Hendra S Raharjaputra,MBA

Executive Director of HSFAMES

Training – Researching - Consulting

        To be sure , China is still in better shape than many of its emerging countries. And some believe that mainland’s cheap labor and domestic market will still attract investors. Although the pressure is particularly acute for companies in Asia where the Chinese have focused a great deal of effort , the threats will be a positive side to encourage the competitors following the China way creating products with low production costs, or die.  
 

       Based on survey done by Mc Kinsey ( in exhibit 2 ) it is very clear that the competitive advantage of China are in 3 pillars ; Low cost production, Support from Chinese government and Not being subject to stringent enforcement.  Those all will be supporting the Chinese competitive edge for the next 5 even 10 years.

 

       In recent year , the Chinese government has helped keep the economy humming . Since 1998, Beijing has issued $43 billion in Treasury bonds, pumping the proceeds into public works and higher official salaries. That, in turn, has helped sustain the spending power of the nation’s 80 million middle class consumer, who purchase of everything from TVs to automobiles to cell phones accounts for nearly half of gross domestic product.

In 2001 , it appears , Beijing’s pump – priming is losing, consumer price had been rising as demand stayed strong , reversing stubborn deflation that had persisted for nearly years. But the consumer price index rose 1 % year on year , the lowest inflation in 5 months. The punch came from the wrong macro economy policy, not from the external factors . One key problem is the widening chasm between China’s cities and countryside. With more than 800 million rural resident earning barely a third of what their urban counterparts take in , Beijing’s effort to boost consumer demand beyond the cities is not working.

 

      I just want to view from the Chinese perspective that low costs will go only so far and that moving up the value chain. In my opinion , it is one of the Chinese’s savvy strategies in facing its competitors , and the sustainable improving value chain will make the Chinese’s  products more competitive .

 

       The survey pictures that almost 44 % the Chinese companies do not have enough managerial talent. But , Referring to the article written by Jonathan R. Woetzel title Reassessing China’s state- owned enterprises , my conclusion is in the next 5 or 10 years the Chinese companies will be the open companies which adopt both the modern management systems and recruiting professional managers.