03/03/2014
Presentation of Corporate strategies in China by Dominique Jolly
The Chinese GDP growth has been outstanding the last
couple of years. It reaches 8,227 billions of dollars in 2013. That makes
China, the second world power behind the United States.
Four good news
a) Mutation of the legal framework
Since China opened its barries to the world, the legal regime is getting closer and closer to the international standards. The trigger of this action relies on the entry of China at the WTO in 2001. However, there is still a lot work to do in terms of individual protection (i.e: danone vs Whahaha which had to split up because of non-respect towards the legal regime by Whahaha). The majority of the litigation proceedings (70, 000/year) regarding the intellectual property are due to conflict between Chinese businesses. That is good news because it means that Chinese companies are starting to innovate, therefore they are trying to protect their inventions.
b) Creation of technologies in China
Even though there is a difference between China and Europe or between China and the United States in terms of technology created, china is slowly starting to become an important actor.
- Among the 2300 Chinese Universities, 100 own a Research Centre and 10 of them are in the worldwide ranking (Fudan University, Beijing University, Tsinghua University, Nanjing University…).
- Apparition of scientific and technic parks over 3 areas: Beijing, Shanghai and Canton.
- A lot of Chinese companies invest in R&D: BYD, Ienovo, Haier, ZTE, Huawei …
-More than 1500 Chinese companies opened R&D centres in China in diverse industries (Chemistry, electronic, agri-food …)
- R&D investment grew from 0.5% of the GDP in 1995 to 2% in 2011 (same percentage as in France). South Korea is ranked number one in terms of investment on R&D with 4% of its GDP.
- Patent deposits went from 100,000 in 1993 to more than 500,000 in 2010 (more than the United States). However, Chinese patent deposits do not represent significant innovations and are not recognized internationally. Significant innovations are probably coming.
c) International supply strategies for natural resources
China is taking advantage to the African natural resources exploitation through many contracts and agreements they contracted with a couple of African countries.
d) Downstream International strategies.
China made an amazing leap forward the International stage through various steps:
Setting to level
Coexistence with international firms for the JV tax. It was a great opportunity for China to upgrade its skills in terms of technic and management. Foreign companies learned the way to effectively communicate and work with Chinese Suppliers as well as managing an important labor.
Exportation
Exportation of manufactured products from China to the rest of the World.
Capitalist strategy
-Active participation of Chinese companies on foreign businesses (Blackstone),
- Take-over a foreign company (IBM PC),
- Acquisition of foreign companies (Volvo)
Breach in the Chinese society
a) Concentration of inward FDI
The majority of the resources are kept on the East Chinese cost, there is a real difference regarding the growth between West and East.
b) Rich vs Poor
There is a growing gap between rich people and poor people. The GINI coefficient (Statistical measure regarding the dispersion of distribution among a population, figure between 0 and 1, where 0 means that there is a perfect equality and 1 a total inequality) of China is 0.47 (0.33 for France, 0.41 for China and 0.59 for Brazil) which means a significant income disparity with a probability of rebellion from poor people according to Sociologists.
c) Urban Chinese vs rural Chinese
Problems due to the Hukou system.
d) Demographic gap
Positive and negative aspects linked to the one child politic (restrain the development of the population for the respect of their health due to resource issue vs lack of an age pyramid)
e) The Red Noble
The tight ties between the Chinese Noble and the politic regime offers to the Noble the right to have privilege regarding the crossing passes and privilege contacts to set up businesses, therefore it increases the gap between rich people and poor people
f) A weak national consumption
The Chinese government is aware of the imbalance regarding the National Chinese consumption.
g) Dark Sides
Working conditions, pollution, suicide rate, internal affairs (Tibet, Tian’anmen, Taiwan), external relations (Japan, Indian, Sudan, United States who are “disappointed to become number 2”)
Four good news
a) Mutation of the legal framework
Since China opened its barries to the world, the legal regime is getting closer and closer to the international standards. The trigger of this action relies on the entry of China at the WTO in 2001. However, there is still a lot work to do in terms of individual protection (i.e: danone vs Whahaha which had to split up because of non-respect towards the legal regime by Whahaha). The majority of the litigation proceedings (70, 000/year) regarding the intellectual property are due to conflict between Chinese businesses. That is good news because it means that Chinese companies are starting to innovate, therefore they are trying to protect their inventions.
b) Creation of technologies in China
Even though there is a difference between China and Europe or between China and the United States in terms of technology created, china is slowly starting to become an important actor.
- Among the 2300 Chinese Universities, 100 own a Research Centre and 10 of them are in the worldwide ranking (Fudan University, Beijing University, Tsinghua University, Nanjing University…).
- Apparition of scientific and technic parks over 3 areas: Beijing, Shanghai and Canton.
- A lot of Chinese companies invest in R&D: BYD, Ienovo, Haier, ZTE, Huawei …
-More than 1500 Chinese companies opened R&D centres in China in diverse industries (Chemistry, electronic, agri-food …)
- R&D investment grew from 0.5% of the GDP in 1995 to 2% in 2011 (same percentage as in France). South Korea is ranked number one in terms of investment on R&D with 4% of its GDP.
- Patent deposits went from 100,000 in 1993 to more than 500,000 in 2010 (more than the United States). However, Chinese patent deposits do not represent significant innovations and are not recognized internationally. Significant innovations are probably coming.
c) International supply strategies for natural resources
China is taking advantage to the African natural resources exploitation through many contracts and agreements they contracted with a couple of African countries.
d) Downstream International strategies.
China made an amazing leap forward the International stage through various steps:
Setting to level
Coexistence with international firms for the JV tax. It was a great opportunity for China to upgrade its skills in terms of technic and management. Foreign companies learned the way to effectively communicate and work with Chinese Suppliers as well as managing an important labor.
Exportation
Exportation of manufactured products from China to the rest of the World.
Capitalist strategy
-Active participation of Chinese companies on foreign businesses (Blackstone),
- Take-over a foreign company (IBM PC),
- Acquisition of foreign companies (Volvo)
Breach in the Chinese society
a) Concentration of inward FDI
The majority of the resources are kept on the East Chinese cost, there is a real difference regarding the growth between West and East.
b) Rich vs Poor
There is a growing gap between rich people and poor people. The GINI coefficient (Statistical measure regarding the dispersion of distribution among a population, figure between 0 and 1, where 0 means that there is a perfect equality and 1 a total inequality) of China is 0.47 (0.33 for France, 0.41 for China and 0.59 for Brazil) which means a significant income disparity with a probability of rebellion from poor people according to Sociologists.
c) Urban Chinese vs rural Chinese
Problems due to the Hukou system.
d) Demographic gap
Positive and negative aspects linked to the one child politic (restrain the development of the population for the respect of their health due to resource issue vs lack of an age pyramid)
e) The Red Noble
The tight ties between the Chinese Noble and the politic regime offers to the Noble the right to have privilege regarding the crossing passes and privilege contacts to set up businesses, therefore it increases the gap between rich people and poor people
f) A weak national consumption
The Chinese government is aware of the imbalance regarding the National Chinese consumption.
g) Dark Sides
Working conditions, pollution, suicide rate, internal affairs (Tibet, Tian’anmen, Taiwan), external relations (Japan, Indian, Sudan, United States who are “disappointed to become number 2”)