motors drive big engine
is not one big economic behemoth growing at 8-9 per cent a year,
but rather a series of regional economies.
you look at it province by province, you will discover up to 100
economies loosely coupled together some galloping at breakneck
speed while others lagging a little further behind, according
to Professor Michael Enright from the University of Hong Kong.
emphasizes that China is top dog in terms of opportunity.
in the world, companies are trying to figure out how to take advantage
of opportunities in China, or how to deal with what some perceive
as threats," he says.
says that, as China takes up a new industry, before long it becomes
a dominant force.
cites an example of Como in Northern Italy. It used to produce
50 per cent of the world's raw silk, but now China accounts for
95 per cent of the total, according to the latest available data,
which is for 2002. Como has dropped off to 2-3 per cent.
example is the garment industry, controlled by the quota regime.
What will happen after 2005 when the World Trade Organization
rules end all quotas? Enright offers a glimpse: If you isolate
a few of the garment categories where the quota regime has not
been constrictive, you will see that China has around 45 per cent
of the world's export share.
he predicts that China will have such a market share in garment
exports when all quotas are lifted.
is more surprising, for Enright, is the fact that this trend applies
even to those industries traditionally not affected by globalization.
manufacturing has always been a local or national industry, he
says, because shipping bulky furniture is simply too costly.
in the last three years, employment in the US furniture industry
has dropped approximately by one-third, which can presumably be
attributed to the export-oriented industry in China, according
explains that most of the exports come from just one city in one
area Dongguan in Guangdong Province.
cautions that one should not attribute China's competitiveness
exclusively to its currency. Even if the yuan is floated, he argues,
China's industries would not weaken in world export markets in
any fundamental way.
Western economists, as well as the media, miss the point when
they blame everything on the yuan, he says.
the outside world tends to see China as one big juggernaut, a
closer look shows that things are quite different.
did China become one of the world's top trading nations in just
20 years after being cut off from the world market for so long,
is a continental economy, which should depend on a network of
infrastructure for fast growth. But China did not start out by
building such a network. The vast majority of growth has come
from three regions, which are all within 300 kilometres of the
Greater Pearl River Delta, the Yangtze River Delta and the Bohai
Rim region, combined, make up only 3 per cent of the nation's
land mass and 20 per cent of the population, but 45 per cent of
the gross domestic product and over 70 per cent of international
trade and investment.
areas have essentially middle-income purchasing power by world
standard. But 50-60 million people are still a fraction of 1.3
billion. If you move inland, even just one province away from
the coast, says Enright, the "export profile" drops
lies the challenge, not only for China's leadership, but also
for people trying to do business in China," he said.
terms of economic policies, the trend of decentralization in the
last 10-15 years gives more autonomy to local administrations.
enterprises started to be responsive to market needs. The central
government, says Enright, now manages by exception rather than
by rule, focusing on the crucial areas that need its attention
and leaving more economic decisions to the devices of local governments.
has improved local management in many cases, but has also created
a dynamic for local protectionism, which sometimes makes it difficult
to trade between provinces more so than trading between countries.
a foreign company, operating in China usually means emphasis on
one or more of the three coastal regions. Even the typically successful
China strategy has generally not scaled, replicated or been rolled
out across the entire nation, he says.
disparity has also dictated that companies may not be able to
manage from a single office. Nowadays, many multinational firms
set up multiple offices in regional hubs in order to calibrate
their management for the specific needs of regional markets. Managing
by "remote control" from a Hong Kong office is a thing
of the past.
acknowledges that uneven development is the big challenge facing
China today. But he says it could not have been addressed earlier.
is too vast to be developed in a uniform fashion, he says. The
step-by-step change first the Pearl River Delta, then the Yangtze
River Delta and the Bohai rim region, and now the northeastern
rust belt and the western hinterland makes sense.
is a natural progression," he says, "because China has
to start somewhere. If it waits until the whole infrastructure
is fully developed or makes sure everyone moves ahead at an equal
pace, China would not have got so far in such a short time."
admits that this policy has left some people behind, but the current
policy to raise rural income will address much of the problem.
for the gap between coastal and inland, and urban and rural regions,
Enright says that the richest region is 8-10 times wealthier than
the poorest of comparable size in China. While in the US, the
ratio is around 1.5. If you take away Manhattan, the average income
in New York is not several times more than the poorest region
in the US. However, this disparity is misleading. It does not
take into account purchasing power parity, for instance.
factor, which James Leung, China Daily Hong Kong Edition's executive
editor, brings up, is the incompatibility between developed nations
like the US and developing ones like China.
should compare today's China with Japan in the 1960s or South
Korea in the 1970s," he says. Enright, for his part, feels
the real rich-poor difference is about 5 or 6-1.
asymmetry in China's regional development makes it extremely difficult
to implement a uniform national policy, argues Enright.
feels monetary and fiscal policies will have to be tailored for
each region. The nationwide infrastructure that is being built
will certainly smooth out some of the unevenness. New urban clusters
a foreign company, it has to be alert to this trend and the urbanization
that comes with it, such as which city will have its population
grow from 1 million to 4 million in the next few years.
China's economic growth is healthy and the issue of unbalanced
development is being addressed, says Enright. It will take some
time before results come through.