I sent Marty's note on China and Lenovo to a friend in China. He seems to have misunderstood the note, but his response is interesting, nonetheless.
As we know, before 1990, China had only 500,000 PCs in a country of more than 1.2 billion people. By 2000, mainland Chinese purchased more than seven million PCs in a single year. And in 2005, China became the world's second largest PC market and output was over 80.8 million units in only one year. In 2010, the number is about 200 million in China Mainland. [The next sentence suggests the minunderstanding] Why did China become a major producer of computer hardware and a major market for information technology products during the past twenty years? I believe that the combination of factors influenced the growth of China's computer industry, including the Regional and National environment, the roles played by domestic PC makers, foreign multinationals and Taiwanese contract manufacturers. In addition, government policies promoted computer production and use, encouraged quasi-state-owned enterprises to enter the PC industry, and invited foreign investment while requiring foreign firms to transfer technology in return for market access. China’s computer-industry strategy includes similar elements, as it has promoted exports and invested heavily in building an information infrastructure. On the other hand, China's strategy also embodies the government's desire to catch up technologically while maintaining central control over key aspects of the economy, reducing its dependence on foreign technologies. For example, a February 2000 editorial published in the People's Liberation Army Daily, which speaks for China's military, argued that China must develop its own software. The editorial stated, "Without information security, there is no national security in politics, economics and military affairs. While learning from others, China should not be under their control.” This willingness to learn from outsiders without surrendering technological or economic control has been a guiding philosophy behind China's computer policies. Conforming to this philosophy, China has opened its computer sector to foreign firms— including US, Taiwanese, and a few Korean and Japanese PC companies—to attract investment and technology. It has also promoted exports by joining the global production networks of multinational corporations. Base on many kinds of goals, China invited foreign computer makers to help develop its industry, often requiring them to transfer technology and form alliances with domestic companies in return for production licenses and market access. Multinational companies such as Hewlett-Packard, Toshiba, and Dell formed joint ventures with local companies to market their own products and gain access to local distribution channels. Now most of Chinese computer firms become to focus on R&D. For example, researchers developed Great Wall's initial PC inside MEI research institutions, and Lenovo commercialized various technologies developed in CAS labs. These technologies enabled the companies to develop successful commercial products that sustained their growth and expansion into new industries, including PC manufacturing. Of course, we must admit that Taiwanese firms play a very important role in China's computer industry. They first entered China in search of low-cost labor and production sites for components and peripherals, but they have since expanded the scale and level of their operations to include PC production. They have also expanded their role to doing contract manufacturing for foreign and Chinese firms and trying to penetrate China's computer market. Taiwanese PC makers initially entered China in the early 1990s with low-end, shoestring operations intended to hold costs and risks to a minimum. They often routed investments through Hong Kong to circumvent Taiwanese government restrictions on direct investment in China. Taiwanese companies have markedly increased their investment since 1995 in response to price pressures from US PC companies and fierce competition among Taiwanese suppliers and manufacturers. Also, Taiwanese PC makers realized, as other multinationals had, that they must localize production if they wanted access to China's large market. Consequently, in the past several years，major Taiwanese firms such as Acer, Quanta, Arima, Hon Hai, FIC, GVC, Twinhead, and Huasheng have built production facilities in China.*/ /* */ /*The share of Taiwanese companies' computer hardware and software produced outside Taiwan increased from 25 percent of gross output in 1995 to 43 percent in 1998 and to 51.7 percent in 2000.A large proportion of that production took place in mainland China. In 2000, Taiwanese firms produced from 78 to 95 percent of various components and peripherals offshore, with 60 to 90 percent produced in mainland China. Taiwanese firms also produced 84 percent of their desktops offshore. They produced 47 percent of their motherboards offshore with 45 percent produced in China. In a word, Taiwanese companies are investing rapidly in mainland China, seeking a place in this fast-growing market. This trend combines Taiwan's management, design skills, and relationships with leading global computer companies，although the political risks involved. China's strategy of promoting computer use to modernize their economy and create demand for local firms. Also, China has focused on developing and exploiting national capabilities to support computer production and use. These capabilities include human resources, R&D institutions, and an information infrastructure. Finally, while China has favored domestic firms, it has maintained a highly competitive local computer market. This approach benefits computer users and also helps domestic firms prepare to compete in markets outside China. As Li Keqiang said at the World Economic Forum Annual Meeting 2010 Davos, who is Vice Premier of the State Council of the PRC, China will rely on technological innovation, energy conservation and emissions reduction to promote industrial restructuring and upgrading. Adjustments of the world economy and upgrading of China’s domestic consumption structure require us to optimize and upgrade our industrial mix. We must adapt to market needs, encourage innovation of enterprises and be supported by technological progress. Efforts need also be made to protect intellectual property rights. These will improve the quality of manufactured products and raise the level of the manufacturing industry. -- Michael Perelman Economics Department California State University michael at ecst.csuchico.edu Chico, CA 95929 530-898-5321 fax 530-898-5901 www.michaelperelman.wordpress.com _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
