Download Enhancement of competing abilities of the Chinese industry in the

Enhancement of competing abilities of the Chinese industry in the
context of Economic Globalization
Han Lu
Xu Qun
School of Humanities and Economic Management, China University of Geosciences, P.R.China, 100083
：
Abstract In the context of economic globalization, how to increase the international competing ability
of our nation’s industry has become a very important and urgent task. This paper emphasized the influence
of global economic integration to our country, analyzed the actuality of the international industry
competitive power of our country, and pointed out the existent major problem of it. Based on the analysis,
this paper proposed the countermeasure and the mentality to improve the international Industry
Competitive Power of our country.
Key words: Economic Globalization, Industry Competitiveness, Ranking of industry competitiveness
1
Performance and Influences of the Economic Globalization
As China becomes a member of the World Trade Organisation (WTO), global economic integration has
become a reality to all enterprises in our country, and it has brought a number of direct influences to our
country’s economy.
1.1 Large flow of foreign capital into China
Within the period of more than 20 years since the open policy first commenced, there has been a gradual
increase in the number of foreign capital. In 2004, the amount of Chinese contract foreign capital was
USD 153,500,000,000s, representing an increase by 33.4%; the actual use of direct foreign investment
was USD 60,600,000,000, increased by 13.3%. The massive in-flow of foreign capital helped alleviating
the shortage of capital in our country, improving our country’s investment structure, and bringing in
advanced technology and management experience, which are instrumental to the economy development
of our country.
1.2 Rapid development of foreign trade
Another performance of the economic globalization is the significant growth of foreign trade, which has
already developed to become an important integral part of the Chinese economy. The continuous increase
in foreign capital had also bring in a large amount of international business, as reflected mainly in the total
amount of import and export.
The related statistics of the State Statistical Bureau showed that, in 2004, the total amount of import and
export in China amounted to USD 1,154,800,000,000, an increase by 35.7% as compared to last year. This
included an export amounted to USD 593,400,000,000, representing an increase by 35.4%; and import
amounted to USD 561,400,000,000, as increased by 36.0%. The rapid development of foreign trade had
highly motivated the national economic advancement. In recent years, more than a quarter of China’s
annual economic growth was due to foreign trade.
879
1.3 Economic development urbanization
With the process of global economic integration, our country’s industry has risen rapidly in the successive
years. It has created much fortune as well as offered many employment opportunities. At the same time,
following the increase in the degree of automation in agricultural production, it has freed more labor force
from agricultural production. The excess labor forces from rural areas had moved towards urban area in
such a large extent, which had led to the urbanization of economic development. It had also given rise to a
series of problems, such as, the transportation congestion, increasing housing prices, increasing demand
for job market, etc. All these are the direct performance of the urbanization of economic development.
2.
The Chinese industry in the context of International Competition
The international competition ability of industry refers to the competing abilities of industry in a country
or an area in the context of the international economy under the circumstances of free and fair market. It
represents the advantage of the industry in the international competition. Under the economic
globalization, the international competition ability of industry has an important meaning for measuring
the total economic development level of a country. Nowadays, there are two significant international
authorities involving in the evaluation of the international competition ability - the World Economic
Forum (WEF) and the International Institute for Management Development (IMD) in Switzerland. These
two organizations use a number of weight comprehensive method to evaluate the international
competition ability of all nations and regions.
In recent years, the international competition ability of the Chinese economy has been increasing. The
WEF Global Competition Ability Report of 2004-2005 showed that the China’s global competition ability
is ranked at 46 out of 104 nations and regions. The macroscopic economic environment index number is
ranked at 24; The technique index number is ranked at 62; the public organization quantity is ranked at 55
and the business competition ability is ranked at 47. These statistics basically reflected the position of the
Chinese industry economy in the global economy.
2
Existent Problems of the Chinese International Competition Ability of
industry
Although the Chinese ranking in the international competition ability has improved in recent years,
Chinese enterprises still face a number of problems in their international competition ability as resulting
from some historic reasons and the current condition of the Chinese economic development and they are
outlined as follows.
3.1 Excessive government intervention and the lack of environment for healthy competition
Although China has successfully become a member of WTO, this does not mean we have actually had a
healthy environment of market economy. In a number of areas, we can still find the shadow of the old
planning economy, and the government still plays some parts in the management of the related
competition industry, and this becomes an obstacle to a healthy environment for enterprises. With its
special background, the state-owned economy still has unique advantage over the accumulation of capital,
mobilisation of human resources and technology and is competing unfairly with the non state-owned
economy. This will no doubt has an impact on the enterprise competing ability, disregard whether they
have advantage or not, as they could not rely on the internal rules of market economy to strengthen their
competing ability.
880
3.2 The weakness of overall strength of Business Enterprise
In the past decades of development, every Chinese business sectors have cultivated some large and
powerful business enterprise groups. But overall, the strength of these groups is still not strong enough, as
compared to the Multinational business groups, as shown in the amount of capital, profit making ability
and international market share.
Relevant sources show that, in 2004, Wal-Mart’s sales income was amounted to USD 263,000,000,000,
British Petroleum was USD 232,500,000,000, GM was USD 195,300,000,000, GE, in general, was USD
134,100,000,000, and Japanese Telegram Telephone Company was USD 98,200,000,000. At the same
time, in 2004, the income of China National Petroleum Corporation was amounted to USD
56,300,000,000, China Petroleum & Chemical Corporation was USD 55,000,000,000, China Mobile was
USD 20,700,000,000, and Shanghai automobile was USD 11,700,000,000. The above data shows the gap
in overall strength between the Chinese and foreign business enterprises. Furthermore, the main business
focus of the Chinese large business enterprises is in the domestic area, with very small portion in
international business. In the context of global economic integration, the big Chinese business enterprises
are unable to attain internationalization of their business, and thus lowering their ability to resist risks, and
this, in turn, will affect their competing ability in the international market.
3.3 Comparatively less advanced management method and strategy
The less advanced management method is a crucial factor hindering competing ability and in the short
term in future restraining the development of the Chinese business enterprises. Based on research using
factors including environmental competing ability, internal competing ability and management competing
ability, the international competing ability of the Chinese enterprises is flowing round the rank of 40. In
terms of the management competing ability, the only advantage of Chinese business enterprises is the
lower labour cost. There is still a big gap compared with other developed countries in the areas of labour
productivity rate, management outcomes and corporate culture.
The backward management is not only reflected in the organizational structure and marketing approach, it
also shows in the management of human resources. Since the open policy has been carried out, we have
been actively absorbing and digesting the advanced technique and equipment from overseas.
Comparatively, study and absorbing of the modern management especially the management idea,
methodology and systems of human resources are obviously not abundant. Particularly, after becoming a
member of WTO, the traditional concept of using people was proved to be not suitable for the needs of
modern enterprise management. Enterprises are lacking of a reasonable and effective set of talent
recruitment, training, and training methodology. At Present, the international competition ultimately
focuses on talents for the enterprises. Without the reservation of talents stock, its international competing
ability will be reduced. For the enterprises in our country, whether to establish a stable and effective talent
system is the key point for their development in the coming days.
3.4 The Shortage of The Advanced Technique
As mentioned earlier by referring to the report of global competition abilities of 2004-2005, China only
ranks at 62 in the technique index number. Comparing this with the macroscopic economic environment
index number rank, the technique index number is obviously low, and this exposes the core technique
difficulties that our country is facing.
In recent years, our country’s business enterprise did not make high profits based o n advanced technology,
it is mainly by mean of the advantage in terms of low cost and cheap labor force. The majority of business
881
enterprises do not own real core techniques, and they are short of creative ability, market contingency
ability and the ability to launch new product. In addition, they have an unreasonable strong desire to gain
short-term interests and do not have the long-term strategy.
This problem is most apparent as reflected in the low expenses invested in the development and research.
The International large business enterprises would take up to 15% of the income in research, but in most
enterprises in China, this research expenditure could be as low as 1% -5% in the sales income, for a
number of small business enterprises the amount could be less than 1%. The irrationally low expense put
in development and research has directly reduced the core competing ability of an enterprise, thus to be
manipulated by others. Take the manufacturer of DVD in China as an example. Due to the lack of core
technique, they have to pay a high amount of patent fee to the cooperated foreign manufacturers. If local
enterprises remain shortsighted, and do not enlarge the technology research construction, the same
incident will happen more frequently in this field.
4
Strategies to improve the International Competing Ability of Chinese Industry
At present, how to raise the international competition ability of our country’s industry has already become
an important issue of the whole national economic development. Here are a few options for consideration.
4.1 To Establish a Sound and Perfect Market economy environment
A perfect market economy environment is a necessary means of promoting our country’s industry
competing ability. Only the real market economy environment makes it possible to promote the
international competing ability of industry. In the market economy, government should play a role to
support business enterprises, and not directly participate in the competition of business enterprises. Thus
business enterprise then can be placed in a fairer environment.
Indeed, this will require government to change its working functions. The government needs to gradually
withdraw from competing in the business sectors, and at the same time, to enlarge its commitment to
public sectors, and take a stronger role in monitoring – to introduce a strict and reasonable standard for
industry and strengthen industry market. In the process of regulating the economy, it is better off to adopt
marketing approach and use less in term of direct administrative intervention. This will help to develop a
healthy legal environment, strengthen law enforcement supervision, and protect the legal right of the
enterprises and customers. This will also help to reform the unfair finance and tax systems, and abolish the
internal unfair policies amongst foreign invested enterprises, state-owned or not state-owned business
enterprises, based on the deregulation of finance and taxation.
A real market economy is established in the context of the global economic integration. It is this market
economy that can lead to the increase in international competing ability of industry.
4.2 Accelerate the adjustment of the Industrial Structure
In the past twenty years and more, labor-intensive industries in our country have obtained fast
development, which is suitable to our country’s entry-level stage of socialism. It made a significant
contribution to improving the living standard of most people, bringing in prosperous and stable
development of the society. Among these industries, clothing industry made the most outstanding
contribution.
As shown in statistics, in 1980 to 2001, the total amount of the world’s clothing exports had increased by
4.86 times. In the same period, the export of Chinese clothing had increased by 21.81 times, USA by 5.56
882
times. Developing countries like Thailand and India each of which had increased by 13.26 and 10.22
times respectively. Since 1994, China has been top of the world in terms of production and export of
clothing. In 2003, the export value of China’s clothing represents 20.56% of the world total exports. If the
re-export trade via Hong Kong was added to this, the China’s clothing export was indeed the world
number one. According to the data shown in WTO 2001 annual report, among the world’s main clothing
import and export nations, the clothing competition ability coefficient of China is 0.94, very close to the
maximum value of 1, ranking the top of all countries.
Judging from a longer-term perspective, our country’s intensive-labor industry, which comprises a larger
portion of all industries, is not good for improving our country’s industry competing ability. This requests
us that, as from now, we should accelerate the progress of industrial structure adjustment, bringing in
various creative mechanisms, enlarging the range of products with high affixture and high technique, and
guiding various resources towards intensive technique.
Our country should support those industries with higher focus on technology through industry policy, such
as electronics industry, automobile industry, machine-manufacturing industry, and high new technique
material industry. We should take initiative in developing high and new technique industry and high
additional value industry, thus to make them become the predominant industry in the national import and
export economy. The integration of these industries is very high, and each has its own tight set of industry
chain. We need to develop these industries, and at the same time, promote the development of other
related industries, and give rise to the traditional intensive-labor industry as well. Therefore, developing
the industry of high processing, high added value, and high-tech content is the necessary choice to take
our country in the way of promoting industry competition ability.
4.3 Increase the ability of the industry to restructure
The small-scale industries and their relatively lower labor efficiency manifest the inequitable layout in our
industry and they are the main reason for the lower overall competing ability of our country’s industry. To
resolve this problem, we can carry on the property reorganization for the business enterprises, realize the
optimizing configuration of social resources, and raise productivity efficiency.
Through more than ten years of development, our country’s capitalist market have already completed the
task of optimizing resources. We can apply the function that had been implemented by the capitalist
market to carry out necessary reorganization of enterprises, which should be an inevitable choice of
optimizing configuration of capital and social resource for enterprises.
We must allow for those unprofitable old state-own enterprises to go bankruptcy, relieving the national
finance from undergoing the burdens caused by maintaining these old state-own enterprises. Only in this
way can the market economy embody the effect of the survival of the fittest. At the same time, the
state-owned business enterprise should withdraw from those areas that are competitive, and leave this to
non-state-owned capital, in order to avoid the unfair competition between state-owned economy and
non-state-owned economy in these professions. And they should exert a full role of its characteristic to
devote more capital into public use.
For business enterprises with technique advantage and scale advantage, they should be given the
preferable policy and encouraged to reshuffle and reform the enterprises with a inferior position, by means
of consociation, annex, procure, bankrupt, and realize optimizing configuration of resources as well as
enhance the concentration degree of the enterprises. Thus, in the long run, they could be grown to the large
competitive enterprises in the international market.
883
4.4 Creating Core Technology for Enterprises
To a large extent, competition of modern business enterprise represents competition on technology. It is
not naïve to say that technology is the source of life for business enterprises and it controls the core factor
on the degree of industry competing ability. In the context of the global economic integration, every
multinational enterprise spends a huge amount of manpower and material resources on technology, in
order to achieve achieved a rapid development. Those who have the most advanced technology in the first
place can get the market in advance. We can make the use of the current accomplishment of science and
technology to acquire the most advanced techniques.
In the past over 20 years, our business enterprises have already mastered and adapted on how to get
needed technology from others. However, as a nation, if it wants to make the industry with competing
ability, it needs to depend on doing research and development and innovations by itself to acquire more
techniques. The nation should encourage business enterprise to be more committed to science and
technology, putting an emphasis on the technicalization process of the electronics information, aviation
aerospace, the bio-engineering and modern medicine, precise machine manufacturing, new material,
photoelectron, and the integration of machinery, etc. Guide the business enterprise to combine its
advantage with the market, to accelerate the ratio of technology achievement transaction, to form the
bigger scale economy, and to strengthen the international competing ability.
4.5 Carry Out Scientific Management of The Business Enterprise
The low management ability of the business enterprise is an important reason for our country’s low
industry international competing ability. This urges us to improve the business enterprise management
control and to carry on scientific strategies of management control. The business enterprises of our
country should usher in the professional management talents and strengthen the information-based
construction, while should not remain in those traditional employing systems and management methods.
The successful experience of big international companies tells us that, only by the modern science
management, can they get valid integrations of various resources of business enterprise. Meanwhile, we
should draw up the famous brand product strategy to create the famous brand product, develop the
international brand, and establish its international image. Each powerful business enterprises should make
its own dominant product, famous brand product and world rank product, at the same time, make the
existing famous brand product more competitive. It is needed to carry out the local famous brand product,
as well as walk out actively, let the international market know our products and accept them, so that more
products like Haier could come out form China.
5
Conclusion
Raising the international competing ability of industry requests our country’s business enterprises to walk
out and strengthen the international capital management ability. If condition permits for some business
enterprises, they should actively carry on international financing, international investment, international
capital cooperation, and develop the multinational capital management, at the same time of producing
productions. The nation needs to encourage the qualified Chinese business enterprises to carry on the
multinational buying, international strategic alliance, overseas investment, and positively performs to
support in the policy. When the overseas business enterprises came in large scales, we should walk out
bravely. Firstly, Chinese business enterprises should buy the foreign business enterprises, and then get the
international market gradually, so that we can improve the ability of resisting the risks and raise the
international competing ability.
884
References
[1] Lan Qingxin, Wang Shuying. The economy comment on[ J].2002(1).
[2] World Economic Forum. Global Competitiveness Report 2004-2005[R].2005
[3] National Bureau of statistics of China. China Statistics Yearbook of 2004[Z] Beijing: China Statistics
Publishing House,2005.
885