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Figure 20. Sales of Chery cars, 2004-7.
This suggests that we should expect Chinese firms to enter at the bottom end of the global market for mass consumer goods, initially mainly in the developing world — of which there is already clear evidence [538] — but later moving into the developed world. It will take time for firms like Chery and Geely to establish themselves in Western markets, where standards and tastes are very different from the ‘cheap-end’ advantage presently enjoyed by Chinese firms. Indeed, both have postponed their American launch dates until around 2009 or later. A cautionary tale in this respect is provided by TCL, the Chinese TV manufacturer, which entered into a joint European venture with the French firm Thomson. It made a number of serious miscalculations based on its ignorance of the European market and a
Although China is already making significant progress in low- and medium-technology industries such as white goods and motor vehicles, it is also intent, in the longer term, on becoming a major player in a high-tech industry like aerospace. China will shortly begin production of its own regional passenger jet, [541] while Airbus has a
Looking into the future, therefore, one can anticipate a number of broad trends regarding the development of Chinese companies. We will continue to see the slow but steady emergence of Chinese multinationals in areas which play to their domestic comparative advantage, such as white and electrical appliances, motorcycles, trucks and cars. [546] We can expect Chinese brands to emerge in fields such as sports equipment (for example Li-Ning) [547] — linked to China ’s growing strength as a sporting nation — and Chinese medicine. We are likely to see Chinese firms become major competitors in high-tech areas such as aerospace (AVIC 1), telecommunications (China Mobile and Huawei), computers (Lenovo) [548] and perhaps in renewable energy (for example, Suntech Power Holdings). China ’s banks, construction companies and oil companies are already rapidly emerging as global giants, helped by the scale of the Chinese market and the resources at their disposal. In 2007 the boom on the Shanghai Stock Exchange saw PetroChina briefly overtake Exxon as the world’s largest company. By the end of 2007 China possessed three of the world’s five largest companies, by value though not by sales, namely PetroChina, the Industrial and Commercial Bank of China (ICBC) and China Mobile. [549] We can also anticipate some of the big Chinese firms seeking to expand overseas by taking over foreign firms. There have already been examples of this with Lenovo acquiring IBM Computers and the Chinese oil giant CNPC unsuccessfully seeking to buy the US oil firm Unilocal; awash with cash and eager to shortcut their expansion, it is not difficult to imagine this happening on a much wider scale. An obvious area is commodities, with Chinalco’s stake in Rio Tinto, the Anglo-Australian mining group, an example. [550] With many Western companies suffering from a serious shortage of cash as a result of the credit crunch, the takeover opportunities for cash-rich Chinese companies, the oil companies in particular, are likely to be considerable, with Western political opposition weakened by the recession. [551] Meanwhile the establishment of the China Investment Corporation, armed with funds of $200 billion, of which some $80 billion is for external investment, could give China growing potential leverage over those foreign companies in which it decides to invest. [552] Finally, we should not forget the increasing importance of Chinese subcontractors as ‘systems integrator’ firms in the global supply chain of many foreign multinationals, a development which might, in the long term at least, prove to have a wider strategic significance for these multinationals in terms of their management, research capability and even ownership. [553]
Crucial to the creation of international firms is overseas direct investment. One forecast has suggested that as early as 201 °China ’s outward direct investment will overtake foreign direct inward investment. It is estimated that overseas investment in 2008 was over $50 billion, a huge increase compared with 2002; official figures indicate that in 2006 60 % went to Asia, 16 % to Latin America, 7 % each to North America and Africa, 6 % to Europe and roughly 4 % to Australasia. [554] (See Figure 21.)
[538] Geely, for example, has a
[539] ‘TCL to Close TV Factories in Europe’, South China Morning Post, 1 November 2006.
[540] ‘ US Market is Losing Its Appeal to China ’, International Herald Tribune, 18 April 2007.
[541] ‘ China ’s Plane Ambitions Take Off’, posted on www.bbc.co.uk/news.
[542] ‘Airbus Near a Deal for Assembly Line in China ’, International Herald Tribune, 16 March 2006.
[543] ‘Chinese Group to Bid for All Six Airbus Plants’, Guardian, 19 June 2007.
[544] ‘Air Battle on the Ground in China ’, International Herald Tribune, 28 February 2007.
[545] ‘China Plans Space Station in 2020’ and ‘China Launches First Moon Orbiter’, posted on www.bbc.co.uk/news.
[546] For the steady penetration of Chinese TV sets into the US market, see Shenkar, The Chinese Century, pp. 152-3; and China Goes Global (London: Financial Times, 2005).
[547] ‘Faced with a Steep Learning Curve’, Financial Times special report on global brands, 23 April 2007; ‘China Aims for Spot among Top World Brands’, South China Morning Post, 5 October 2006.
[548] Lenovo is the world’s fourth biggest PC seller; Sonia Kolesnikov-Jessop, ‘Putting Lenovo’s Brand on the Global Map’, International Herald Tribune, 27-8 September 2008.
[549] ‘PetroChina Overtakes Exxon After Shanghai Debut’, Financial Times, 5 November 2007; Gideon Rachman, ‘China Has Risen’, international affairs blog, Financial Times, 9 November 2007; also Andy Xie, ‘China’s Bubble May Burst But the Impact Will Be Limited’, Financial Times, 16 October 2007.
[550] ‘A Complex Rationale for China ’s Raid on Rio ’, Financial Times, 13 February 2008.
[551] Lex, ‘Chinese Oil Majors’, Financial Times, 29 October 2008.
[552] ‘ China Turns Risk Averse, Even as Capital Outflows Rise’, Financial Times, 17 January 2008.
[553] Nolan, Transforming China , pp. 222, 227-8.
[554] Lawrence Brainard and Jonathan Fenby, ‘Chinese Takeout’, Wall Street Journal, 20 February 2007.