The Chinese Century: The Rising Chinese Economy and Its Impact on the Global Economy, the Balance of Power, and Your Job

Citation

Grossman, D.A. (2006), "The Chinese Century: The Rising Chinese Economy and Its Impact on the Global Economy, the Balance of Power, and Your Job", International Journal of Emerging Markets, Vol. 1 No. 3, pp. 282-283. https://doi.org/10.1108/ijoem.2006.1.3.282.1

The Chinese Century: The Rising Chinese Economy and Its Impact on the Global Economy, the Balance of Power, and Your Job

Oded Shenkar states that his book's intended purpose is to clearly present the China debate by capturing the impact of the foreseeable climb that China will have on business, employees, and consumers. Shenkar's analysis of our global economy provides us with an insight into the changes that are impacting many of the developed and developing economies. Emphasis is given to several industries (many found in the USA) where employment will be affected; and he offers the reader several approaches to respond to these inevitable changes. Of particular interest is the issue of outsourcing and how it will continue to have an affect on industrialized countries and emerging powers. The Chinese Century offers a detailed look into the business forces of China as well as the price, such as piracy, that is being paid to achieve a sustainable global competitive advantage for the future.

Shenkar emphasizes that China is not comparable to Japan, Korea or the European Union because it is larger in terms of achieving scale quicker. Shenkar believes the best analogy is the USA because of its emergence as a world economic power a century ago. The Chinese Century is different than current books about the Chinese economy because it provides an insightful analysis of China's piracy industry, “Between 10 and 30 percent of China's GDP comes from piracy and counterfeiting.” Another important component of China's growth is its long‐term relationship with larger retailers such as Wal‐Mart. Shenkar notes that the, “fates of Wal‐Mart and the Chinese industry will remain closely intertwined for years to come.”

Shenkar discusses the lead that China has when it comes to manufacturing toys and how it is becoming the number one manufacturer in the world for furniture, not just low‐end furniture, but top‐end furniture. The Chinese will not give up their low‐cost labor advantage as they move up the value chain to high technology production. “It is already active in areas where technology plays an important role and labor is not a dominant factor.” Furthermore, China will, “leverage its dominance in labor‐intensive and mid‐technology industries to fund a major push into knowledge‐intensive areas that will drive the future world economy.” Shenkar also points out some other interesting statistics. For example, in China's manufacturing sector they currently builds half of the world's microwave ovens, one‐third of the television sets and air conditioners, a quarter of the washers and one‐fifth of the refrigerators.

As much as one‐third of China's GDP comes from piracy and counterfeiting, including more than 90 percent of the country's software and 95 percent of its video games. Shenkar points out that five of six Yamaha motorcycles in China are not genuine. Yamaha's suppliers sell authentic Yamaha parts to imitation Yamaha assemblers. Counterfeiting occurs on products such as razor blades, cell phones, drugs, chewing gum, and shampoo. Most intriguingly, electronic chips are reverse‐engineered and modified to allow third parties to write add‐ons, creating fake chip value chains. In some cases, the craftsmanship behind the impersonators is so good that even the manufacturers cannot tell the difference. Shenkar indicates that China is outgrowing the usefulness of pirated products within their own boundaries, and they now see the new frontier for piracy is exporting.

Shenkar recommends that multinationals can be preventative by spending more on litigators who can make it more of a challenge for imitators to imitate products. Multinationals can also redesign business strategies to make it more difficult for theft. Shenkar also recommends not getting involved in Chinese joint‐ventures, which function as a starting point for many stolen ideas and products. Instead, he recommends entry into China with products focusing on shorter life cycles or utilizing price slashing to curb Chinese piracy and make it less profitable.

The content of Shenkar's research is stirring because it is practical to the business, employee and the consumer. For American businesses and employees, Shenkar's book raises many concerns about their future. On the other hand, for some US industries, such as agriculture, the outlook is better because American job losses caused by a surge of Chinese imports will be less in states that have a strong agricultural base.

Shenkar notes that in order to maintain its economic position the US is becoming more dependent on services, especially in technology and education. The USA can continue to work as a service economy if it continues to attract people toward education, tourism, and as future citizens. Unfortunately, the USA has no precedent to follow since there is no major economy that is predominantly dependent on services.

With the detailed discussion of Chinese piracy and counterfeiting combined with the discussion of Chinese corruption, and the near serious state of the Chinese banking system and the non‐existence of Chinese law, Shenkar provides a very troubling account that suggests that the Chinese will be able to deliberately violate intellectual property laws as part of their growth. As troubling as this may sound, it provides a very interesting and realistic discussion for future ventures to China.

One other point the author makes is that it will be the lesser developed countries who will suffer most from being displaced by the Chinese. This is an important issue regarding the impact on emerging markets, such as Mexico, that are using low labor costs to improve its national economic position, because they have invested their entire economy on progressing through a low‐labor competitive position.

One of Shenkar's main points is that it is wrong to assume that China is simply capturing the labor‐intensive, low‐wage industrial capacity. While aspiring to economic growth, China has no desire to emulate the American way of life. China has its own values and will not sacrifice them for the sake of economic growth. The presence of an extraordinary human resource pool that not only is the world's largest, but it also includes an unusually large number of scientists, engineers and experienced executives. China possesses an advanced and rapidly improving technological infrastructure that is in some ways more efficient than what is found in the USA.

Based on his agenda, Shenkar accomplishes what he outlines. However, there are two areas that would have been interesting to read about. First, Shenkar does not emphasize the pollution problem that the Chinese already face. As this continues the health costs on the population will be devastating in the long‐run. Second, it is hard not to ask for more after reading this book. While this is a good thing that can come from any book; it invokes a thought that this topic needs considerably more attention and the analysis Shenkar gives it is insightful but in need of more material that may initiate further analysis by others.