subject: China Is Attempting To Move Up The Value Chain [print this page] There are at present seven Asian countries where wages are lower than in China.
2010-07-27 www.easy2bid.com
When The Great Helmsman, Mao Zedong, died in 1976, Deng Xiaoping spent two years fighting for control over The Chinese Communist Party, and China. In 1978 he succeeded. One of the first things he did was starting the politics of reforming and opening up China gaige kaifang. This was basically a process of changing Chinese economy from planed economy to market economy.
Foreign companies were only too happy to come to China and set up shop, and during the cause of the next 20-30 years a growing number of goods sold in the west were produced by Chinese manufacturers. China attracted an incredible amount of Foreign Direct Investment (FDI), and Chinese economy soared.
Today China is the second or third economy in the world, depending on how you look at it. The problem for China is that its unprecedented growth has happened mostly due to labor intensive, low tech production. This is becoming a problem for China, since today there are many other countries where this kind of production can be undertaken at a lower cost. In 2008 the Chinese government, by law, implemented higher wages. This means that countries like Vietnam, India, and Bangladesh can provide labor intensive production at a lower cost than China.
This situation is not without advantages because it forces Chinese suppliers to focus on creativity and innovation, thus moving up the value chain. One industry that has suffered because of the financial crisis and the increase in wages is the apparel industry. Many such factories have had to close, although it is still a huge industry in China.
Nowadays it is obvious when meeting with representatives from the Chinese apparel industry that they are looking for more than just producing cheap products at a low price; they are looking to provide high quality products to the best western companies. And, already, many famous western brands are being produced in China.
So, even though much of Chinese economic growth will still depend on the traditional labor intensive low cost production, in the years to come, there is no doubt that China will move up the value chain. This is supported by the huge amount of resources the Chinese spend on Research & Development. Thus, the crisis may actually turn out to be exactly what China needed in order to move up the chain.
