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The economic growth of China has attracted the attention of many professionals who try to evaluate the long-term implications of this phenomenon. This paper is aimed at examining the competitive strength of international and local firms that operate in China. Furthermore, it is important to discuss the social effects of this economic development.
These questions are important because the increasing manufacturing capacity of Chinese firms can affect millions of people throughout the world. Apart from that, this issue can play an important role in international relations. This is why these questions should not be overlooked.
Much attention should be paid to such a term as competitiveness which can be defined as the ability of producers to retain or increase its market share (Hong 2008, p. 33). These questions can be examined by looking at the operations of domestic and foreign firms that manufacture their products in China.
Overall, it is possible to argue that the competitive strength of these organizations is based on the ability to reduce operational expenses and lower the price for their products. Furthermore, one can identify several impacts such as the improvement of living conditions in China and increased activism in this country. Apart from that, one should speak about the growing unemployment in advanced countries and intense competition in the labor market.
Competitiveness of domestic and foreign manufacturing companies
While evaluating the performance of Chinese-based firms, scholars focus on several aspects. In particular, the competitive advantage of these organizations relies on the surplus and low cost of labor force (Steinfeld 2008, p. 1971). Additionally, economists believe that the majority of exports from China are not technology-intensive (Zhang 2007, p. 94).
In other words, these products are not based on some unique and innovative design that can create extra value for users. Apart from that, these enterprises do not employ technologies that can dramatically increase the volume of production (Zhang 2007, p. 94).
More importantly, a significant proportion of Chinese exports are produced by the affiliates of American or European companies that can bring new technologies to this country (Zhang 2007, p. 94). Therefore, manufacturers located in China can be very diverse, but they benefit from the excessive supply of labor. These are some of the main aspects that can be identified.
Nevertheless, one should remember that labor-intensive production can often give significant advantage of to Chinese manufacturers. For instance, the prices for Chinese products are lower by 30-50 percent lower than the prices set by American-based manufactures (Pan 2009, p. 9).
In some cases, these prices are even lower than the cost of materials in the United States (Pan 2009, p. 9). This is one of the reasons why these organizations can increase their market share. Apart from that, many Western firms decided to move to China in effort to decrease their operational costs.
This strategy has been affected by high-tech companies such as Apple, Google, or Nokia that prefer to assemble their products in China. These corporations have indeed increased their competitive strength; this is why this policy is adopted by other firms. This is one of the main points that can be made.
These examples suggest that the strength of Chinese manufacturers relies on the labor-intensive production. This argument is particular important when one speaks about domestic companies which do not usually manufacture innovative products. In turn, some of the foreign firms can rely on the technology-intensive production, but at the same time, they can benefit from the surplus of labor.
Nevertheless, these organizations use the component parts that came from the United States, Japan, Europe, or South Korea (Steinfeld 2008). Therefore, one should not suppose that China dominates every aspect of the global production. This is one the issues that should be taken into consideration.
Social effects of Chinese economic development
Overall, the trends that were described in the previous sections have several important implications. First of all, the economic growth of China gradually increases the welfare of local workers (Appelbaum 2008, p. 69). Certainly, their income level does not correspond to the standard of living set in North America or Japan.
However, even these relatively low wages can be regarded as a significant improvement in comparison with previous years. These benefits were available mostly to people living in urban areas of the country (Appelbaum 2008). This is one of the first effects that should be identified.
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Another important issue is the growing movement in support of trade unions. Researchers argue that the large concentration of workers in a relatively small area results enables them to join their efforts in order to protect their rights (Appelbaum 2008). This issue is important when one speaks about frequent abuses of workers in China (Appelbaum 2008).
Additionally, increasing interaction among workers can lead to the increased activism. So, the economic development of this country can eventually influence the political culture of this country (Appelbaum 2008). This is one of the main impacts that researchers speak about. So, the growing manufacturing capacity of Chinese businesses can significantly transform this country. Yet, the long-term effects of this tendency cannot be accurately predicted.
Finally, it is important to remember that the economic growth of China influence many people living in the advanced countries. First of all, many European and American firms choose to outsource their operations to China since in this way they try to decrease their costs.
This process decreases the number of jobs that are available to local workers. Thus, the competition in the global labor market has also increased. This is one of the impacts that should be taken into account. Furthermore, the increased strength of Chinese manufacturers decreases the market share of Western manufacturers. As a result, many of these firms are forced out of business (Pan 2009, p. 9). Therefore, the economic development of China has implications for millions of people who may not be living in China.
This discussion indicates at several important issues. First of all, local and international companies rely mostly on the labor-intensive production which means that they have access to less expensive labor. This is how they gain competitive advantage over their major rivals. This tendency can affect various societies.
In particular, it can lead to the relative improvement of living standards in China. Furthermore, this trend can eventually result in the political transformation of China. Finally, one can argue that this development can influence millions of people who have fewer opportunities for finding a job. So, this process makes the global market more competitive. These effects should be taken considered by people who examine the social development of China as well as other countries.
Appelbaum, R 2008, ‘Giant Transnational Contractors in East Asia: Emergent Trends in Global Supply Chains’, Competition & Change, vol. 12 no. 1, pp. 69-87.
Hong, W 2009, Competitiveness in the tourism sector: a comprehensive approach from economic and management points, Springer, New York.
Pan, C 2009, ‘What is Chinese about Chinese Businesses? Locating the ‘rise of China’ in global production networks’, Journal of Contemporary China, vol. 18 no. 58, pp. 7-25.
Steinfeld, E 2004, ‘China’s Shallow Integration: Networked Production and the New Challenges for Late Industrialization’, World Development, vol. 32 no. 11, pp. 1971-1987.
Zhang, K 2007, ‘International Production Networks and Export Performance in
Developing Countries’, The Chinese Economy, vol. 40 no. 6, pp. 83-96.