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Universitatea Ovidius Faculatea de Stiinte Economice Asigurarea Calitatii in Afaceri

Evaluarea Competitivitii in China

Indrumator: Prof.univ.dr. Utureanu Simona

Masterand:

Constanta 2013

Evaluarea Competitivitii in China

China a devenit foarte competitiv ntr-o perioada relativ scurt de timp, iar acum urmareste sa treaca la stadiul de dezvoltare urmtor, i anume competitivitatea bazat pe inovare. Traiectoria general a Chinei n aceast privin este clara, iar companiile strine se confrunt cu perspectiva unui peisaj competitiv semnificativ modificat de ctre concurenii n curs de dezvoltare din China.
China n 2012 este pe punctul de a trecerea la a treia generaie de lider naional, ncearcand s fac economia Chinei mai competitiv n economia mondial. Dup trei decenii de cretere economic susinut, China are ambiii, nu numai de a fi competitiv, ci de a fi un lider n inovaie i industrie. Pentru a atinge aceste obiective, conducerea Chinei are n vedere iniiative i reforme pentru a face o China mai dezvoltat, ar mai prosper i mai creativa. Economia Chinei i a capacitii sale competitive n lume este ntr-o stare de schimbare, i n diverse industrii, acest lucru se prezint diferite tipuri de oportuniti i provocri pentru companiile strine.

Msurarea succesului Chinei

Companiile i rile sunt n mod inevitabil atrase ntr-o competiie mai mare asupra pieelor finite. Pentru a obine o cot mai mare a acestor piee, o societate trebuie s furnizeze produse care sunt ntr-un fel superioare celor ale concurenilor si, astfel nct acesta poate crete n cele din urm de profit. Pentru o ar, obiectivul final de a obine o mai mare parte a pieelor globale este de a crete nivelul de trai al cetenilor si. Competitivitatea n cretere a Chinei dup 1978 a fost rezultatul unei mobilizri a dotrilor, factor pe care ara l-a avut din abunden, mai ales ieftine,aceasta fiind fora de munc necalificat. Pri de deschidere ale economiei fa de investitorii strini au atras n tehnologie i au permis Chinei s se integreze n lanurile valorice globale. China a devenit un furnizor sistematic al forei de munc intensiv de produse i componente, care combin investiiile strine directe, cu o politica de a dezvolta companii competitive locale.Creterea competitivitii Chinei a fost condiionat de acordul mai multor factori: o rat de schimb favorabil, salariile mici si consumabile mari forei de munc, fluxul de investiiilor strine directe, potenialul uria al pieei interne din China, precum i deschiderea pieelor mondiale la productorii chinezi. China a ajuns s ocupe o poziie unic n studii de competitivitate. Creterea sa rapid n ultimele trei decenii a fost vzuta prin faptul ca exporturilor chineze ctig cot de pia la nivel mondial ntr-o gam de industrii expansiune, mpreun cu progresie Chinei pn la lanul valoric. Standardelor de via ale cetenilor chinezi s-au mbuntit n mod evident, de asemenea, astfel nct competitivitatea in China a crescut att la nivel naional ct i al societatii. Raportul Competitivitii Globale (GCR), o publicaie anual de World Economic Forum, este cea mai cuprinztoare evaluare a competitivitii naionale. Acesta definete competitivitatea ca set de instituii, politici, i factori care determin nivelul de productivitate al unei ri, n cazul n care productivitatea duce la creterea economic i prosperitate. Raportul msoar o gam larg

de factori grupati n 12 piloni, i evalueaz importana acestor piloni pentru fiecare ar n parte prin mprirea acesteia n trei etape de dezvoltare: Conduse de factori, pentru rile care se afl nc n baza dotrilor, factor, cum ar fi munca necalificat i resursele naturale; Conduse de eficienta, pentru rile care dezvolta procese de producie mai eficiente i cresc calitatea produselor tinand cont de cresterea salariilor; Bazate pe inovare, pentru rile n care salariile au crescut att de mult nct companiile s poat concura doar prin producerea de produse noi i unice.

n cea mai recent ediie a raportului (2011-12), China, care si-a mbuntit poziia n fiecare an, ncepnd din 2005, iar acum este pe locul 26 n ansamblu, este clasificat n etapa tarilor conduse de eficien.Raportul constat c China i-a mbuntit performana n cei mai multi dintre piloni, dar cele mai notabile n cazul n care statutul su este mult mai mic dect pozi ia sa n general, sunt instituiile (datorita aparitiei coruptiei), dezvoltarea pieei financiare i pregtirea tehnologic. Pentru referin de performan industrial naional pentru evaluarea competitivitii companiilor, Naiunile Unite pentru Dezvoltare Industrial (UNIDO) au dezvoltat indicele de Competitivitate pentru Performanta Industriala, care masoara competitivitatea unei economii pentru producerea i exportul de bunuri manufacturate. Msurarea unui set de opt indicatoricheie prin utilizarea taxei pe valoare adaugata, precum i date privind populaia i comerul din 2005 i 2009 pentru 118 economii, in 2011, indicele de Competitivitate pentru Performanta Industriala a clasat China pe locul 5, crescand de la 6 in 2005. Pe primele locuri se gasesc Singapore (locul 4), Statele Unite, Japonia si Germania(locul 1). n analiza datelor utilizate pentru indicele CIP, raportul UNIDO a constatat ca China a majorat ponderea totala la nivel mondial a taxei pe valoare adaugata de la 6,7% n 2000 la 15,4% n 2010, taxa pe valoare

adaugata la nivel global ridicandu-se la 7.39 miliarde dolari. Reflectand deplasarea peisajului din procesul de fabricatie la nivel mondial catre Asia, in 2010, economiile in curs de dezvoltare au reprezentat 35,6% din taxa pe valoare adaugata globala si China reprezinta aproape 75% din total. Exporturile mondiale sunt dominate de produse fabricate cu tehnologie medie si inalta, acestea nescazand sub 60% din exporturile mondiale fabricate ncepnd cu anul 1992. Raportul UNIDO a constatat ca cele cinci sectoare cu cea mai rapida crestere la nivel global de-a lungul anilor 2005-2009 au fost prelucrate cu tehnologie medie si inalta (mai putin metalele de baza). n toate aceste sectoare, de fapt, n 21 din totalul de 22 de sectoare industriale, China a devenit primul sau al doilea productor n lume. n acest proces, n perioada 2001-08, exporturile totale de producie in China au crescut cu un uimitor 27,9% anual. rile dezvoltate reprezint nc aproximativ 60% din exporturile mondiale de medie i nalt tehnologie, iar ponderea produselor de medie i nalt tehnologie din totalul exporturilor Chinei au crescut de la 45,5% n 2000 la aproape 60 % n anul 2009.

Avertismente
China a mbuntit n mod vizibil si dinamic competitivitatea, att la nivel naional ct i in sferele companiilor. Cu toate acestea, in timp ce exporturile Chinei s-au extins intr-adevar enorm dupa aderarea sa la Organizatia Mondiala a Comertului (OMC) in 2001, prelucrarea schimburilor comerciale reprezint aproximativ jumtate din exporturile sale. Potrivit unei recenzii a politicii comerciale a Chinei, publicat in 2010,companiile cu investitii straine au reprezentat 84,1% din totalul exporturilor Chinei prelucrate n 2009. Asa cum datele de export reflect valoarea brut a produselor care prsesc porturile unei ri, ponderea foarte mare de intrri importate din exporturile chinezeti denota faptul ca datele de export nu msoar n mod adecvat valoarea produsa n China. Competitivitatea exporturilor chineze este, aadar, n mare parte alimentata de instalaiile strine multinaionale din regiunile de coast ale Chinei, i nu neaprat de companii de talie mondiala din China.

n plus, din 1996, firmele strine au reprezentat aproximativ 85% din exporturile de nalt tehnologie ale Chinei. Efectele externe tehnologice care au fost de ateptat s se acumuleze de la companiile cu investitii straine si numeroasele corporatii multinationale care opereaza in China nu au reusit sa se materializeze. Pentru toata creterea exporturilor i creterea competitivitii industriei sale, i, n ciuda faptului c 58 de societi din China continentala au fost incluse n topul Fortune 500 n 2011 (a treia dup SUA i Japonia), China nu a fost nc n msur s produca un brand cu adevrat global. In cea mai recent ediie a Interbrand Best Global Brands 100 din 2011, Chinei ii esueaza in continuare prima intrare. n ceea ce privete nivelul de trai al poporului chinez, obiectivul final al competitivitii naionale, China este nc departe n arierate. Cu un PIB pe cap de locuitor USD 4382 n anul 2010, cifrele din China nu sunt nc jumtate din cele ale Braziliei sau Rusiei, tari cu un rang mai scazut ca al Chinei comparand competivitatea nationala si industriala.

Tranzitii

Teoretic, China poate atinge pragul bazat pe inovare prin cresterea competentelor lucratorilor sai si modernizarea tehnologiei si institutiilor interne pentru a fi n msur s produc produse inovatoare i tehnologii de pionierat. Drumul pentru creterea competitivitii Chinei este n prezent nvluit ntr-o tranziie larga a economiei, care urmareste sa dezvolte locuri de munca

mai bine platite si lucratori mai inscusiti si mai competitivi. n 2012, acest lucru are loc pe fondul unei tranziii de lider national.

O viziune pentru o China competitiv i inovatoare a fost prezentata n februarie 2012 ntr-un studiu voluminos dezvoltat n comun de Banca Mondial, Ministerul chinez de Finane i de Centrul de Cercetare si Dezvoltare al Consiliului de Stat al Chinei. Documentul Rezultanta China in 2030 prezinta sapte aspecte strategice, pe care China trebuie sa le ia in considerare, pentru a deveni o tara cu venituri ridicate pana in 2030. Acestea se axeaz n parte pe regndirea rolului statului i a sectorului privat n economia Chinei, pentru a ncuraja creterea concurenei, inovaia, i integrarea continu a Chinei, cu pieele globale.

Asa cum Raportul Competitivitatii Globale a subliniat, cresterea salariilor a avut un rol esenial n determinarea societilor de a inova pentru a rmne competitive. Salariile din China au crescut rapid de la mijlocul anilor 2000. Toate cresterile salariilor urbane au fost mari, dar cea a lucratorilor necalificati a fost mai mare decat in randul tuturor salariatilor, dublandu-se, mai mult sau mai putin, in termini reali din 2001 in 2010. Forta de munca a Chinei se asteapta sa ajunga pragul de 1 miliard de lucratori in 2015, iar China se poate sa fi trecut deja, sau va trece de punctual de cotitura al lui Lewis. (Punctul n care munca n exces n sectorul de subzisten este pe deplin absorbit n sectorul modern, i n cazul n care acumularea de capital ncepe s creasc salariile). Cresterea salariilor din mediul urban din China sunt, de asemenea, considerate ca fiind un mijloc important pentru reducerea decalajului urban-rural i creterea urbanizarii din China, stimuland astfel industria serviciilor.

Cu toate acestea, competitivitatea Chinei va scdea, n cazul n care apare cresterea salariilor fr creterea concomitent a productivitii muncii i inovrii. Tinand cont de acestea, guvernul

Chinei a identificat mbuntirea calitii capitalului uman al Chinei ca un obiectiv-cheie. Cadrul politic de baz n acest sens este al 12-lea plan cincinal pentru 2011-15, care i propune s proiecteze avantaje competitive pentru China, bazate pe tiin, tehnologie i inovare i de a face China, un lider industrial n anumite industrii strategice. In timpul cincinalului anterior din 2007-11, cheltuielile Chinei privind cercetare si dezvoltare au crescut cu 22% anual, iar in 2011 cheltuielile cu cercetarea si dezvoltarea au ajuns la 1.85% din PIB.

Producia Chinei de publicaii academice a crescut n ultimul deceniu, ajungnd la 112.000 n 2008 (8,5% din producia global), i publicaiile de cercetare din China au devenit lideri n domeniul tiinei materialelor, fizica, chimie i matematic. Cererile de brevet din China ctre Biroul Mondiale a Proprietii Intelectuale (OMPI) a crescut de la 23.000 n 1996 la 290.000 n 2008. Cu toate acestea, n termeni de lucrri academice, din contributiile Chinei inca lipsesc asanumitele articole de mare impact, iar calitatea brevetelor sale nu au fost acoperite de cantitate ca stimulente pentru ca cererile de brevet de depunere au produs un numr mare de proiectare minore i brevete de utilitate.

Un numar mic, dar in crestere de companii chineze au ajuns sau se apropie de frontiera tehnologica in industriile respective. Acestea includ ZTE i Huawei n industria tehnologiei de informatii si comunicare, Suntech Power n industria solar i Dalian Machine Tool Group in inginerie. . Huawei, de exemplu, a dezvoltat prima tehnologie 100G" din lume, capabila s ofere cantiti mari de date fr fir pe distane lungi. Companiile chineze - att de stat i privat exceleaza in domenii cum ar fi PVC(circuitele virtual permanente), biofarmaceutice, nanotehnologie, terapeutica de celule stem, baterii electrice de nalt densitate, supercomputere, i containere de transport maritim. Companiile chineze au realizat, de asemenea rezultate cu alte forme de inovare, de exemplu, dezvoltarea de modele creative de afaceri pentru a se potrivi cu produsele existente.

Stare de schimbare: Implicaiile unei Chine, mai competitiv

Tranzitiile actuale din economia si societatea chineza au implicatii largi pentru noul tip de concurenta si ofera oportunitatea Chinei de a deveni mai competitiva. In diverse industrii, companiile straine sunt prezentate din ce in ce mai mult cu un peisaj competitive modificat semnificativ de aceste tranzitii in China.

China este inca in mare masura o optine atractiva pentru produsele cu valoare adaugata mai mica in conditiile in care China a fost mult timp dominanta in productia low cost. Cu toate acestea, in conditiile in care managerii de achizitii publice isi concetrau atentia doar pe China, ei iau acum in considerare China ca fiind doar una dintre cele cateva optiuni. De exemplu, companiile de textile care se aprovizionau din China, o vor gasi acum atractiva numai pentru sursa anumitor produse, deoarece detine inca un avantaj comparative in domenii cum ar fi varitatea industriala si infrastructura, dar isi vor aproviziona din ce in ce mai mult elementele selectate din alte tari asiatice, cum ar fi India si Sri Lanka.

O industrie care poate servi ca o ilustrare a competitivitii n cretere a Chinei este industria grea. n aceast industrie, China a inceput sa ofere in ultimii ani noi optiuni pentru cumparatori de construcii i utilaje miniere, provocand liderii industriei stabilite. n perioada 2000-10, exporturile Chinei de utilaje grele au avut o cretere anual de aproximativ 30%. In aceste sens, companiile chineze au avut cel mai mare succes in dezvoltarea pietei si au castigat o cota de piata mica, dar importanta in tari precum Brazilia si Africa de Sud.

Acest proces este nc ntr-un stadiu incipient, i n timp ce productorii de utilaje de constructii din China, de exemplu, sunt acum capabili sa produca un buldozer sau un greder la standardele industriale cerute, si sa aiba castiguri din conta de piata pe pret, aceste masini inca nu pot concura cu cele mai importante branduri de pe piata. Cu toate acestea, companiile chineze fac investiii n aceste ri i isi modernizeaza sistematic calitatea masinilor, precum si a serviciilor post-vanzare, pentru a deveni mai competitivi, urmand exemplul Coreei de Sud. Concluzia logic a acestui proces va fi un buldozer din China, care este mai ieftin i practice, la fel de bun ca un buldozer Caterpillar, oferind o alternativ atractiv pentru companiile miniere i de construcii. Aceasta evolutie extraordinara poate fi inca la cativa ani distanta, dar este inevitabila. Companiile si brand-urile chineze competitive la nivel global si de pionierat sunt inca in curs de dezvoltare, dar contururile au inceput sa prinda forma.

Spre deosebire de valul iniial de investiii de peste mri condus de sectorul de stat dominant n achiziiile de companii miniere i energetice din regiuni cu resurse bogate ale Chinei, actualul M & A(fuziuni si achizitii) de activitate este n curs de dezvoltare ca un factor-cheie de consolidare, cretere, poziionarea pe pia i achiziionarea de active strategice i expertiz pentru companiile chineze. Companiile chineze considera acum investiii de peste mri ca o

abordare viabil pentru a se deplasa ascendent pe lantul valoric prin accesul la brand-uri straine si tehnologie.

Mutarea accentului

Cu ascensiune economic rapid a Chinei i transformarea ulterioar ntr-o economie de pia, companiile chineze se extind acum n strintate i la nivel mondial, nu numai pe mandatul guvernului, dar, de asemenea, pentru a reduce dependenta de creterea economic a Chinei prin extinderea pe noi piee. n acelai timp, forele pieei ii determina s achiziioneze sau s ob in acces la tehnologii sofisticate prin fuziuni si achizitii strategice (M & A), la pre uri din ce n ce mai favorabile, pentru a ridica nivelul de competitivitate. Achizitiile de peste mri Chinei n sectorul non-financiar, care a atins un record de 60.1 miliarde dolari n 2011, vor continua n timp ce cumprtori din ce n ce mai sofisticati chinezi caut chilipiruri pe fondul recesiunii din economiile dezvoltate, n special n Europa. Pe termen scurt, criza datoriilor din zona euro n curs de desfurare va crea mai multe oportuniti pentru investitorii activi din China, oferindu-le acces mai uor la tehnologiile pe care le au rvnit de mult pe pieele europene i alte ri dezvoltate.

Companiile chineze au artat, de asemenea, un apetit mai mare pentru activele relativ mai riscante comparativ cu colegii lor din rile dezvoltate. Cu alte cuvinte, companiile chineze au nceput s realizeze beneficiile intangibile de a face achiziii n strintate. Dar de ce anume sunt chinezi devin mai ndrznei, n cutarea de achiziii n afara propriilor frontiere? Este din ce n ce mai bine-cunoscut faptul c societile chineze nu sunt doar ngrijorate de a deveni mai mari i

de a creter cota lor de pia pe termen scurt, companiile chineze sunt n cutarea de a investi n active n strintate, care le va pozitiona mai bine in tara lor, n raport cu rivalii lor interni, precum i pentru a obine un punct de sprijin in noi piete pe termen lung. Firmele cele mai competitive au realizat ca dimensiunea n sine nu va garanta succesul la nivel mondial pe termen lung, know-how tehnologic sporete competitivitatea pe termen lung, i le pune ntr-o poziie mai bun pentru a concura cu rivalii occidentali pe pieele lor de origine. De exemplu, Sany a deschis recent o fabrica de asamblare de 60 de milioane de dolari, cea mai mare astfel de faciliatate in afara Chinei, pentru a ajuta la realizarea obiectivului pe termen lung, si anume de a produce excavatoare in SUA care sa concureze direct impotriva industriei lider din tara de origine. In time ce consolidarea industriei este inca incurajata sa faciliteze dezvoltarea propriilor campioni globali ai Chinei, cresterea rapida a concurentilor globali chinezi permit ambitiile globale sa le conduca strategiile, decat sa se bazele pe politica guvernului.

O idee a ce va urma

In comparatie cu dimensiunea economiei sale, investiii de peste mri ale Chinei rmn destul de modeste. Stocul total de investiii n strintate a crescut la 5,3% din PIB-ul Chinei n 2011, de la doar 2,6% n 2001, dar rmne mult sub media de 27,7% pentru rile OCDE (Organizatia pentru Dezvoltare si Cooperare Economica). Mergnd mai departe, ntreprinderilor chineze nu numai ca vor avea bani, dar, de asemenea, motivul i ocazia de a cheltui suplimentar 560 miliarde dolari pe investiii de peste mri n urmtorii cinci ani. Companiile chineze profita de criza, achizitioneaza active strategice de peste mri care vor permite s se deplaseze spre frontiera de competiia global. n plus, Banca Popular Chinez a lansat recent cea mai detaliata propunere publica de pana acum pentru relaxarea controlului strict din partea guvernului asupra capitalului, o miscare care va impulsiona companiile chineze s cumpere mult mai multe active americane i europene, care au devenit mai accesibile odata cu criza financiara globala. Cu toate acestea, a face afaceri cu China este complex i poate pune probleme speciale de integrare pentru ambele pri din cauza diferenelor culturale, de afaceri i politice. Pentru societile chineze i noii lor parteneri, cheia se afl n maximizarea sinergiilor, dat ce obstacolele de mai sus sunt depite. Privind n perspectiv, companiile chineze vor avea mai multe instrumente, mai mult experien si o intelegere aprofundata a complexitatii proceselor de fuziune si achizitii transfrontaliere.

State of Change: Assessing Chinas Competitiveness


China has become very competitive in a relatively short space of time, and now it is aiming to transition to the next development stage, namely innovation-driven competitiveness. China's general trajectory in this regard is clear, and foreign companies are facing the prospect of a competitive landscape significantly altered by emerging Chinese competitors.

China in 2012 is on the verge of transitioning to a third generation of national leadership that is seeking to make China's economy more competitive in the global economy. After three decades of sustained economic growth, China has ambitions not only of being competitive, but of being a leader in innovation and industry. To reach these objectives, China's leadership is considering initiatives and reforms for making China a more developed, more prosperous and more creative country. China's economy and its competitive standing in the world is in a state of change, and in various industries, this is presenting different types of opportunities and challenges for foreign companies.

Measuring China's success


Companies and countries are inevitably drawn into greater competition over finite markets. To gain a greater share of those markets, a company must provide products that are in some way superior to those of its competitors, so it can ultimately increase profit. For a country, the ultimate objective of gaining greater share of global markets is to increase the standards of living of its citizens. China's rising competitiveness after 1978 was the result of a mobilisation of the factor endowments that the country had in abundance, especially cheap, unskilled labour. Opening parts of the economy to foreign investors drew in technology and allowed China to integrate itself into global value chains. China systematically became a supplier of labour-intensive products and components, combining inward FDI with a policy to develop competitive local

companies. The rise in China's competitiveness was conditioned by the concurrence of several factors: a favourable exchange rate, low wages and large labour supplies, the inflow of FDI, the huge potential of the Chinese domestic market, and the opening of world markets to Chinese manufacturers. China has come to occupy a unique position in studies of competitiveness. Its rapid growth in the last three decades has seen Chinese exports gaining global market share in an expanding range of industries along with China's progression up the value chain. The living standards of Chinese nationals have also clearly improved, so that China's competitiveness has increased at both the national and company levels. The Global Competitiveness Report (GCR), an annual publication by the World Economic Forum, is the most comprehensive assessment of national competitiveness. It defines competitiveness as the set of institutions, policies, and factors that determine the level of productivity of a country, where productivity leads to economic growth and prosperity. The report measures a wide range of factors grouped into 12 pillars 1, and it evaluates the importance of these pillars to individual countries by dividing the latter into three stages of development:

Factor-driven, for countries still competing based on factor endowments such as unskilled labour and natural resources; Efficiency-driven, for countries developing more efficient production processes and increasing product quality to account for rising wages; Innovation-driven, for countries where wages have risen so much that businesses can only compete by producing new and unique products

In the latest edition of the report (2011-12), China, which has improved its ranking each year since 2005 and is now ranked 26th overall 2, is categorised in the Efficiency-driven stage. The report notes that China has improved its performance in most of the pillars, yet notable ones where its standing is much lower than its overall position are Institutions (due mostly to occurrences of corruption), Financial market development and Technological readiness. To benchmark national industrial performance for evaluating the competitiveness of companies, the United Nations Industrial Development Organisation (UNIDO) developed the Competitive

Industrial Performance (CIP) index, which measures an economy's competitiveness for producing and exporting manufactured goods. Measuring a set of eight key indicators using manufacturing value add (MVA) data as well as population and trade data from 2005 and 2009 for 118 economies, the 2011 CIP index ranked China in 5th place overall, rising from 6th in 2005, and trailing only Singapore (1st overall), the US, Japan and Germany. In analysing the data used for the CIP index, the UNIDO report found that China had increased its share in overall global MVA from 6.7% in 2000 to 15.4% in 2010, when global MVA amounted to USD 7.39 billion. Reflecting the shifting landscape of global manufacturing towards Asia, in 2010, developing economies accounted for 35.6% of global MVA (up from 20.7% in 1990), and China accounted for almost 75% of the latter total. Global manufactured exports are dominated by medium- and high-technology products, which have never dropped below 60% of world manufactured exports since 1992. The UNIDO report found that the five fastest-growing sectors globally over 2005-09 3 were all (except for Basic Metals) in medium- and high-technology manufacturing. In all of these sectors, in fact in 21 out of the total 22 industrial sectors, China has become the first or second leading manufacturer in the world (see table above). In this process, over the period 2001-08, China's total manufacturing exports grew by a staggering 27.9% annually. Developed countries still account for around 60% of global medium- and high-technology exports, yet here also China has made inroads, with the share of medium- and high-technology products of its total exports increasing from 45.5% in 2000 to almost 60% in 2009.

Caveats
China has clearly dynamically improved its competitiveness, both in the national as well as company spheres. Yet while China's exports have indeed expanded enormously after its accession to the World Trade Organisation (WTO) in 2001, the processing trade accounts for around half of its exports. According to a WTO trade policy review on China published in 2010, foreign-invested enterprises (FIEs) accounted for 84.1% of China's total processed exports in 2009. As export data reflect the gross value of products leaving a country's ports, the very high share of imported inputs in Chinese exports means that export data do not adequately measure the value actually produced in China. The competitiveness of Chinese exports is thus in large

part fuelled by foreign multinational plants in China's coastal regions, and not necessarily by world-class Chinese companies. Furthermore, since 1996, foreign firms have accounted for around 85% of China's hightechnology exports4. The technological spillovers that were expected to accrue from the FIEs and many MNCs operating in China, moreover, have largely failed to materialise. For all its export growth and the increasing competitiveness of its industry, and despite the fact that 58 mainland Chinese companies were included in the Fortune 500 in 2011 (the third-most after the US and Japan), China has not as yet been able to produce a truly global brand 5: the latest edition of Interbrand's 100 Best Global Brands in 2011 is still missing the first Chinese entry. In terms of the living standards of Chinese people, the ultimate objective of national competitiveness, China is still far in arrears. With a GDP per capita of USD 4,382 in 2010, the figure for China is not yet half that of Brazil or Russia's, countries that rank below China in comparisons of national and industrial competitiveness.

Transitions
China can theoretically only reach the innovation-driven threshold by raising the skills of its workers and upgrading its domestic technology and institutions to be able to produce innovative products and pioneering technology. The drive for increasing China's competitiveness is currently enveloped in a broad transition of China's economy seeking to develop better paid, more skillful and more competitive workers and industries. In 2012, this is occurring on the backdrop of a national leadership transition. A vision for a competitive and innovative China was presented in February 2012 in a voluminous study jointly developed by the World Bank, the Chinese Ministry of Finance and the Development Research Centre of China's State Council. The resultant China in 20306 document outlined six key strategic aspects for China to consider in order to become a high-income country by 2030. These focus in part on rethinking the role of the state and the private sector in China's economy to encourage increased competition, innovation, and China's continued integration with global markets.

As the Global Competitiveness Report outlined, rising wages have been instrumental in inducing companies to innovate to remain competitive. Wages in China have been rising rapidly since the mid-2000s. All urban wage growth has been high, yet that of low-skilled workers has been highest among all wage earners, more or less doubling in real terms from 2001 to 2010. China's labour force is expected to peak at around 1 billion workers in 2015, and China may already have passed or is about to pass the Lewisian turning point 7. Rising wages in urban areas in China are also regarded as an important means for decreasing the urban-rural income gap and increasing urbanisation in China, thereby stimulating the services industry. China's competitiveness will decline, however, if rising wages occur without concomitant increases in labour productivity and innovation. With this in mind, China's government has identified improving the quality of China's human capital as a key objective. The core policy framework to this end is the 12th Five-Year Plan (FYP) for 2011-15, which aims to engineer competitive advantages for China based on science, technology and innovation and to make China an industrial leader in certain strategic industries. During the previous FYP of 2007-11, China's expenditure on R&D increased by 22% annually, and in 2011, R&D spending is estimated to reach 1.85% of GDP8. China's output in academic publications has soared in the last decade, reaching 112,000 in 2008 (8.5% of the global output), and Chinese research publications have become leaders in the fields of materials science, physics, chemistry and mathematics. Chinese patent applications to the World Intellectual Property Office (WIPO) increased from 23,000 in 1996 to 290,000 in 2008. Yet in terms of academic papers, Chinese contributions are reportedly still lacking so-called high-impact articles, and the quality of its patents have not been matched by its quantity as incentives for filing patent applications have produced a large number of minor design and utility patents. A small but growing number of Chinese companies have actually reached or are approaching the 'technological frontier' in their respective industries. These include ZTE and Huawei in the ICT industry, Suntech Power in the solar industry and Dalian Machine Tool Group in engineering. Huawei, for example, has developed the world's first '100G' technology capable of delivering large amounts of data wirelessly over long distances. Chinese companies both state-owned and

private are excelling in areas such as PVCs, biopharmaceuticals, nanotechnology, stem cell therapeutics, high density power batteries, supercomputers, and shipping containers. Chinese companies have also achieved results with other forms of innovation, for example developing creative business models to suit existing products9.

State of change: The implications of a more competitive China


The current transitions in China's economy and society have broad implications for the new type of competition as well opportunity that a more competitive China can hold. Foreign companies in various industries are increasingly presented with a competitive landscape significantly altered by these transitions in China. For lower value-added products in industries where China has long been dominant as a Low Cost Country (LCC) producer, China is still to a large extent an attractive option. Yet whereas procurement managers could previously focus their attention solely on China, they are now increasingly considering China as only one of a few options. Foreign companies sourcing textiles and clothes from China, for example, will now find it attractive to source only some products from China, as it still holds comparative advantage in areas such as industrial variety and infrastructure, while increasingly sourcing selected items from other Asian countries like India and Sri Lanka. One industry that can serve as an illustration of China's increasing competitiveness is heavy industry. In this industry, China has over the last few years begun to provide new options for buyers of construction and mining machinery, challenging the established industry leaders. In the period 2000-10, China's exports of heavy machinery grew by a CAGR of around 30%. Chinese companies have been most successful in this regard in developing markets, and have gained a small degree of market share in countries like Brazil and South Africa, as our next article How to Engage outlines. This process is still at an early stage, and while China's construction equipment manufacturers, for example, are now able to manufacture a bulldozer or a motor grader by industry standards

and make gains in market share on price, these machines do not yet compete with the leading brands in the market. Yet Chinese companies are making investments in these countries and are systematically upgrading the quality of their machines as well as their parts and after sales services to become more competitive, following the example of the likes of South Korea. The logical conclusion of this process will be a Chinese bulldozer that is cheaper and basically just as good as a Caterpillar bulldozer, providing an attractive alternative for mining and construction companies. This gound-breaking development may still be a few years away, yet it is inevitable10.The globally competitive and pioneering Chinese company and brand are still under development, but the outlines have started to take shape. Unlike the initial wave of overseas investment led by China's dominant state sector in their purchases of mining and energy companies in resource-rich regions, the current M&A activity is emerging as a key enabler of consolidation, growth, market positioning and the acquisition of strategic assets and expertise for Chinese companies. Forward-looking Chinese companies now consider overseas investment as a viable approach towards moving up the value chain by gaining access to foreign brands and technology.

Shifting Focus
With China's rapid economic ascent and subsequent transformation into a market-based economy, Chinese companies are now expanding abroad and going global not only per the government's mandate, but also to reduce their reliance on China's economic growth by expanding into new markets. At the same time, market forces are inducing them to acquire or gain access to sophisticated technologies through strategic mergers and acquisitions (M&A), at increasingly favourable prices, to raise their level of competitiveness. China's overseas acquisitions in the non-financial sector, which reached a record USD 60.1 billion in 2011, will continue as increasingly sophisticated Chinese buyers seek bargains amid the downturn among developed economies, especially in Europe . Over the short term, the ongoing euro zone debt crisis will create multiple opportunities for active Chinese investors, giving them easier access to technologies they have long coveted in the European and other developed markets.

Chinese companies have also shown a bigger appetite for relatively riskier assets compared to their peers from developed countries. In other words, Chinese companies are beginning to realise the intangible benefits from making purchases overseas. But why exactly are Chinese becoming bolder, looking for acquisitions outside their own borders? It is becoming increasingly wellknown that Chinese companies are not only concerned about becoming bigger and increasing their market share in the short term, Chinese companies are seeking to invest in assets abroad that will better position them at home, relative to their domestic rivals, as well gain a foothold in new markets over the long term. The most competitive firms realise size alone will not guarantee long-term global success; technological know-how enhances long-term competitiveness, and puts them in a better position to compete against western rivals in their own home markets. For example, aforementioned Sany recently opened a USD 60 million office and assembly plant in the south-eastern US in 2011, its largest such facility outside China, to help realise it's long term goal of eventually manufacturing excavators in the US to directly compete against industryleading Caterpillar on its home turf. So while industry consolidation is still being encouraged to facilitate the development of China's own 'global champions', China's fast-rising global competitors are now letting their global ambitions drive their strategies rather than relying on government policy alone.

A sigh of things to come


Relative to the size of its economy, China's overseas investments remain quite modest. The total stock of investment abroad rose to 5.3% of China's GDP in 2011, up from just 2.6% in 2001, but it remains well below the average of 27.7% for OECD countries. Moving forward, Chinese enterprises will not only have the money, but also the motive and opportunity to spend an additional USD 560 billion on overseas investments in the next five years. Chinese companies are taking advantage of the crisis, acquiring strategic assets overseas which will empower them to move toward the frontier of global competition. Additionally, the People's Bank of China recently released the most detailed public proposal yet for loosening the government's strict capital controls, a move which will only spur Chinese companies to buy up far more American and European assets, which have become more affordable by the global financial crisis.

However, doing deals with China is complex and can pose special integration challenges for both sides due to cultural, business and political differences. For Chinese companies and their new partners, the key lies in maximising synergies once the above obstacles are overcome. Looking ahead, Chinese companies will have more tools, more experienced and seasoned M&A professionals and a greater overall understanding of the complexity of cross-border M&A processes, a good recipe for success in future Sino-foreign M&A deals.

Article written by: Barry van Wyk, Senior Consultant Daniel Galvez, Consultant

Sources: http://www.thebeijingaxis.com/tca/editions/the-china-analyst-apr-2012/113 http://www.thebeijingaxis.com/tca/editions/the-china-analyst-apr-2012/115chinese-ofdi-bolder-wiser-and-more-strategic

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