retail landscape increasingly dominated by large retailers." (p. 149) The largest of these is Wal-Mart "which accounts for more than 10 percent of the US imports from China." (p. 150) Shenkar notes that the Chinese "need...large retailers to take their growing production capacity... Thus, the fates of Wal-Mart and the Chinese industry will remain closely intertwined for years to come." (p. 151)
Right now China leads the world in the manufacturing of toys. It is now or soon will be the number one manufacturer of furniture, and as Shenkar points out, not just low-end furniture, but top-end as well. Shenkar speculates, "Given the general overcapacity in industry and the technological edge of the newer China plants, it is difficult to see how automotive manufacturing in the developed markets such as the United States and Europe will not be affected." (p. 114) Furthermore, most TVs made today are made in China, and that includes plasma and high definition models. The reason for this real "great leap forward" in manufacturing is first the leadership of Deng Xiaoping and incentives from the Chinese government, and second the vast amount of cheap Chinese labor.
But Japan once made the cheapest goods in the world, and then made (as China is now doing) better and better products, and still sold them for less. However, today, the Japanese economy is stagnate and the reasons are mostly cultural. From the evidence that Shenkar presents, I think it is easy to guess that China's economy will eventually stagnate as well, and also for cultural and political reasons.
There is much to chew on and think about in this book, but what I found myself wondering about was the future of the US as a service economy. Obviously, even if China relinquishes some of its dominance in manufacturing, it won't be the US with its expensive labor that will take up the slack. What the US is doing, as Shenkar notes, is becoming more and more dependent on services, especially in technology and education, to maintain its economic supremacy. He warns that "we have no precedent of a major economy that is predominantly dependent on services," noting that successful service economies tend to be small, e.g., "Luxembourg, Hong Kong, and Hawaii." (p. 164)
What I thought about when reading this is that the US can work as a service economy if it continues to (1) have the best universities in the world; (2) be a great tourist destination (with relatively clean air and water); and (3) be a great place to live (freedom and security can make for some very lofty real estate values!).
One thing that Shenkar does not address (although he mentions it in passing) is the horrendous pollution problem that the Chinese already face. Their great cities are looking more and more like London during the Industrial Revolution. What will be the health cost to China in the long run? And will the Chinese people continue to be so productive or will they leave the polluted cities, or worse, revolt?